Company Registration No. 05512138 (England and Wales)
PICKSTOCK HOMES LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020 PICKSTOCK HOMES LIMITED
COMPANY INFORMATION
Directors Mr N W Scott Miss C Pickstock Mr J A Pickstock Mr G V Pickstock Mr J R Pickstock
Company number 05512138
Registered office Brookland Hall Guilsfield Welshpool Powys SY21 9BU
Auditor Champion Accountants LLP 2nd Floor Refuge House 33-37 Watergate Row Chester CH1 2LE PICKSTOCK HOMES LIMITED
CONTENTS
Page
Strategic report 1 - 3
Directors' report 4
Directors' responsibilities statement 5
Independent auditor's report 6 - 8
Group statement of comprehensive income 9
Group balance sheet 10
Company balance sheet 11
Group statement of changes in equity 12
Company statement of changes in equity 13
Group statement of cash flows 14
Company statement of cash flows 15
Notes to the financial statements 16 - 29 PICKSTOCK HOMES LIMITED
STRATEGIC REPORT FOR THE YEAR ENDED 31 JULY 2020
The directors present the strategic report for the year ended 31 July 2020.
Principal Activity and Business Review The principal activity of the company is the development of new residential properties designed to meet a range of requirements from starter homes to larger family houses for private purchasers, as well as providing affordable accommodation working in partnership with a number registered social landlords.
Key Performance Indicators The key performance indicators are set out below:
2020 2019
£10,514,388 Turnover (£000) £539,766 £13,254,699 Profit on ordinary activities before taxation (£000) (£104,171) £1,180,524 Taxation on Profit on ordinary activities (£000) £4,302
£435,595 Profit for the financial year (£000) £1,184,826
14.52% Gross margin (%) 6.38% 16.77% Net operating margin (%) 73 10.29% Plots sold in the year £210 64 Average house price (£ per sq foot) £185
Whilst the last financial year has seen the housing market face a number of challenges, including Brexit, a National Election and the COVID-19 pandemic the market has remained strong as a result of the availability of mortgage finance products at affordable levels and solid loan to value ratios.
The government has a target for 300,000 new homes to be built each year by the mid-2020s in order to meet existing demand. The National Planning Policy Framework introduced by the Government is increasing the supply of residential land to the market, which will provide further support for housing growth.
Pickstock Homes Limited has delivered a resilient operational and financial performance this year against the unprecedented impact of the COVID-19 pandemic and the resulting lockdown of our operations from the end of March, through to the middle of May. Prior to the pandemic we were delivering good progress against our medium term targets, increasing our weighting in speculative residential housing, whilst retaining partnership work with valued social housing clients, however the lockdown period had a significant impact on our financial performance this year.
Pickstock Homes Limited continues to drive operational efficiencies from strong construction and specification controls, alongside the use of standard house types where ever possible, whilst carefully considering planning and design developments to complement the local environment and demographic.
Pickstock Homes Limited invests in our employees through ongoing training, training of apprentices and through a rigorous recruitment programme intended to strengthen key disciplines within the business.
Pickstock Homes Limited has proactively invested in quality strategic and planning consented land, maintaining a strong forward land supply, ensuring the ability to build houses of the highest quality and trade successfully in our regional market place.
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STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
Principal risks and uncertainties Risk Management The management of risk through our business is a high priority. Processes are designed to identify, mitigate and manage risk at each stage both during the pre-construction as well as during the onsite construction stages of our business operations. Our Managing Director and Board of Directors are ultimately responsible for risk management.
Availability of land The careful evaluation and monitoring of all major new investment opportunities relating to land acquisition remains a key requirement for our business. In recognition of this risk the business is investing in improving its technical management resources, whilst strengthening internal controls and procedures to ensure the favourable delivery of consented development land.
Economic conditions and mortgage availability Mortgage constraints, applied through appropriate regulation and prudent lending criteria, provide a sustainable foundation for the housing market. Pickstock Homes Limited however recognises that the housing industry is sensitive to changes in economic conditions such as employment levels, interest rates, and consumer confidence. Any prolonged deterioration in the UK economy may have a detrimental impact on the demand and pricing of new homes, which in turn could materially affect the company’s turnover and profitability.
Pickstock Homes Limited mitigates against this risk by maintaining a proportion of partnership contract work and by ensuring that the levels of investment in land and work in progress managed appropriately to the level of sales and expected market conditions.
Material costs and availability of subcontractors The optimisation of house build cost efficiency, allied with the flexibility to commence work on a range of new sites as planning permissions allow, means that the vast majority of our work is carried out by sub-contractors. As production is geared to meet increasing demand for new housing, so demand for sub-contractors and materials also increase and may lead to some labour shortages and material price inflation.
Pickstock Homes Limited has managed this risk through the continued investment in our commercial department to help improve and broaden our sub-contract base and to assist in negotiating and placing our sub-contract orders in a timely manner
Liquidity and cash flow risk The businesses trading requirements and cash flow forecast are seen as key performance indicators within the company. Working capital and capital investment requirements are carefully monitored and reported to board directors. The company funds part of its operations through medium to long term debit facilities on a project by project bases, the terms of these facilities are prudently assessed to provide sufficient headroom, to adequately meet the fiscal demands of each project.
Health and safety The Health and safety of our staff and all the sub-contractors working on or visiting our sites is core to the company’s business principles. The company has continued the development of its formal health and safety management systems to reflect the growth of the business and the changing regulatory requirements.
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STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
Impact of COVID-19 Pandemic Effect on the Global Economy and Operations The health and safety of all individuals who work for or with us is of fundamental importance to Pickstock Homes Ltd. Following the Prime Minister’s lockdown announcement on the 23rd March 2020 our senior management team acted quickly to commence the temporary closure of the majority of our construction sites, sales centres and offices. This was completed by the 27th March, during the lockdown period, our senior managers held a number of virtual meetings to ensure key decisions on furloughing staff, workforce remuneration, and our liquidity were made in a timely manner.
As the lockdown restrictions eased we monitored the phased reopening of our construction sites in England and in Wales, by the end of June all of our construction sites were operational and our employees, other than those shielding, had returned to work.
In the short to medium term the outlook of the UK economy and housing market will remain uncertain in terms of both values and demand. Prior to the pandemic the availability of 95% LTV lending and the Government’s Help to Buy scheme provided invaluable assistance to those to get onto the housing ladder. Currently there are no mainstream mortgage lenders providing mortgages at 95% LTV for new build homebuyers, increasing reliance on Help to Buy.
The Government has confirmed that Help to Buy will only continue in its current form until March 2021. Thereafter a new scheme will be in place for the next two years, limited to first time buyers with regional price caps. The regional price caps will be restrictive, creating a significant limitation on the choice of new housing available within the new scheme. Planning for the changes to the Help to Buy scheme, we expect our purchasers who do not qualify for the new Help to Buy scheme to qualify for other mortgage products or to be able to use our part-exchange schemes.
Financing our Business The revenue achieved by the business in the financial year was lower than originally forecast, as a result of the restrictions in place between March and June 2020. However the impact was mitigated by the weighting towards partnership work, the well planned build programme and decisive management response to the emergence of the COVID -19 situation. Tight cost control and cash management, alongside the careful utilisation of the Government Furlough scheme, meant that the business was able to maintain a strong cash position, whilst safeguarding the jobs of all our employees.
Overall Pickstock Homes Limited remains highly liquid with a healthy cash balance and banking facilities committed on our key projects through to 31st March 2023.
On behalf of the board
Miss C Pickstock Director
30 April 2021
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DIRECTORS' REPORT FOR THE YEAR ENDED 31 JULY 2020
The directors present their annual report and financial statements for the year ended 31 July 2020.
Principal activities The principal activity of the company and group continued to be house building for both the general market and under contract for Housing Associations in the United Kingdom.
Results and dividends The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £125,000. The directors do not recommend payment of a further dividend.
Directors The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr N W Scott Miss C Pickstock Mr J A Pickstock Mr G V Pickstock Mr J R Pickstock
Future developments In accordance with section 414 c(11) of the Companies Act 2006 the company has chosen to set out details of likely future developments in the business as required by schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports Regulations 2008) within the strategic report.
Auditor In accordance with the company's articles, a resolution proposing that Champion Accountants LLP be reappointed as auditor of the group will be put at a General Meeting.
Statement of disclosure to auditor So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.
On behalf of the board
Miss C Pickstock Director
30 April 2021
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DIRECTORS' RESPONSIBILITIES STATEMENT FOR THE YEAR ENDED 31 JULY 2020
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF PICKSTOCK HOMES LIMITED
Opinion We have audited the financial statements of Pickstock Homes Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2020 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements: give a true and fair view of the state of the group's and the parent company's affairs as at 31 July 2020 and of the group's profit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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INDEPENDENT AUDITOR'S REPORT (CONTINUED) TO THE MEMBERS OF PICKSTOCK HOMES LIMITED
Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of our audit: the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors' remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
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INDEPENDENT AUDITOR'S REPORT (CONTINUED) TO THE MEMBERS OF PICKSTOCK HOMES LIMITED
Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Susan Harris MA ACA (Senior Statutory Auditor) For and on behalf of Champion Accountants LLP 30 April 2021
Chartered Accountants Statutory Auditor 2nd Floor Refuge House 33-37 Watergate Row Chester CH1 2LE
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GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2020
2020 2019 Notes £ £
Turnover 3 10,514,388 13,254,699 Cost of sales (8,987,672) (11,031,347)
Gross profit 1,526,716 2,223,352
Administrative expenses (1,042,020) (861,198) Other operating income 186,252 2,400
Operating profit 4 670,948 1,364,554
Interest payable and similar expenses 8 (131,182) (184,030)
Profit before taxation 539,766 1,180,524
Tax on profit 9 (104,171) 4,302
Profit for the financial year 435,595 1,184,826
Profit for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
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GROUP BALANCE SHEET AS AT 31 JULY 2020
2020 2019 Notes £ £ £ £
Fixed assets Tangible assets 11 1,174,859 97,808
Current assets Stocks 14 2,400,820 2,986,223 Debtors 15 4,154,935 4,073,038 Cash at bank and in hand 422,724 1,372,027
6,978,479 8,431,288 Creditors: amounts falling due within one year 16 (5,489,607) (6,172,718)
Net current assets 1,488,872 2,258,570
Total assets less current liabilities 2,663,731 2,356,378
Provisions for liabilities Deferred tax liability 17 15,342 18,584 (15,342) (18,584)
Net assets 2,648,389 2,337,794
Capital and reserves Called up share capital 19 100 100 Profit and loss reserves 2,648,289 2,337,694
Total equity 2,648,389 2,337,794
The financial statements were approved by the board of directors and authorised for issue on 30 April 2021 and are signed on its behalf by:
Miss C Pickstock Director
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COMPANY BALANCE SHEET AS AT 31 JULY 2020
2020 2019 Notes £ £ £ £
Fixed assets Tangible assets 11 121,286 97,808 Investments 12 1 -
121,287 97,808 Current assets Stocks 14 2,400,820 2,986,223 Debtors 15 5,208,508 4,073,038 Cash at bank and in hand 422,724 1,372,027
8,032,052 8,431,288 Creditors: amounts falling due within one year 16 (5,489,608) (6,172,718)
Net current assets 2,542,444 2,258,570
Total assets less current liabilities 2,663,731 2,356,378
Provisions for liabilities Deferred tax liability 17 15,342 18,584 (15,342) (18,584)
Net assets 2,648,389 2,337,794
Capital and reserves Called up share capital 19 100 100 Profit and loss reserves 2,648,289 2,337,694
Total equity 2,648,389 2,337,794
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £435,595 (2019 - £1,184,826 profit).
The financial statements were approved by the board of directors and authorised for issue on 30 April 2021 and are signed on its behalf by:
Miss C Pickstock Director
Company Registration No. 05512138
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GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2020
Share Profit and Total capital loss reserves Notes £ £ £
Balance at 1 August 2018 100 1,277,868 1,277,968
Year ended 31 July 2019: Profit and total comprehensive income for the year - 1,184,826 1,184,826 Dividends 10 - (125,000) (125,000)
Balance at 31 July 2019 100 2,337,694 2,337,794
Year ended 31 July 2020: Profit and total comprehensive income for the year - 435,595 435,595 Dividends 10 - (125,000) (125,000)
Balance at 31 July 2020 100 2,648,289 2,648,389
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COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2020
Share Profit and Total capital loss reserves Notes £ £ £
Balance at 1 August 2018 100 1,277,868 1,277,968
Year ended 31 July 2019: Profit and total comprehensive income for the year - 1,184,826 1,184,826 Dividends 10 - (125,000) (125,000)
Balance at 31 July 2019 100 2,337,694 2,337,794
Year ended 31 July 2020: Profit and total comprehensive income for the year - 435,595 435,595 Dividends 10 - (125,000) (125,000)
Balance at 31 July 2020 100 2,648,289 2,648,389
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GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2020
2020 2019 Notes £ £ £ £
Cash flows from operating activities Cash generated from/(absorbed by) 22 operations 317,163 (322,401) Interest paid (131,182) (184,030) Income taxes refunded/(paid) 102,953 (249,029)
Net cash inflow/(outflow) from operating activities 288,934 (755,460)
Investing activities Purchase of tangible fixed assets (1,113,237) -
Net cash used in investing activities (1,113,237) -
Financing activities Dividends paid to equity shareholders (125,000) (125,000)
Net cash used in financing activities (125,000) (125,000)
Net decrease in cash and cash equivalents (949,303) (880,460)
Cash and cash equivalents at beginning of year 1,372,027 2,252,487
Cash and cash equivalents at end of year 422,724 1,372,027
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COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2020
2020 2019 Notes £ £ £ £
Cash flows from operating activities Cash absorbed by operations 23 (736,409) (322,401) Interest paid (131,182) (184,030) Income taxes refunded/(paid) 102,953 (249,029)
Net cash outflow from operating activities (764,638) (755,460)
Investing activities Purchase of tangible fixed assets (59,664) - Proceeds on disposal of subsidiaries (1) -
Net cash used in investing activities (59,665) -
Financing activities Dividends paid to equity shareholders (125,000) (125,000)
Net cash used in financing activities (125,000) (125,000)
Net decrease in cash and cash equivalents (949,303) (880,460)
Cash and cash equivalents at beginning of year 1,372,027 2,252,487
Cash and cash equivalents at end of year 422,724 1,372,027
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NOTES TO THE GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies
Company information Pickstock Homes Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Brookland Hall, Guilsfield, Welshpool, Powys, SY21 9BU.
The group consists of Pickstock Homes Limited and all of its subsidiaries.
1.1 Accounting convention These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares; Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income; Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements; Section 33 ‘Related Party Disclosures’: Compensation for key management personnel. 1.2 Business combinations In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies (Continued)
1.3 Basis of consolidation The consolidated group financial statements consist of the financial statements of the parent company Pickstock Homes Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 July 2020. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
1.4 Going concern The directors have considered the on-going situation with regard to COVID-19 as part of their going concern assessment. The view of the directors is that, whilst they acknowledge the significant disruption and uncertainty that the pandemic has brought, the directors believe that the company is well placed to negotiate the unique set of conditions currently facing the UK economy. The company has a strong balance sheet, no external borrowing, the majority of its sites are contract based and construction work ceased for a relatively short period of time. This gives the directors comfort in being able to meet the company’s liabilities for the coming 12 months.
In reaching their conclusion, the directors have reviewed the company’s monthly cash flows, applied sensitivity analyses as appropriate, and considered the various financial support measures that have been announced by the UK government.
After consideration of all factors, the directors continue to adopt the going concern basis in preparing the financial statements.
1.5 Turnover Revenue from the sale of houses is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on exchange of contracts), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from social housing as part of a land sale and design and build contract is recognised when the significant risks and rewards of ownership have transferred to the purchaser, which is when the homes are build complete and all material contractual obligations have been fulfilled.
The purchase and subsequent sale of part-exchange properties is an activity undertaken in order to achieve the sale of a new property. As such, the activity is regarded as a mechanism for selling. Impairments and gains or losses on the sale of part-exchange properties are classified as a cost of sale.
1.6 Tangible fixed assets Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies (Continued)
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Freehold land and buildings No depreciation Plant and machinery 25% reducing balance Computer equipment 25% Reducing balance Motor vehicles 25% Reducing balance
Freehold land is not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
1.7 Fixed asset investments Interests in subsidiaries, associates and jointly controlled entities are initially measured at transaction price excluding transaction costs, and are subsequently measured at fair value at each reporting date. Transaction costs are expensed to profit or loss as incurred. Changes in fair value are recognised in other comprehensive income except to the extent that a gain reverses a loss previously recognised in profit or loss, or a loss exceeds the accumulated gains recognised in equity; such gains and loss are recognised in profit or loss.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.8 Stocks Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
Management are required to apply considerable judgement in assessing the profitability of a site and any impairment provisions required.
1.9 Construction contracts Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies (Continued)
1.10 Cash and cash equivalents Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.11 Financial instruments The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Other financial assets Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies (Continued)
Other financial liabilities Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
1.12 Taxation The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.13 Employee benefits The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
1 Accounting policies (Continued)
1.14 Retirement benefits Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15 Leases Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
2 Judgements and key sources of estimation uncertainty
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
3 Turnover and other revenue 2020 2019 £ £ Turnover analysed by class of business Principle activity 10,514,388 13,254,699
2020 2019 £ £ Other significant revenue Job retention support scheme 165,430 -
4 Operating profit 2020 2019 £ £ Operating profit for the year is stated after charging:
Depreciation of owned tangible fixed assets 36,186 32,603 (Profit)/loss on disposal of tangible fixed assets - 4,492 Operating lease charges 75,119 79,637
5 Auditor's remuneration 2020 2019 Fees payable to the company's auditor and associates: £ £
For audit services Audit of the financial statements of the group and company 8,700 7,299
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
5 Auditor's remuneration (Continued)
For other services Taxation compliance services 3,571 3,371
6 Employees
The average monthly number of persons (including directors) employed by the group and company during the year was: Group Company 2020 2019 2020 2019 Number Number Number Number
Direct 16 15 16 15 Staff 14 12 14 12 Directors 2 2 2 2
Total 32 29 32 29
Their aggregate remuneration comprised: Group Company 2020 2019 2020 2019 £ £ £ £
Wages and salaries 1,219,040 1,182,632 1,219,040 1,182,632 Social security costs 132,417 129,281 132,417 129,281 Pension costs 24,194 17,915 24,194 17,915
1,375,651 1,329,828 1,375,651 1,329,828
7 Directors' remuneration 2020 2019 £ £
Remuneration for qualifying services 165,000 165,000
8 Interest payable and similar expenses 2020 2019 £ £ Interest on financial liabilities measured at amortised cost: Other interest on financial liabilities 3,299 7,164 Other finance costs: Other interest 127,883 176,866
Total finance costs 131,182 184,030
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
9 Taxation 2020 2019 £ £ Current tax UK corporation tax on profits for the current period 107,413 127,101 Adjustments in respect of prior periods - (146,200)
Total current tax 107,413 (19,099)
Deferred tax Origination and reversal of timing differences (3,242) 14,797
Total tax charge/(credit) 104,171 (4,302)
The actual charge/(credit) for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2020 2019 £ £
Profit before taxation 539,766 1,180,524
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2019: 19.00%) 102,556 224,300 Tax effect of expenses that are not deductible in determining taxable profit 4,857 8,492 Tax effect of utilisation of tax losses not previously recognised - (21) Depreciation on assets not qualifying for tax allowances (3,242) 14,797 Research and development tax credit - (105,670) Under/(over) provided in prior years - (146,200)
Taxation charge/(credit) 104,171 (4,302)
10 Dividends 2020 2019 Recognised as distributions to equity holders: £ £
Final paid 125,000 125,000
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
11 Tangible fixed assets
Group Freehold land Plant and Computer Motor Total and buildings machinery equipment vehicles £ £ £ £ £ Cost At 1 August 2019 - 136,107 5,250 10,510 151,867 Additions 1,053,573 11,700 - 47,964 1,113,237
At 31 July 2020 1,053,573 147,807 5,250 58,474 1,265,104
Depreciation and impairment At 1 August 2019 - 44,117 3,589 6,353 54,059 Depreciation charged in the year - 24,153 554 11,479 36,186
At 31 July 2020 - 68,270 4,143 17,832 90,245
Carrying amount At 31 July 2020 1,053,573 79,537 1,107 40,642 1,174,859
At 31 July 2019 - 91,990 1,661 4,157 97,808
Company Plant and Computer Motor Total machinery equipment vehicles £ £ £ £ Cost At 1 August 2019 136,107 5,250 10,510 151,867 Additions 11,700 - 47,964 59,664
At 31 July 2020 147,807 5,250 58,474 211,531
Depreciation and impairment At 1 August 2019 44,117 3,589 6,353 54,059 Depreciation charged in the year 24,153 554 11,479 36,186
At 31 July 2020 68,270 4,143 17,832 90,245
Carrying amount At 31 July 2020 79,537 1,107 40,642 121,286
At 31 July 2019 91,990 1,661 4,157 97,808
12 Fixed asset investments Group Company 2020 2019 2020 2019 Notes £ £ £ £
Investments in subsidiaries 13 - - 1 -
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
12 Fixed asset investments (Continued)
Movements in fixed asset investments Company Shares in subsidiaries £ Cost or valuation At 1 August 2019 - Additions 1
At 31 July 2020 1
Carrying amount At 31 July 2020 1
At 31 July 2019 -
13 Subsidiaries
Details of the company's subsidiaries at 31 July 2020 are as follows:
Name of undertaking Address Nature of business Class of % Held shares held Direct
Pickstock Homes (Ludlow) Limited 1 House Building Ordinary 100.00
Registered office addresses (all UK unless otherwise indicated):
1 2 Mile Oak, Maesbury Road, Oswestry, Shropshire, UK, SY10 8GA
The aggregate capital and reserves and the result for the year of the subsidiaries noted above was as follows:
Name of undertaking Capital and Profit/(Loss) Reserves £ £
Pickstock Homes (Ludlow) Limited 1 -
14 Stocks Group Company 2020 2019 2020 2019 £ £ £ £
Raw materials and consumables 57,308 38,024 57,308 38,024 Work in progress 2,343,512 2,046,045 2,343,512 2,046,045 Finished goods and goods for resale - 902,154 - 902,154
2,400,820 2,986,223 2,400,820 2,986,223
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
15 Debtors Group Company 2020 2019 2020 2019 Amounts falling due within one year: £ £ £ £
Trade debtors 16,873 633,910 16,873 633,910 Corporation tax recoverable - 123,665 - 123,665 Amounts owed by group undertakings - - 1,053,573 - Other debtors 3,758,496 3,185,675 3,758,496 3,185,675 Prepayments and accrued income 54,453 30,429 54,453 30,429
3,829,822 3,973,679 4,883,395 3,973,679
Amounts falling due after more than one year:
Gross amounts owed by contract customers 325,113 99,359 325,113 99,359
Total debtors 4,154,935 4,073,038 5,208,508 4,073,038
16 Creditors: amounts falling due within one year Group Company 2020 2019 2020 2019 £ £ £ £
Trade creditors 1,720,110 1,647,752 1,720,110 1,647,752 Corporation tax payable 213,802 127,101 213,802 127,101 Other taxation and social security 191,795 92,248 191,795 92,248 Other creditors 2,147,263 2,914,940 2,147,264 2,914,940 Accruals and deferred income 1,216,637 1,390,677 1,216,637 1,390,677
5,489,607 6,172,718 5,489,608 6,172,718
17 Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Liabilities Liabilities 2020 2019 Group £ £
Accelerated capital allowances 15,342 18,584
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
17 Deferred taxation (Continued)
Liabilities Liabilities 2020 2019 Company £ £
Accelerated capital allowances 15,342 18,584
Group Company 2020 2020 Movements in the year: £ £
Liability at 1 August 2019 18,584 18,584 Credit to profit or loss (3,242) (3,242)
Liability at 31 July 2020 15,342 15,342
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
18 Retirement benefit schemes 2020 2019 Defined contribution schemes £ £
Charge to profit or loss in respect of defined contribution schemes 24,194 17,915
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
19 Share capital 2020 2019 2020 2019 Ordinary share capital Number Number £ £ Issued and fully paid Ordinary £1 shares of £1 each 100 100 100 100
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
20 Operating lease commitments
Lessee At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Group Company 2020 2019 2020 2019 £ £ £ £
Within one year 36,323 26,577 36,323 26,577 Between two and five years 34,612 18,828 34,612 18,828
70,935 45,405 70,935 45,405
21 Directors' transactions
At the year end there was an amount of £1,723,640 (2019 - £2,658,298) outstanding to a director of the company. The movement in the year relates to interest charged and amounts repaid. The loan has no fixed repayment terms and interest is payable at a rate of 6%.
During the year rental expenses of £43,545 (2019 - £44,055) were paid to a director of the company. An amount of £Nil (2019 - £255) was outstanding at the year end.
During the year £6,454 (2019 - £809,645) was charged to the company by entities controlled by one or more of the directors in respect of services, materials or equipment provided and expenditure incurred on behalf of the company. An amount of £6,454 (2019 - £5,113) was outstanding at the year end.
During the previous year a loan was provided to a company controlled by one of the directors. The loan is interest free and repayable on demand. The balance outstanding at the end of the year was £2,692,116 (2019 - £2,247,655).
22 Cash generated from/(absorbed by) group operations 2020 2019 £ £
Profit for the year after tax 435,595 1,184,826
Adjustments for: Taxation charged/(credited) 104,171 (4,302) Finance costs 131,182 184,030 (Gain)/loss on disposal of tangible fixed assets - 4,492 Depreciation and impairment of tangible fixed assets 36,186 32,603
Movements in working capital: Decrease in stocks 585,403 1,365,740 Increase in debtors (205,562) (3,236,230) (Decrease)/increase in creditors (769,812) 146,440
Cash generated from/(absorbed by) operations 317,163 (322,401)
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NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 JULY 2020
23 Cash absorbed by operations - company 2020 2019 £ £
Profit for the year after tax 435,595 1,184,826
Adjustments for: Taxation charged/(credited) 104,171 (4,302) Finance costs 131,182 184,030 (Gain)/loss on disposal of tangible fixed assets - 4,492 Depreciation and impairment of tangible fixed assets 36,186 32,603
Movements in working capital: Decrease in stocks 585,403 1,365,740 Increase in debtors (1,259,135) (3,236,230) (Decrease)/increase in creditors (769,811) 146,440
Cash absorbed by operations (736,409) (322,401)
24 Analysis of changes in net funds - group 1 August Cash flows 31 July 2020 2019 £ £ £
Cash at bank and in hand 1,372,027 (949,303) 422,724
25 Analysis of changes in net funds - company 1 August Cash flows 31 July 2020 2019 £ £ £
Cash at bank and in hand 1,372,027 (949,303) 422,724
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