Clear direction, effective management and a highly professional workforce

Clear direction, effective management and a highly professional workforce GROUP PLC HIGGINS GROUP PLC ANNUAL REPORT

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Directors and Corporate Information 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 Independent Auditor s Report 2 3 4 56 7 8 9 10 11 11 11 1230 31 GROUP PLC Maintaining a Focus on Housing, Care and Education Higgins Group PLC Annual Report and Accounts 1

Directors and Corporate Information 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.higginsgroup.co.uk www.higginshomes.co.uk www.higginsconstruction.co.uk www.bassettbusinessunits.co.uk 2 Higgins Group PLC Annual Report and Accounts

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 31 st July 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 riskattitude 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 27 th October Higgins Group PLC Annual Report and Accounts 3

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 (: 181 million) with profit before tax growing by 86% to 4.53 million (: 2.44 million). Net Assets for the Group at the yearend 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 crosssubsidy 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. By Order of the Board P H Lewellen BSc FCA Company Secretary 27 th October 4 Higgins Group PLC Annual Report and Accounts

Directors Report Introduction The Directors present their Directors Report and Financial Statements for the year ended 31 st July. 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: R G Higgins ACIOB (Chairman) S P Higgins BA M J Higgins P H Lewellen BSc FCA No. 2,208,135 1,619,541 1,619,541 Nil Beneficial Interests at 31 st July No. 2,208,135 1,619,541 1,619,541 Nil Dividends The Directors have not paid an interim or final dividend in the year (: 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 31 st July the Group s average payment period from date of invoice or agreement of valuation was 32 days (: 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 8 th October the Company repurchased and cancelled 250,000 ordinary 10 pence shares for a total consideration of 1,650,000 from Higgins Group PLC Founder Directors Retirement benefits Scheme under an authorisation granted on 29 th September. Higgins Group PLC Annual Report and Accounts 5

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 P H Lewellen BSc FCA Company Secretary 27 th October 6 Higgins Group PLC Annual Report and Accounts

Statement of Directors Responsibilities in respect of the Directors Reports and Financial Statements 31 st July The directors present their report and the financial statements for the year ended 31 st July. 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 P H Lewellen BSc FCA Higgins Group PLC Annual Report and Accounts 7

Consolidated Profit and Loss Account For the year ended 31 st July Note 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 1,2 226,171 (204,682) 181,499 (167,667) Gross profit Administrative expenses 21,489 (19,762) 13,832 (15,982) Operating (loss)/profit Share of operating profit in joint venture 3 1,727 4,278 (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 4,528 (1,208) 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. The notes on pages 12 to 30 form part of these financial statements. 8 Higgins Group PLC Annual Report and Accounts

Consolidated Balance Sheet 31 st July Fixed Assets Tangible assets Investment properties Investments in joint venture Share of gross assets Share of gross liabilities Note 10 9 000 000 000 000 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 55,400 40,346 27,625 123,371 41,067 64,027 32,438 18,372 114,837 47,350 Creditors: Amounts falling due within one year 14 (103,953) (97,736) Net Current Assets 19,418 17,101 Total Assets Less Current Liabilities Creditors: Amounts falling due after more than one year 15 Net assets excluding pension scheme liabilities 60,485 (4,179) 56,306 64,451 (9,199) 55,252 Staff Pension Scheme Founder Directors Pension Scheme 4 4 (5,271) (1,532) (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 27 th October. R G Higgins ACIOB Director Paul Lewellen BSc FCA Director The notes on pages 12 to 30 form an integral part of these financial statements. Higgins Group PLC Annual Report and Accounts 9

Company Balance Sheet 31 st July Note 000 000 000 000 Fixed Assets Investments 11 1,505 1,505 Current Assets Debtors Cash at bank 13 16,785 16,785 54,509 6 54,515 Creditors: Amounts falling due within one year 14 (10,348) (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 27 th October. R G Higgins ACIOB Director Paul Lewellen BSc FCA Director The notes on pages 12 to 30 form an integral part of these financial statements. 10 Higgins Group PLC Annual Report and Accounts

Statement of Total Recognised Gains and Losses For the year ended 31 st July Note 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) Consolidated Cash Flow Statement For the year ended 31 st July Note 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 21,323 (10,783) Financing 21 (10,956) 10,106 Increase/(decrease) in cash in the year 10,367 (677) Reconciliation of Net Cash Flow to Movement in Net Funds/Debts For the year ended 31 st July 000 000 Increase/(Decrease) in cash in the year Cash inflow/(outflow) from increase/(decrease) in debt and lease financing 10,367 10,956 (677) (10,106) Movement in net debt in the year Net debt at 1 st August 21,323 (22,306) (10,783) (11,523) Net debt at 31 st July (983) (22,306) The notes on pages 12 to 30 form part of these financial statements. Higgins Group PLC Annual Report and Accounts 11

31 st July 1. 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: Longterm 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 As permitted by the transitional provisions of FRS 15, the company has elected not to adopt a policy of revaluation of tangible fixed assets. The company will retain the book value of land and buildings, previously revalued at 31 st July and will not update that valuation. 12 Higgins Group PLC Annual Report and Accounts

31 st July 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) Longterm Contract Balances Profit on longterm 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 slowmoving 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. Higgins Group PLC Annual Report and Accounts 13

31 st July 1. 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 31 st 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; ii) sales of the Groups development projects where the contract for sale has been completed. All turnover arose within the United Kingdom. 14 Higgins Group PLC Annual Report and Accounts

31 st July 3. Operating Profit/(Loss) Operating profit/(loss) is stated after charging/(crediting): 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 4. Staff Costs (a) Staff Costs Staff costs, including directors remuneration, were as follows: 560 65 5,752 1,215 985 (3) 551 65 4,500 885 998 12 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: No. No. Office and management Contract staff 158 218 152 207 376 359 (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 1 st September 2008: the latter was closed to future accrual on 30 th 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. The Group also sponsors the Higgins Group Personal Pension Scheme which is provided by Scottish Widows and whose assets are managed independently from the group and the Staff Scheme Trustees. Higgins Group PLC Annual Report and Accounts 15

31 st July 4. Staff Costs (continued) (c) Money Purchase Contributions Contributions amounting to 1,335,000 ( 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 30 th 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 1 st 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 31 st 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 31 st July were sufficient to cover 83% ( 82%) and 86% ( 91%) of the respective Scheme defined benefit obligations at that date. The principal actuarial assumptions are as follows: At 31 st July At 31 st July At 31 st July 2013 Inflation Discount rate Salary increase Pension in payment increase (19972006 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 31 st July and for the formal funding valuations of the Schemes as at 30 th 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. 16 Higgins Group PLC Annual Report and Accounts

31 st July 4. Staff Costs (continued) On the basis of these assumptions the pension assets or liabilities and the expected longterm rates of returns were: Expected Long Term Rate of Return % % 2013 % 2012 % 2011 % Staff Scheme Value 2013 2012 2011 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 34,181 (41,027) 30,835 (37,591) 29,072 (35,131) 23,496 (31,570) 22,646 (26,773) 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) Investment in Higgins Group PLC Other Equities Corporate Bonds Government Bonds Cash Expected Long Term Rate of Return % 5.00 6.20 3.60 2.80 2.90 % 5.00 7.40 4.50 3.40 0.50 2013 % 5.00 7.40 4.50 3.40 0.50 2012 % 5.00 6.80 4.20 2.80 0.50 2011 % 5.00 7.00 5.30 4.00 0.50 1,650 7,810 1,489 1,537 Founder Scheme Value 3,150 7,226 1,269 262 2013 4,500 5,874 1,189 123 2012 4,300 4,493 1,654 48 2011 5,800 4,486 1,848 86 Fair value of defined benefit assets Present value of defined benefit obligations 12,486 (14,475) 11,907 (13,093) 11,686 (12,523) 10,495 (12,096) 12,220 (13,554) 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) Higgins Group PLC Annual Report and Accounts 17

31 st July 4. Staff Costs (continued) (f) Changes in the Fair Value of Scheme Assets Staff Scheme Founders Scheme 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 Expected return from assets Actuarial gains/(losses) 1,805 1,091 1,913 (550) 700 169 693 (186) Actual return of scheme assets 2,896 1,363 869 507 (h) Changes in the Present Value of Scheme Liabilities Staff Scheme 2013 Founders Scheme 2013 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) Closing present value of scheme liabilities 41,027 37,591 14,475 13,093 18 Higgins Group PLC Annual Report and Accounts

31 st July 4. Staff Costs (continued) (i) Changes in the Fair Value of Net Pension Liability Staff Scheme 2013 Founders Scheme 2013 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 Expected return on pension scheme assets Interest on pension scheme liabilities 1,805 (1,562) 1,913 (1,563) 700 (544) 693 (557) 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 Difference between expected and actual returns on assets 1,091 (550) 169 (186) Experience (losses)/gains arising in the scheme liabilities (2,670) (1,697) (1,128) (298) Actual losses (1,579) (2,247) (959) (484) Higgins Group PLC Annual Report and Accounts 19

31 st July 4. Staff Costs (continued) (l) History of Experience Gains and Losses Staff Scheme 2013 2012 2011 Difference between expected and actual returns on assets Percentage of assets at year end 1,091 3% (550) 2% 4,112 14% (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% 3,051 9% (4,339) 14% (529) 2% Founders Scheme Difference between expected and actual returns on scheme assets Percentage of assets at year end 169 1% (186) 2% 916 8% 137 1% 43 0% Experience (losses)/gains arising in the scheme liabilities Percentage of liabilities at year end (1,128) 8% (298) 2% 212 2% 634 5% (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 ( 1,201,497). He did not participate in a defined benefit pension scheme during the year and has not accrued any further pension at 31 st July (: Nil) 6. Interest Receivable Share of joint ventures interest receivable Other interest receivable 201 37 134 82 238 216 20 Higgins Group PLC Annual Report and Accounts

31 st July 7. Interest Payable On bank loans and overdrafts Share of joint ventures interest payable 1,977 137 2,043 147 2,114 2,190 8. Taxation 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 (914) 1,397 Total Current Tax 712 483 Deferred tax Origination and reversal of timing differences Relating to retirement benefits 151 345 (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 ( lower than) the standard rate of corporation tax in the UK of 20.67% ( 22.33%). The differences are explained below: 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% ( 22.33%) 936 544 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 49 85 (345) (13) 431 (54) (438) Current tax charge for the year 712 483 Higgins Group PLC Annual Report and Accounts 21

31 st July 8. Taxation (continued) Factors affecting tax charge for the year Reductions in the UK corporation tax rate from 26% to 24% (effective 1 st April 2012) and to 23% (effective 1 st April 2013) were substantively enacted on 26 th March 2012 and 3 rd July 2012 respectively. Further reductions to 21% (effective from 1 st April ) and 20% (effective from 1 st April ) were substantively enacted on 2 nd July 2013. This will reduce the Company s future current tax charge accordingly. 9. Investment Properties Freehold Investment Property Long Term Leasehold Properties Total Group Valuation At 1 st August Surplus on revaluation 8,920 514 1,545 94 10,465 608 At 31 st July 9,434 1,639 11,073 The valuations were made by the Director, on an open market value for existing use basis. 10. Tangible Fixed Assets Freehold Property Long Term Leasehold Properties Plant & Machinery Motor Vehicles Office Equipment Total Cost or Valuation At 1 st August Additions Disposals 18,401 171 7,206 411 (93) 1,518 510 (450) 38 27,334 921 (543) At 31 st July 18,401 171 7,524 1,578 38 27,712 Depreciation At 1 Ausgut Charge for year On disposals 61 10 5,374 380 (72) 1,056 168 (304) 24 2 6,515 650 (376) At 31 st July 71 5,682 920 26 6,699 Net Book Amount At 31 st July 18,401 100 1,842 658 12 21,013 At 31 st July 18,401 110 1,832 462 14 20,819 22 Higgins Group PLC Annual Report and Accounts

31 st July 10. 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 31 st July 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 (: 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 30 th May 2008. Leasehold improvements undertaken at the Company s Plant Yard Offices. The property is held on a 25 year lease commencing 1 st October 1991. 11. Fixed Asset Investments As at 31 st July 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 Group Cost or Valuation At 1 st August Repayment of Capital Share of profit 16,066 (10,660) 3,575 At 31 st July 8,981 Net Book Value At 31 st July 8,981 At 31 st July 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 Company Cost or Valuation At 1 st August and 31 st July 1,505 Net Book Value At 31 st July 1,505 At 31 st July 1,505 Higgins Group PLC Annual Report and Accounts 23

31 st July 11. Fixed Asset Investments (continued) Subsidiary Undertakings 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 Principal Activity 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 Residential development and buildings Contracting stock and Work In Progress 49,808 5,592 63,656 371 55,400 64,027 13. Debtors Group Company 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 (: 3,240,000). Other debtors includes: 3,483,000 (: 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 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 cost less impairment. 24 Higgins Group PLC Annual Report and Accounts

31 st July 14. Creditors: Amounts Falling Due Within One Year Group Company 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 Bank loan Share capital treated as debt (note 17) 3,179 1,000 8,199 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Disclosure of the terms and conditions attached to the nonequity shares is made in note 17. Creditors include amounts not wholly repayable within 5 years as follows: Group Company 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. Higgins Group PLC Annual Report and Accounts 25

31 st July 16. Deferred Taxation Group At beginning of year (Charge for)/released during the year (P&L) 195 (151) (54) 249 At end of year 44 195 The deferred taxation balance is made up as follows: Group Accelerated capital allowances Shortterm timing differences 359 (403) 359 (554) (44) (195) 17. Share Capital Shares classified as capital Allotted, called up and fully paid 6,321,402 ( 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 8 th October the Company repurchased and cancelled 250,000 ordinary 10 pence shares for a total consideration of 1,650,000 under an authority granted on 29 th September. The preference shares are classified as liabilities and ordinary shares are classified in shareholders funds. The preference shares are redeemable between 5 and 35 years after the date of issue at the option of the Company. 26 Higgins Group PLC Annual Report and Accounts

31 st July 18. Reserves Group At 1 st August Profit for the financial year Purchase of own shares Pension reserve movement Surplus on revaluation of freehold property Revaluation reserve 6,787 608 Other reserves 93 Profit and loss account 41,600 3,320 (1,550) (1,987) At 31 st July 7,395 93 41,383 The closing balance on the Profit and loss account includes a 6,803,000 ( 6,115,000) debit, stated after deferred taxation of 2,032,000 ( 1,827,000), in respect of pension scheme liabilities of the Group and Company pension scheme. Company At 1 st August Loss for the financial year Dividends: Equity capital Purchase of own shares Other reserves 84 Profit and loss account 6,247 (8,471) 10,000 (1,550) At 31 st July 84 6,226 Higgins Group PLC Annual Report and Accounts 27

31 st July 19. Reconciliation of Movement in Shareholders Funds 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 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 ( 3,765,000). 20. Net Cash Flow From Operating Activities 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 Net cash inflow/(outflow) from operating activities 14,946 (8,010) 28 Higgins Group PLC Annual Report and Accounts

31 st July 21. Analysis of Cash Flows For Headings Netted in Cash Flow Statement Returns on investments and servicing of finance Interest received Interest paid 37 (1,977) 100 (1,936) Net cash outflow from returns on investments and servicing of finance (1,940) (1,836) 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) Aquisitions and disposals Repayment of Capital by joint ventures 10,660 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 During the period the initial equity invested in Myatts Field Developments LLP was repaid to the Company. The Company retain 50% control in the LLP. Higgins Group PLC Annual Report and Accounts 29

22.Analysis of Changes in Net Debt 1 st August Cash flow Other noncash changes 31 st July Cash at bank and in hand Bank overdraft 18,372 (1,192) 9,253 1,114 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 31 st July the Group had capital commitments as follows: Group Contracted for but not provided in these financial statements 80 153 24. Operating Lease Commitments At 31 st July the Group had annual commitments under noncancellable operating leases as follows: Land and buildings Other Group Expiry date: Within 1 year Between 2 and 5 years 62 112 56 555 137 398 25. Related Party Transactions During the year the Group generated turnover of 9,800,000 from construction work carried out for the joint venture partnership in Myatt s Field Development LLP. 30 Higgins Group PLC Annual Report and Accounts

Independent Auditor s Report To the Members of Higgins Group PLC We have audited the financial statements of Higgins Group PLC for the year ended 31 st July, 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 nonfinancial 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 31 st July 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 27 th October Higgins Group PLC Annual Report and Accounts 31

Printed at Higgins HQ by the reprographics department. 32 Higgins Group PLC Annual Report and Accounts

Mill Farm Close, Pinner