Chairman’s Statement Group Strategic Report Directors’ Report
Statement of Directors’ Responsibilities Consolidated Profit and Loss Account Consolidated Balance Sheet
Company Balance Sheet
Statement of Total Recognised Gains and Losses Consolidated Cash Flow Statement
Reconciliation of Net Cash Flow Notes to the Financial Statements Independent Auditor’s Report
3 4 5-6 7 8 9 10 11 11 11 12-30 31 GROUP PLC
Maintaining a Focus on
Housing, Care and
Directors
R G Higgins ACIOB (Chairman) S P Higgins BA M J Higgins P H Lewellen BSc FCA Secretary P H Lewellen BSc FCA Auditor KPMG LLP 15 Canada Square London E14 5GL Bankers HSBC Bank PLC
West End Corporate Banking Centre 2nd Floor, 70 Pall Mall
London SW1Y 5EZ
The Royal Bank of Scotland PLC Corporate Banking London Property & Construction 9th Floor, 280 Bishopsgate London EC2M 4RB Barclays Bank PLC Property Finance Team UK Banking - Larger Business Floor 27, One Churchill Place London E14 5HP
Registered Office One Langston Road Loughton Essex IG10 3SD Registered Number 2348986 Group Websites www.higgins-group.co.uk www.higginshomes.co.uk www.higginsconstruction.co.uk www.bassettbusinessunits.co.uk
Chairman’s Statement
The chairman presents his statement for the period.
I am pleased to report an 86% increase in the Higgins Group’s profit before tax for the year ended 31st July 2015
– from £2.4 million to £4.5 million. Group turnover grew by 25% to £226 million.
All political and economic commentators agree that the rate of supply of new housing is inadequate and that high demand is sustainable for the foreseeable future - particularly in our key operating area of London and the Home Counties.
Both our operations, Higgins Homes and Higgins Construction, are therefore being positioned to deliver significant growth in turnover. This will be individually in their specialist areas of private and affordable housing – but also collaboratively in joint venture with key clients.
One such project – the five year regeneration of the Myatts Field North estate in London Borough of Lambeth is now entering its final phase and has been a significant success for all stakeholders involved. When complete we will have delivered a revitalised estate of over 800 mixed tenure properties – including over 350 for private sale in a 50:50 joint venture.
Other sites are either underway or in pipeline where the client will participate in the financial success of the project. We are keen to develop such partnerships as they demonstrate our ability to adapt our acquisition model to suit the aspirations and risk-attitude of the landowner.
I would like to take this opportunity to offer my thanks for the continuing hard work and commitment shown by all employees of the Higgins Group.
R G Higgins ACIOB Chairman
Group Strategic Report
Principal Activity
The principal activities of the Group during the financial year were that of building contracting and the acquisition and development of building land.
Review of the Business
The Directors can report 25% growth in consolidated turnover for the year to £226 million (2014: £181 million) with profit before tax growing by 86% to £4.53 million (2014: £2.44 million).
Net Assets for the Group at the year-end have increased only slightly to £49.5 million due to the planned repurchase and cancellation of its shares and an increase in the declared pension deficit of £0.7 million. Net Borrowing was negligible at the year end and the Group is operating well within its banking facilities. Both our principal bankers, HSBC and RBS, have expressed a willingness to increase facilities.
Higgins Construction, the contracting arm of the Group, increased turnover by 13% in the year reflecting their success in operating as a “community contractor” in the key sectors of social housing and education. The order book remains strong and significant growth in turnover is anticipated in the year ended July 2016.
The private development arm of the Group, Higgins Homes, has maximised on a period of significant sales price growth by continuing to design and present a very attractive range of product. The Company continues to develop its existing portfolio of schemes whilst looking to locate and secure new opportunities.
The Directors believe that Higgins Group can offer our Registered Social Landlord and Local Authority clients a proven model that combines finance solutions, design, construction, marketing and sales services. We are well- placed to engage in joint venture partnerships to maximise the cross-subsidy return available from private development.
Principal Risks and Uncertainties
The Directors are aware of the inherent risks within the Construction and Housebuilding industries. These risks principally concern the availability of public funds, the contract tendering process and the general housing market and availability of mortgages. The Directors monitor and manage these risks through internal controls and maintaining awareness of the markets within which they operate. A careful and sensitive approach to pricing and tight cost management, together with the maintenance of strong relationships with clients and suppliers, will ensure that the Group can adapt to changing market conditions.
Directors’ Report
Introduction
The Directors present their Directors’ Report and Financial Statements for the year ended 31st July 2015.
Directors and Directors’ Interests
The names of the Directors, who held office throughout the year and at the date of this report and their interests in the shares of the Company at the end of the year, were as follows:
Beneficial Interests at 31st July
2015
No. 2014No.
R G Higgins ACIOB (Chairman) S P Higgins BA M J Higgins P H Lewellen BSc FCA 2,208,135 1,619,541 1,619,541 Nil 2,208,135 1,619,541 1,619,541 Nil Dividends
The Directors have not paid an interim or final dividend in the year (2014: no interim or final dividend). Creditor Payment Policy
The Group’s current policy concerning creditors is to:
a) agree payment terms with its suppliers when it enters into binding purchase contracts;
b) ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
c) abide by the payment terms agreed whenever it is satisfied that the supplier has provided the goods or services in accordance with the contracts.
For the year to 31st July 2015 the Group’s average payment period from date of invoice or agreement of valuation
was 32 days (2014: 32 days).
Employment of Disabled Persons
It is the policy of the Group to employ disabled persons where they are suited to a particular vacancy and to develop their careers by means of training and promotion.
Employee Involvement
The Group encourages disclosure of information and employee involvement in matters of concern to their employment. Special attention is paid to Health and Safety and Quality Assurance, accordingly industrial accidents remain at a level well below the industry norm. The Group actively promotes training programmes, the employment of trade apprentices and the participation in other youth training schemes; particularly within the London Boroughs’ neighbourhood centres.
Post Balance Sheet Event
On 8th October 2015 the Company repurchased and cancelled 250,000 ordinary 10 pence shares for a total
Directors’ Report
Disclosure of Information to Auditor
Each of the persons who are directors at the time when this Directors’ report is approved has confirmed that: • so far as that director is aware, there is no relevant audit information of which the company and the group’s
auditor is unaware, and
• that director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company and the group’s auditor is aware of that information.
Auditor
The auditor, KPMG LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf. By Order of the Board
Statement of Directors’ Responsibilities
in respect of the Directors’ Reports and Financial Statements 31st July 2015
The directors present their report and the financial statements for the year ended 31st July 2015.
Directors’ Responsibilities Statement
The directors are responsible for preparing the strategic report, the Directors’ 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 UK Accounting Standards and applicable law ( UK Generally Accepted Accounting Practice)
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 group and parent company and of the profit or loss of the group and parent company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently;
• make judgments 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 group 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 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.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors who served during the year were: Directors
R G Higgins ACIOB S P Higgins BA M J Higgins
Consolidated Profit and Loss Account
For the year ended 31st July 2015Note 2015 2014
£000 £000
Turnover
Group and share joint venture’s turnover
Less share of joint venture’s turnover 238,449(12,278) 197,660(16,161)
Group turnover
Cost of sales 1,2 (204,682)226,171 (167,667)181,499
Gross profit
Administrative expenses (19,762)21,489 (15,982)13,832
Operating (loss)/profit
Share of operating profit in joint venture 3 1,7274,278 (2,150)6,077
Total operating profit
Interest receivable and similar income Interest payable and similar charges
Other finance income – retirement benefits
6 7 6,005 238 (2,114) 399 3,927 216 (2,190) 485
Profit on ordinary activities before taxation
Taxation on profit on ordinary activities 8 (1,208)4,528 2,438(672)
Profit for the financial year 18 3,320 1,766
All amounts relate to continuing operations.
There are no material differences between the profit on ordinary activities before taxation and the retained profit for the financial year stated above and their historical cost equivalents.
Consolidated Balance Sheet
31st July 2015 Note 2015 2014 £000 £000 £000 £000 Fixed Assets Tangible assets Investment properties Investments in joint venture - Share of gross assets - Share of gross liabilities10 9 13,917 (4,936) 21,013 11,073 26,455 (10,389) 20,819 10,465
- Share of net assets 11 8,981 16,006
Total Fixed Assests Current Assets Stocks
Debtors
Cash at bank and in hand
12 13 55,40040,346 27,625 41,067 64,027 32,438 18,372 47,350
Creditors: Amounts falling due within one year 14
123,371 (103,953)
114,837 (97,736)
Net Current Assets 19,418 17,101
Total Assets Less Current Liabilities
Creditors: Amounts falling due after more than one year 15
60,485 (4,179)
64,451 (9,199)
Net assets excluding pension scheme liabilities Staff Pension Scheme
Founder Directors Pension Scheme 44
56,306 (5,271) (1,532) 55,252 (5,202) (913)
Net assets including pension scheme liabilities 49,503 49,137
Capital and Reserves Called up share capital Revaluation reserve Other reserves Profit and loss account
632 7,395 93 41,383 657 6,787 93 41,600 Shareholders’ Funds 49,503 49,137
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 27th October 2015.
R G Higgins ACIOB Paul Lewellen BSc FCA
Director Director
Company Balance Sheet
31st July 2015 Note 2015 2014 £000 £000 £000 £000 Fixed Assets Investments 11 1,505 1,505 Current Assets Debtors Cash at bank 16,785- 654,509Creditors: Amounts falling due within one year
13 14 16,785 (10,348) 54,515 (48,032)
Net Current Assets 6,437 6,483
Total Assets Less Current Liabilities
Creditors: Amounts falling due after more than one year 15
7,942 (1,000)
7,988 (1,000)
Net Assets 6,942 6,988
Capital and Reserves Called up share capital Other reserves Profit and loss account
17 18 18 632 84 6,226 657 84 6,247 Shareholders’ Funds 19 6,942 6,988
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 27th October 2015.
R G Higgins ACIOB Paul Lewellen BSc FCA
Director Director
Consolidated Cash Flow Statement
For the year ended 31st July 2015Statement of Total Recognised Gains and Losses
For the year ended 31st July 2015Note 2015 2014
£000 £000
Profit for the financial year
Unrealised surplus on revaluation of tangible fixed assests
Unrealised surplus/(deficit) on revaluation of investment properties Actuarial loss related to pension schemes
Deferred tax attributable to actural gain
3,320 -608 (2,538) 551 1,766 40 (537) (2,732) 472
Total recognised gains and losses relating to the year 1,941 (991)
Note 2015 2014
£000 £000
Net cashflow from operating activities Returns on investment and servicing of finance Taxation
Capital expenditure and financial investment Acquisitions and disposals
20 21 21 21 14,946 (1,940) (4) (2,339) 10,660 (8,010) (1,836) 915 (1,852)
-Cash inflow/(outflow) before financing
Financing 21
21,323 (10,956)
(10,783) 10,106
Increase/(decrease) in cash in the year 10,367 (677)
2015 2014
£000 £000
Increase/(Decrease) in cash in the year
Cash inflow/(outflow) from increase/(decrease) in debt and lease financing 10,36710,956 (10,106)(677)
Movement in net debt in the year Net debt at 1st August 2014
21,323
(22,306) (10,783)(11,523)
Net debt at 31st July 2015 (983) (22,306)
The notes on pages 12 to 30 form part of these financial statements.
Notes to the Financial Statements
31st July 20151. Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements.
(a) Basis of Preparation
The financial statements have been prepared under the historical cost convention as modified by the revaluation of Investment properties and in accordance with applicable accounting standards.
The Directors have prepared a consolidated cashflow forecast for a period of 12 and 24 months. The projections incorporate current market trends and incorporate reasonable judgements and estimates of future market conditions. The Directors continue to use bank finance for many of the development projects of Higgins Homes and maintain a strong cash balance enabling the Group to be reactive and well positioned for new opportunities. The Group has the full support of its bankers and sufficient facilities are available to meet the Company’s predicted requirement. The Directors, therefore, consider it appropriate to produce these financial statements on a going concern basis.
(b) Basis of Consolidation
The financial statements consolidate the accounts of Higgins Group PLC and all of its subsidiary undertakings (‘subsidiaries’).
(c) Tangible Fixed Assets and Depreciation
Tangible fixed assets are stated at cost or valuation less depreciation. Depreciation is provided at rates calculated to write off the cost or valuation of fixed assets, less their estimated residual value, over their expected useful lives on the following bases:
Long-term leasehold properties - Period of the lease
Plant and machinery - 25%
Motor vehicles - 25%
Office equipment - 15%
Freehold land and buildings and leasehold properties
Freehold land and buildings and leasehold properties occupied by the Group and held as investments are included in fixed assets at their latest valuation plus subsequent additions at cost and surpluses or deficits on revaluations are included in the revaluation reserve. It is the policy of the Group to revalue freehold and leasehold properties at least every three years. Provision for any impairment in the value of properties held as fixed assets is made in the profit and loss account.
Depreciation is not provided in respect of freehold properties occupied or investment properties held by the Group. Investment properties do not require depreciation in accordance with SSAP 19, Investment properties. Depreciation of occupied properties is not considered material. In accordance with FRS 11, Impairment of fixed assets and goodwill, the assets are reviewed for impairment at the end of each reporting period.
(d) Revaluation of Tangible Fixed Assets
1. Accounting Policies (continued) (e) Investment Properties
Investment properties are included in the Balance sheet at their open market value in accordance with Statement of Standard Accounting Practice No.19 and are not depreciated. This treatment is contrary to the Companies Act 2006 which states that fixed assets should be depreciated but is, in the opinion of the directors, necessary in order to give a true and fair view of the financial position of the company and the group.
(f) Turnover
Turnover comprises revenue recognised by the company in respect of goods and services supplied during the year, exclusive of Value Added Tax and trade discounts.
(g) Long-term Contract Balances
Profit on long-term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the year end, by recording turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs incurred to date bear to total expected costs for that contract. Revenues derived from variations on contracts are recognised only when they have been accepted by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen.
(h) Stock of Development Land and Properties
Stocks and work in progress are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads.
(i) Shared Equity Assets
These are granted as part of sales transactions where the group retains an equity interest and are secured by way of a legal charge on the respective property. On initial recognition these are held at fair value being the present value of expected future cash flows taking into account the estimated market value of the property at the time of repayment. Thereafter, these are held at fair value less impairment. (j) Deferred Taxation
Full provision is made for deferred tax assets and liabilities arising from all timing differences between the recognition of gains and losses in the financial statements and recognition in the tax computation. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets in the financial statements.
A net deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse.
Deferred tax assets and liabilities are discounted.
Notes to the Financial Statements
31st July 20151. Accounting Policies (continued) (k) Investments
i) Subsidiary undertakings
Investments in subsidiaries are valued at cost less provision for impairment.
ii) Joint venture undertakings
Investments in joint ventures are stated at the company’s share of net assets. The company’s share of the profits or losses of the joint ventures is included in the Profit and loss account using the equity accounting basis.
(l) Pensions
The company operates a defined contribution pension scheme and the pension charge represents the amounts payable by the company to the fund in respect of the year.
The company operates a defined benefits pension scheme and the pension charge is based on a full actuarial valuation dated 31st July 2013.
(m) Leases
Operating lease costs are charged to the profit and loss account on a straight line basis. Fixed assets held under finance leases are capitalised and depreciated over their expected useful lives. The finance charges are allocated over the primary period of the lease in proportion to the capital outstanding.
(n) Preference Shares
In accordance with FRS 25 the Preference Shares issued by the Company do not meet the definition of equity, they are therefore recorded as a liability in the balance sheet. The shares carry entitlement to a cumulative dividend and are redeemable by the Company at any point between 5 and 35 years after the date of issue.
2. Turnover
The whole of the turnover is attributable to:
i) the gross value of work carried out for the period to the balance sheet date and is normally determined by external certification;
Notes to the Financial Statements
31st July 20153. Operating Profit/(Loss)
Operating profit/(loss) is stated after charging/(crediting):
2015
£’000 £’0002014
Depreciation of tangible fixed assets: - owned by the group Auditor’s remuneration
Aggregate Directors’ emoluments Hire of plant and machinery Rents Receivable
Loss/(profit) on sale of tangible fixed assets
560 65 5,752 1,215 985 (3) 551 65 4,500 885 998 12 4. Staff Costs (a) Staff Costs
Staff costs, including directors’ remuneration, were as follows:
2015 2014
£’000 £’000
Wages and salaries Social security costs Other pension costs
24,865 2,975 1,557 20,111 2,362 1,346 29,397 23,819
The average monthly number of employees, including the directors, during the year was as follows:
2015 2014
No. No.
Office and management
Contract staff 158218 152207
376 359
(b) Pensions
The Group operates two Pension Schemes.
The Higgins Group PLC Pension & Life Assurance Scheme (“Staff Scheme”) has defined contribution and defined benefit sections. The former was closed to new contributions on 1st September 2008: the latter
was closed to future accrual on 30th April 2010.
The Higgins Group PLC Founders Directors Retirement Benefit Scheme (“Founders Scheme”) has the intention of operating as a defined benefit scheme and is reported as such within these financial statements.
4. Staff Costs (continued)
(c) Money Purchase Contributions
Contributions amounting to £1,335,000 (2014 - £1,158,000) were paid into the money purchase section of the Staff Scheme and the company sponsored Personal Pension plan during the year. In addition the group covers the cost of insured benefits.
(d) Defined Benefit Contributions
A schedule of minimum contributions for the group’s defined benefit schemes is determined by an independent qualified actuary on the basis of triennial valuations – the most recent of which was at 30th April 2013. The Scheme Actuary has recommended that contributions be made into the defined
benefit section of the Staff Scheme at the rate of £100,000 per month with effect from 1st August 2013,
increasing by 3% per annum to make good the funding shortfall arising from the latest actuarial valuation by 2020. The Actuary has recommended that no contributions are necessary into the Founders Scheme. In addition the group covers the cost of insured benefits and other expenses of both schemes.
Based on the current remuneration levels the directors would expect the total employers’ contributions to be £1,282,628 for the financial period ended 31st July 2016.
(e) Defined Benefit Assets and Liabilities
The market value of the defined benefit section of the Staff Scheme and the Founders Scheme assets at 31st July 2015 were sufficient to cover 83% (2014 - 82%) and 86% (2014 - 91%) of the respective Scheme
defined benefit obligations at that date.
The principal actuarial assumptions are as follows:
At 31st July 2015 At 31 st July 2014 At 31 st July 2013 Inflation Discount rate Salary increase
Pension in payment increase (1997-2006 accrual) Pension in payment increase (post 2006 accrual)
3.20% 3.70% 3.20% 3.10% 2.40% 3.25% 4.20% 3.25% 3.15% 2.45% 3.20% 4.50% 3.20% 3.10% 2.40%
The adopted set of demographic assumptions are consistent with those used for the FRS17 disclosures as at 31st July 2014 and for the formal funding valuations of the Schemes as at 30th April 2013.
Life expectancy within the Founders Scheme is assumed to be in line with the PNXL00 life tables based on year of birth with a 90% scaling factor. The Medium Cohort improvements were adopted for future improvements until 2020.
Life expectancy within the Staff Scheme is assumed to be in line with the S1PXA life tables based on year of birth with a 100% scaling factor.
The expected return on assets is based on the long term expectancies for each asset class at the beginning of the period. The expected return on assets is set by the company having taken actuarial advice.
4. Staff Costs (continued)
On the basis of these assumptions the pension assets or liabilities and the expected long-term rates of returns were:
Expected Long Term Rate of Return Staff Scheme Value 2015 % 2014% 2013% 2012% 2011% £’0002015 £’0002014 £’0002013 £’0002012 £’0002011 Equities Corporate Bonds Government Bonds Cash 6.20 3.60 2.80 2.90 6.90 4.20 3.40 3.60 7.40 4.50 3.40 0.50 6.80 4.20 2.80 0.50 7.00 5.30 4.00 0.50 23,206 4,107 6,245 623 20,324 3,728 5,721 1,062 22,012 3,465 3,362 233 16,700 3,401 3,220 175 16,452 2,896 2,967 331 Fair value of defined benefit assets
Present value of defined benefit obligations (41,027)34,181 (37,591)30,835 (35,131)29,072 (31,570)23,496 (26,773)22,646 Deficit
Related deferred tax asset (6,846)1,575 (6,756)1,554 (6,059)1,575 (8,074)2,100 (4,127)1,156 Pension liability (5,271) (5,202) (4,484) (5,974) (2,971)
Expected Long Term Rate of Return Founder Scheme Value 2015 % 2014% 2013% 2012% 2011% £’0002015 £’0002014 £’0002013 £’0002012 £’0002011 Investment in Higgins Group PLC Other Equities Corporate Bonds Government Bonds Cash 5.00 6.20 3.60 2.80 2.90 5.00 7.40 4.50 3.40 0.50 5.00 7.40 4.50 3.40 0.50 5.00 6.80 4.20 2.80 0.50 5.00 7.00 5.30 4.00 0.50 1,650 7,810 -1,489 1,537 3,150 7,226 -1,269 262 4,500 5,874 -1,189 123 4,300 4,493 -1,654 48 5,800 4,486 -1,848 86 Fair value of defined benefit assets
Present value of defined benefit obligations (14,475)12,486 (13,093)11,907 (12,523)11,686 (12,096)10,495 (13,554)12,220 Deficit
Related deferred tax asset (1,989)457 (1,186)273
(837) 218 (1,601) 416 (1,334) 374 Pension liability (1,532) (913) (619) (1,185) (960)
Notes to the Financial Statements
31st July 20154. Staff Costs (continued)
(f) Changes in the Fair Value of Scheme Assets
Staff Scheme Founders Scheme
2015
£’000 £’0002014 £’0002015 £’0002014
Opening fair value of scheme assets Expected return from assets
Contributions by the employer Actuarial gains/(losses) Benefits paid 30,836 1,805 1,245 1,091 (796) 29,073 1,913 1,200 (550) (800) 11,907 700 -169 (290) 11,685 693 (186) (285)
Closing fair value of scheme assets 34,181 30,836 12,486 11,907
(g) Actual Return of Scheme Assets
Staff Scheme Founders Scheme
2015
£’000 £’0002014 £’0002015 £’0002014
Expected return from assets
Actuarial gains/(losses) 1,8051,091 1,913(550) 700169 (186)693
Actual return of scheme assets 2,896 1,363 869 507
(h) Changes in the Present Value of Scheme Liabilities
Staff Scheme Founders Scheme
2014
£’000 £’0002013 £’0002014 £’0002013
Opening present value of scheme liabilities Interest cost Actuarial losses Benefits paid 37,591 1,562 2,670 (796) 35,131 1,563 1,697 (800) 13,093 544 1,128 (290) 12,523 557 298 (285)
Notes to the Financial Statements
31st July 20154. Staff Costs (continued)
(i) Changes in the Fair Value of Net Pension Liability
Staff Scheme Founders Scheme
2014
£’000 £’0002013 £’0002014 £’0002013
Net pension liability at beginning of year Movement in year:
Contributions Net finance income Actuarial losses Deferred Tax (5,202) 1,245 243 (1,579) 22 (4,484) 1,200 350 (2,247) (21) (913) -156 (959) 184 (619) -135 (484) 55
Net pension liability at end of year (5,271) (5,202) (1,532) (913)
(j) Amounts Recognised in Profit and Loss Account
The amounts charged to profit and loss account in respect of defined benefit obligations are as follows:
-Staff Scheme Founders Scheme
2015
£’000 £’0002014 £’0002015 £’0002014
Expected return on pension scheme assets
Interest on pension scheme liabilities (1,562)1,805 (1,563)1,913 (544)700 (557)693
Net finance income 243 350 156 136
As the defined benefit section of the Staff Scheme is closed to future service accrual, the current service cost, under the projected unit method, will increase as the members of the scheme approach retirement. (k) Actuarial Gains and Losses Recognised in Equity
The amounts that have been included within the statement of total recognised gains and losses are as follows:
Staff Scheme Founders Scheme
2015
£’000 £’0002014 £’0002015 £’0002014
Difference between expected and actual returns on assets Experience (losses)/gains arising in the scheme liabilities
Notes to the Financial Statements
31st July 20154. Staff Costs (continued)
(l) History of Experience Gains and Losses
Staff Scheme £’0002015 £’0002014 £’0002013 £’0002012 £’0002011
Difference between expected and actual returns on assets
Percentage of assets at year end 1,0913% (550)2% 4,11214% (502)2% (1,524) 7%
Experience losses arising in scheme the liabilities
Percentage of liabilities at year end (2,670)7% (1,697)5% (908)3% (1,171)4% (257) 1%
Total actuarial (losses)/gains
Percentage of liabilities at year end (1,579)4% (2,247)6% 3,0519% (4,339)14% (529) 2%
Founders Scheme
Difference between expected and actual returns on scheme assets
Percentage of assets at year end 1691% (186)2% 9168% 1371% 43 0%
Experience (losses)/gains arising in the scheme liabilities
Percentage of liabilities at year end (1,128)8% (298)2% 2122% 6345% (330) 2%
Total actuarial losses
Percentage of liabilities at year end (959)7% (484)4% (210)2%
(361) 3% (692) 5% 5. Directors Remuneration
The highest paid director received remuneration of £1,505,807 (2014 - £1,201,497). He did not participate in a defined benefit pension scheme during the year and has not accrued any further pension at 31st July 2015 (2014:
Nil)
6. Interest Receivable
2015
£’000 £’0002014
Share of joint ventures’ interest receivable
Other interest receivable 20137 13482
Notes to the Financial Statements
31st July 20157. Interest Payable
2015
£’000 £’0002014
On bank loans and overdrafts
Share of joint ventures’ interest payable 1,977137 2,043147
2,114 2,190
8. Taxation
2015
£’000 £’0002014
Analysis of charge in the year Current tax (see note below)
UK Corporation tax charge/(credit) on profit for the year - (914)
Share of joint ventures’ current tax 712- 1,397(914)
Total Current Tax 712 483
Deferred tax
Origination and reversal of timing differences
Relating to retirement benefits 151345 (249)438
Total deferred tax (see note 16) 496 189
Tax on profit on ordinary activities 1,208 672
Factors affecting tax charge for the year
The tax assessed for the year is lower than (2014 - lower than) the standard rate of corporation tax in the UK of 20.67% (2014 - 22.33%). The differences are explained below:
2015
£’000 £’0002014
Profit on ordinary activities before tax 4,528 2,438
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.67% (2014 - 22.33%)
Effects of:
Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
Capital allowances for period in excess of depreciation
Increase or decrease in pension fund prepayment leading to an increase/ (decrease) in tax
Other differences leading to an increase/(decrease) in the tax charge
936 49 85 (345) (13) 544 431 (54) (438)
Notes to the Financial Statements
31st July 20158. Taxation (continued)
Factors affecting tax charge for the year
Reductions in the UK corporation tax rate from 26% to 24% (effective 1st April 2012) and to 23% (effective 1st
April 2013) were substantively enacted on 26th March 2012 and 3rd July 2012 respectively. Further reductions
to 21% (effective from 1st April 2014) and 20% (effective from 1st April 2015) were substantively enacted on 2nd
July 2013. This will reduce the Company’s future current tax charge accordingly. 9. Investment Properties Freehold Investment Property £’000 Long Term Leasehold Properties £’000 £’000Total Group Valuation At 1st August 2014 Surplus on revaluation 8,920 514 1,545 94 10,465 608 At 31st July 2015 9,434 1,639 11,073
The 2015 valuations were made by the Director, on an open market value for existing use basis. 10. Tangible Fixed Assets
Freehold Property £’000 Long Term Leasehold Properties £’000 Plant & Machinery £’000 Motor Vehicles £’000 Office Equipment £’000 £’000Total Cost or Valuation At 1st August 2014 Additions Disposals 18,401 -171 -7,206 411 (93) 1,518 510 (450) 38 -27,334 921 (543) At 31st July 2015 18,401 171 7,524 1,578 38 27,712 Depreciation At 1 Ausgut 2014 Charge for year On disposals -61 10 -5,374 380 (72) 1,056 168 (304) 24 2 -6,515 650 (376) At 31st July 2015 - 71 5,682 920 26 6,699
Net Book Amount
Notes to the Financial Statements
31st July 201510. Tangible Fixed Assets (continued)
The freehold property is located at One Langston Road, Loughton, Essex and is the Company’s Head Office. This property was professionally valued at £18,400,000 by Glennys LLP, Chartered Surveyors, as at 31st July
2014 on an existing value basis in compliance with RICS Statement of Asset Valuation Practice and Guidance Notes.
The historical cost of the freehold property is £13,370,669 (2014: £13,370,669). The leasehold property
comprises:-• Leasehold improvements undertaken at the Company’s Business Continuity Offices. The property is held on a 10 year lease commencing 30th May 2008.
• Leasehold improvements undertaken at the Company’s Plant Yard Offices. The property is held on a 25 year lease commencing 1st October 1991.
11. Fixed Asset Investments
As at 31st July 2015 the Group holds a 50% share in Myatts Field Development LLP through its subsidiary
Higgins Homes PLC. The remaining shares are held by My8 Development LLP. Myatts Field Development LLP is engaged in the regeneration of land at Myatts Field North, Lambeth to provide 357 new homes for private sale, 146 homes for shared ownership and a retail store.
Investment in joint ventures Total £’000 Group Cost or Valuation
At 1st August 2014 Repayment of Capital Share of profit 16,066 (10,660) 3,575 At 31st July 2015 8,981
Net Book Value
At 31st July 2015 8,981
At 31st July 2014 16,066
During the period the initial equity invested in Myatts Field Developments LLP was repaid to the Company. The Company retains 50% control in the LLP.
Investment in subsidiary companies £’000 Company Cost or Valuation
At 1st August 2014 and 31st July 2015 1,505
Net Book Value
At 31st July 2015 1,505
11. Fixed Asset Investments (continued)
Subsidiary Undertakings Principal Activity
Higgins Homes PLC Higgins Construction PLC Higgins Investments PLC Bassett Business Units Limited Higgins City Limited
D J Higgins Investments Limited Higgins Group Services Limited D J Higgins Construction Limited D J Higgins Building Works Limited Higgins Homes Estate Limited Station Garage (Loughton) Limited
House building Contracting
Property investments Managing business units # Dormant Dormant Dormant Dormant* Dormant* Dormant** Dormant* *All these companies are 100% subsidiary undertakings of Higgins Construction PLC. # This Company is a 100% subsidiary of Higgins Investments PLC.
**This Company is a 100% subsidiary of Higgins Homes PLC.
All other companies are 100% subsidiary undertakings of the Company. 12. Stocks
2015
£’000 £’0002014
Residential development and buildings
Contracting stock and Work In Progress 49,8085,592 63,656371
55,400 64,027 13. Debtors Group Company 2015 £’000 £’0002014 £’0002015 £’0002014 Trade debtors
Amounts owed by group undertakings Other debtors
Prepayments and accrued income
Amounts Recoverable on long term contracts Deferred tax asset (see note 16)
26,275 -6,321 1,038 6,668 44 18,605 -6,985 664 5,989 195 -16,522 1 262 -54,283 1 225 -40,346 32,438 16,785 54,509
Included in trade debtors are amounts falling due after more than one year of £4,450,000 (2014: £3,240,000). Other debtors includes: £3,483,000 (2014: £4,080,000) shared equity values. These are granted as part of sales transactions where the Group retains an equity interest and are secured by way of a legal charge on
14. Creditors: Amounts Falling Due Within One Year
Group Company
2015
£’000 £’0002014 £’0002015 £’0002014
Bank loans and overdrafts Payments received on account Trade creditors
Amounts owed to group undertakings Other taxation and social security Other creditors
Accruals and deferred income
24,429 15,498 20,507 -1,190 1,888 40,441 31,479 12,453 16,257 -1,104 2,300 34,143 1 -7,933 -2,414 -47,028 -1,004 103,953 97,736 10,348 48,032
The bank loans and overdrafts are secured on:
(i) certain freehold and leasehold properties retained as tangible fixed assets and (ii) certain properties within the stock of development land.
15. Creditors: Amounts Falling Due After More Than One Year
Group Company
2015
£’000 £’0002014 £’0002015 £’0002014
Bank loan
Share capital treated as debt (note 17) 3,1791,000 8,1991,000 1,000- 1,000
-1,000 1,000 1,000 1,000
Disclosure of the terms and conditions attached to the non-equity shares is made in note 17. Creditors include amounts not wholly repayable within 5 years as follows:
Group Company
2015
£’000 £’0002014 £’0002015 £’0002014
Repayable other than by instalments 1,000 1,000 1,000 1,000
The bank loan is secured on certain properties within the stock of development land. The bank loan is repayable upon the sale of the completed housing unit.
The preference shares carry an entitlement to a fixed cumulative dividend at a rate of 1.5% above the bank base lending rate. The preference shares can be redeemed by the Company at any point between 5 and 35 years after issue.
Notes to the Financial Statements
31st July 2015 16. Deferred Taxation Group 2015 £’000 £’0002014 At beginning of year(Charge for)/released during the year (P&L) (151)195 249(54)
At end of year 44 195
The deferred taxation balance is made up as follows:
Group 2015
£’000 £’0002014
Accelerated capital allowances
Short-term timing differences (403)359 (554)359
(44) (195)
17. Share Capital
2015
£’000 £’0002014
Shares classified as capital Allotted, called up and fully paid 6,321,402 (2014 - 6,571,402)
Share Capital allotted, and fully paid shares of £0.10 each 632 657
Shares classified as debt
Allotted, called up and fully paid
1,000,000 Preference shares shares of £1 each 1,000 1,000
On 8th October 2015 the Company repurchased and cancelled 250,000 ordinary 10 pence shares for a total
consideration of £1,650,000 under an authority granted on 29th September 2015.
Notes to the Financial Statements
31st July 2015 18. Reserves Revaluation reserve £’000 Other reserves £’000Profit and loss account
£’000 Group
At 1st August 2014
Profit for the financial year Purchase of own shares Pension reserve movement
Surplus on revaluation of freehold property
6,787 -608 93 -41,600 3,320 (1,550) (1,987) -At 31st July 2015 7,395 93 41,383
The closing balance on the Profit and loss account includes a £6,803,000 (2014 - £6,115,000) debit, stated after deferred taxation of £2,032,000 (2014 - £1,827,000), in respect of pension scheme liabilities of the Group and Company pension scheme.
Other reserves
£’000
Profit and loss account
£’000 Company
At 1st August 2014
Loss for the financial year Dividends: Equity capital Purchase of own shares
Notes to the Financial Statements
31st July 201519. Reconciliation of Movement in Shareholders’ Funds
2015
£’000 £’0002014
Group
Opening shareholders’ funds Profit for the financial year
Shares redeemed/cancelled during the year Other recognised gains and losses during the year
49,137 3,320 (1,575) (1,379) 51,628 1,766 (1,500) (2,757)
Closing shareholders’ funds 49,503 49,137
2015
£’000 £’0002014
Company
Opening shareholders’ funds Loss for the financial year Dividends
Shares redeemed/cancelled during the year
6,988 (8,471) 10,000 (1,575) 7,253 (3,765) 5,000 (1,500)
Closing shareholders’ funds 6,942 6,988
The company has taken advantage of the exemption contained within section 408 of the Companies Act 2006 not to present its own Profit and loss account.
The loss for the year dealt with in the accounts of the company was £8,471,000 (2014 - £3,765,000). 20. Net Cash Flow From Operating Activities
2015
£’000 £’0002014
Operating profit/(loss)
Depreciation of tangible fixed assests Loss on disposal of tangible fixed assets Decrease/(increase) in stocks
Increase in debtors Increase in creditors
Decrease in net pension assets/liabilities Other 1,727 560 36 8,627 (8,056) 13,265 (1,245) 32 (2,150) 551 12 (13,084) (4,582) 12,398 (1,200) 45
Notes to the Financial Statements
31st July 201521. Analysis of Cash Flows For Headings Netted in Cash Flow Statement
2015
£’000 £’0002014
Returns on investments and servicing of finance Interest received
Interest paid (1,977)37 (1,936)100
Net cash outflow from returns on investments and servicing of finance (1,940) (1,836)
2015
£’000 £’0002014
Capital expenditure and financial investment Purchase of tangible fixed assets
Sale of tangible assets Share buyback (921) 132 (1,550) (428) 76 (1,500)
Net cash outflow from capital expenditure (2,339) (1,852)
2015
£’000 £’0002014
Aquisitions and disposals
Repayment of Capital by joint ventures 10,660
-2015
£’000 £’0002014
Financing
Purchase of ordinary shares Repayment of loans Other (25) (10,956) 25 -10,106
-Net cash (outflow)/inflow from financing (10,956) 10,106
22.Analysis of Changes in Net Debt 1st August 2014 £’000 Cash flow £’000 Other non-cash changes £’000 31st July 2015 £’000 Cash at bank and in hand
Bank overdraft 18,372(1,192) 9,2531,114 -- 27,625(78)
Debt:
Debts due within one year
Debts falling due after more than one year
17,180 (30,287) (9,199) 10,367 10,956 -(5,020) 5,020 27,547 (24,351) (4,179) Net debt (22,306) 21,323 - (983) 23.Capital Commitments
At 31st July 2015 the Group had capital commitments as follows:
Group 2015
£’000 £’0002014
Contracted for but not provided in these financial statements 80 153
24. Operating Lease Commitments
At 31st July 2015 the Group had annual commitments under non-cancellable operating leases as follows:
Land and buildings Other
2015
£’000 £’0002014 £’0002015 £’0002014
Group Expiry date: Within 1 year
Between 2 and 5 years 62- 112- 55556 137398
25. Related Party Transactions
Independent Auditor’s Report
We have audited the financial statements of Higgins Group PLC for the year ended 31st July 2015, set out on
pages 8 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
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.
Respective Responsibilities of Directors and Auditor
As explained more fully in the Directors’ responsibilities statement set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Group strategic report and the Directors’ report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on Financial Statements In our opinion the financial statements:
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31st July 2015
and of the group’s profit for the year then ended
• have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matter Prescribed by the Companies Act 2006
In our opinion the information given in the Group strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on Which We Are Required to Report by Exception
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. Shaun Kirby (Senior Statutory Auditor)
For and on behalf of KPMG LLP
Statutory Auditor, Chartered Accountants 15 Canada Square, London E14 5GL 27th October 2015
