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

The company’s performance for the year under review is based on a 12 month period, compared to the prior financial period which covered 18 months.

The company’s results for the year comprised turnover of £31.9m (2024 - £90.9m), a gross profit of £2.7m (2024 - £1.5m gross loss), operating profit of £0.5m (2024 – £4.3m operating loss) and profit on ordinary activities before taxation of £0.5m (2024 - operating loss of £3.7m).

The directors are pleased to report a strong and decisive return to profitability during the year. This turnaround reflects the disciplined execution, improved forecasting and realignment of strategic priorities set out in the previous report, and demonstrates the underlying strength and resilience of the operating model. Margin discipline has been restored across both contracting and development, and the company enters the new financial year with real momentum, having proven its ability to deliver a sustained recovery even during one of the most demanding periods the sector has faced in recent years.

The directors remain mindful of the wider pressures facing the construction and housebuilding sector, including inflationary pressure on energy, material and labour costs, and the potential for further movement in interest rates. These are risks the company manages actively and effectively, through long-term supplier relationships, careful procurement and rigorous cost control, and the directors are confident in the ability to continue trading successfully through changing market conditions.

During the year the company completed, or was in contractual process on, a total of 225 beds and 28 residential units across three sites, and commenced construction of a further 202 care home beds and 82 residential units across three live sites. Four new contracts started in 2025 will support a healthy revenue flow through 2026 and beyond, underlining the strength of the order book and its ability to secure and deliver further work with confidence.

The key risks and uncertainties expected to impact the group in the future include:

Housing incentives and supply chain implications

Government-led housing incentives, whether in the form of subsidies, planning reforms or new-build targets, have the potential to increase demand sharply. While this presents growth opportunities, it also places strain on a supply chain already under pressure. Increased demand for materials and labour could inflate costs and extend delivery timelines, challenging the ability to meet client expectations efficiently. Strategic partnerships and long-term supplier agreements continue to give a strong platform for managing this risk.

Demographic challenges in the construction workforce

The construction sector continues to face a critical shortage of new talent entering the workforce, compounded by an ageing demographic among skilled tradespeople. This talent gap affects future capacity and raises considerations around knowledge transfer, continuity and project resilience across the sector. The continued investment in apprenticeships, training initiatives and strategic recruitment is building a sustainable talent pipeline for the years ahead.

Geopolitical risk

Ongoing global instability heightens uncertainty in supply chains, financing and investor confidence, and can also affect energy prices and material availability. The scenario-based forecasting gives the directors confidence in the business's ability to maintain continuity under a range of global risk conditions.

The strategy and core strengths remain aligned with its long-established approach: delivering successful partnership-led developments by securing land, expertly managing the planning process, and building out in close collaboration with registered providers, local authorities and private sector partners. This end-to-end capability continues to underpin the Group's strong reputation for reliability, agility and value creation.

The company has made a deliberate and successful strategic pivot to prioritise operational efficiency over headline turnover, both in the period under review and looking ahead. This shift has strengthened margins, reduced exposure to market volatility, and supported continued investment in the long-term value of key relationships. The focus has been on forming deeper, more purposeful partnerships in the care and partnership housing sectors, and on maintaining a diverse delivery pipeline that spreads risk and supports consistent, sustainable growth.

This deliberate repositioning as a true partnerships-led business, together with the scale of investment made during the year in development land and pipeline, gives the directors real confidence in the ability to grow turnover back towards pre-pandemic levels over the coming years, and to continue winning and delivering new business with clients across the sector.

The contracting arm remains a vital and valued component of the integrated business model, particularly where it supports the land-led developments for key clients. We have strategically mitigated risk by reducing tendering and focusing on delivering the land-led development pipeline only. The ongoing focus remains on delivering profitable business through active cost control and strong, long-standing relationships with suppliers and customers, and the directors are confident in its continuing contribution to Group performance.

The business has made appropriate provisions for a small number of legacy sites, reflecting its commitment to acting responsibly and maintaining high standards of corporate governance. The directors' prudent and proactive approach to managing historical liabilities ensures the business remains on a stable and secure footing.

The diversity of the business model has been a genuine source of resilience and strength, and its ability to operate across the value chain, from land acquisition through to delivery, provides flexibility and control in a market where certainty is at a premium. This adaptability, combined with a proven track record of delivery, gives clients and partners real confidence in the ability to trade successfully into the future.

Looking ahead, the directors are confident in the prospects. The land pipeline is strong, client partnerships are deepening, and the team has shown itself to be experienced, resilient and highly capable through a demanding period for the sector. With continued discipline, a proven ability to navigate challenging conditions, and a clear focus on quality and trust, the directors are confident that the Highwood Group is well placed to build on this year's turnaround and to continue trading successfully for many years to come.

Management consider key performance indicators to include: turnover, gross profit, profit on ordinary activities before taxation, number of housing units completed and number of beds completed or in contractual process. The values of these key performance indicators can be found in the 'Review of the business' section.

The Highwood Group operates as a consolidated entity, with contracting and development activities overseen by the Highwood Holdings Board. The Board reviews major decisions made by the subsidiary boards to ensure alignment with the Group’s standards, strategy and values.

The directors acknowledge their duty under Section 172 of the Companies Act 2006 to act in a way that promotes the success of the group for the benefit of its members as a whole. In doing so, the Board balances long-term sustainability with short-term objectives, considering the impact of its decisions on employees, suppliers, clients, the environment and the communities in which we operate.

During the period the Board has focused on being a responsible business in practical terms: how we treat our people, engage with communities, and use our position in the industry to support positive change.

Long-term decision making

Our business model is built around long-term commercial and social value, focused on land-led development with housing associations, care providers and private clients. The shift in recent years toward efficiency and margin over headline turnover has strengthened the group’s foundations and positioned us to grow from a more secure base.

Employees

The Board is committed to a safe, inclusive workplace with clear career pathways and ongoing training. During the year we provided 284 apprenticeship weeks, and we invest in wellbeing through our digital health service and cash plan, including tailored mental health support.

During the year we joined The 5% Club, committing to at least 5% of our workforce in earn-and-learn roles, and partnered with South Hampshire College Group (SHCG) to give T-Level students structured work experience across the two years of their course. Both reflect our view that the industry’s future depends on developing the next generation and addressing the sector’s well-documented talent shortage.

Suppliers and subcontractors

We work closely with a trusted network of subcontractors, consultants and suppliers, treating them as partners. We prioritise fairness, prompt payment and collaboration, and the Board regularly reviews procurement to ensure ethical practice, commercial fairness and environmental standards.

Clients and partners

Our business is built on long-standing partnerships with registered providers, local authorities, care providers and private clients, based on open communication and mutual trust. The Board recognises and appreciates the continued support of key client partners through the more challenging years of the recent cycle.

Environment and sustainability

Highwood Group is committed to minimising our environmental impact, applying sustainability principles from land acquisition through to construction and aftercare. We prioritise biodiversity, meet or exceed energy efficiency targets, and respond to frameworks such as water and nutrient neutrality. The Board treats environmental performance as a key pillar of risk management and long-term success.

Community and social value

For each new project we commit a financial contribution to local community-led initiatives, from outdoor classrooms to charitable funds, totalling £19,000 during the year. We engage early with residents, local authorities and other stakeholders, generating wider social value through placemaking, employment and community investment.

This year we named Treloar’s, a Hampshire charity supporting young people with physical disabilities, as our Charity of the Year. Beyond fundraising, team members have contributed to discussions on making construction more accessible to people with disabilities, both as a sector to work in and through the buildings we design and build. This is already shaping our thinking on workplace inclusion, site accessibility and design, and we look forward to extending it over the coming year.

Governance and stakeholder engagement

The Board maintains strong governance, with structured engagement across clients, staff, supply chain partners and professional advisors ensuring stakeholder perspectives inform key decisions. This allows us to anticipate challenges early, adapt with confidence and remain accountable to those we serve.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2025.

The principal activity of the company continued to be that of property development, building and construction services.

The results for the year are set out on page 10.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The company operates a treasury function which is responsible for managing the liquidity and interest risks associated with the company's activities.

The company's principal financial instruments include bank balances, trade debtors and trade creditors arising directly from its operations.

The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

Investments of cash surpluses and borrowings are made through financial institutions which must fulfil credit rating criteria approved by the Board.

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

The directors consider that the company faces the usual pricing risk of any other company operating in a competitive, commercial environment.

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of strategies and future outlook.

The auditor, Fiander ETL, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The directors are responsible for preparing the annual report 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;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the 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.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

We have audited the financial statements of Highwood Construction Limited (the 'company') for the year ended 31 December 2025 which comprise the statement of income and retained earnings, the balance sheet and notes to the financial statements, including 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 December 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 Auditor's 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which 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.

As explained more fully in the directors' responsibilities statement, 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 is 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.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

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:

• the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.

• we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience.

• 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, taxation legislation, data protection, anti-bribery, employment, environmental and health and safety legislation.

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 risks of fraud and non-compliance with laws and regulations.

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

• performed analytical procedures to identify any unusual or unexpected relationships.

• tested journal entries to identify unusual transactions.

• assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 2 were indicative of potential bias.

• investigated the rationale behind significant or unusual transactions.

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.

• reading the minutes of meetings of those charged with governance.

• enquiring of management as to actual and potential litigation and claims.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, 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 is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Highwood Construction Limited is a private company limited by shares, incorporated in England and Wales. The registered office is The Hay Barn, Upper Ashfield Farm, Hoe Lane, Romsey, Hampshire, SO51 9NJ.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

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 £1,000.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income

• Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

The financial statements of the company are consolidated into the financial statements of Highwood Group Limited which are consolidated into the financial statements of Highwood Holdings Limited and then consolidated into the ultimate parent Highwood Group Holdings Limited. All sets of consolidated financial statements are available from Companies House.

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

Highwood Construction Limited is a wholly owned subsidiary of Highwood Group Limited and the results of Highwood Construction Limited are included in the consolidated financial statements of Highwood Group Limited which are available from Companies House.

Atruet 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.

The financial statements cover the 12 month year ended 31 December 2025, the prior period covers the 18 month period ending 31 December 2024. The company had decided to change it's prior year reporting period to better reflect it's business cycle. As a result, the comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. The company recognises turnover on an accruals basis, where the amount of turnover can be reliably measured and it is probable that the future economic benefits will flow to the company.

Revenue from construction contracts is recognised by reference to the value of certified work at the period end.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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 charged to profit or loss.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Stock and work in progress are valued at the lower of cost or net realisable value.

Long term contracts are stated at cost less foreseeable losses and payments on account.

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.

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

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, 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, 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.

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 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.

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, 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.

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.

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

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.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

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.

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.

Recognition of revenue and profit is based on judgements made in respect of the ultimate profitability of a contract. Such judgements are arrived at through the use of estimation in relation to costs and value of work performed to date and to be performed in bringing contracts to completion. These estimates are made by reference to recovery of pre-contracts costs, variations in work scopes, claim recoveries and expected contract costs to complete. The company has appropriate control procedures to ensure all estimates are determined on a consistent basis and subject to review and authorisation. The amount included in cost accruals which has been estimated based on the expected profit margin for the contract is £8,424,932 (2024: £8,938,860).

An analysis of the company's turnover is as follows:

The average monthly number of persons (including directors) employed by the company during the year was:

All employees and directors are employed and remunerated through other group companies. Costs are recharged from these companies to the group company which utilises the employees services. During the year £3,828,775 (2024: £7,142,288) of costs were recharged to Highwood Construction Limited, representing the value of services provided to this company.

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 5 (2024 - 5).

The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:

Details of the company's subsidiaries at 31 December 2025 are as follows:

The value of the shareholding in Highwood Ventures 2 is made up of £441.18 of ordinary A shares, this is not included on the balance sheet due to rounding to the nearest £1,000. The results for the period for this subsidiary has been consolidated into the financial statements of the parent company, Highwood Group Limited.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The amount payable at the period end amounted to £nil (2024: £Nil).

Ordinary A shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.

The company has taken advantage of the provision of FRS102 section 33 to not disclose transactions with other wholly owned members of the group.

The immediate parent company is Highwood Group Limited, a company incorporated in England and Wales. Its registered office is The Hay Barn Upper Ashfield Farm, Hoe Lane, Romsey, Hampshire SO51 9NJ and copies of the consolidated financial statements can be obtained from Companies House.

The ultimate parent is Highwood Group Holdings Limited consolidated accounts can be obtained from Companies House. Its registered office is The Hay Barn Upper Ashfield Farm, Hoe Lane, Romsey, Hampshire SO51 9NJ.