Annual Report • Jul 31, 2011
Annual Report
Open in ViewerOpens in native device viewer
ANNUAL REPORT AND STATEMENT OF ACCOUNTS TO 31st JULY 2011
J. M. SMART, Chairman and Managing Director A. D. MCCLURE, Secretary L. E. GLENDAY D. W. SMART
28 CRAMOND ROAD SOUTH, EDINBURGH, EH4 6AB
MCGOWAN & CO. (CONTRACTORS) LIMITED CRAMOND REAL ESTATE COMPANY LIMITED THOMAS MENZIES (BUILDERS) LIMITED CONCRETE PRODUCTS (KIRKCALDY) LIMITED C. & W. ASSETS LIMITED
EQUINITI LIMITED, 34 SOUTH GYLE CRESCENT, SOUTH GYLE BUSINESS PARK, EDINBURGH, EH12 9EB
BANK OF SCOTLAND, 38 ST ANDREW SQUARE, EDINBURGH, EH2 2YR
FRENCH DUNCAN LLP, CHARTERED ACCOUNTANTS, 375 WEST GEORGE STREET, GLASGOW, G2 4LW
RUSSEL & AITKEN LLP, 27 RUTLAND SQUARE, EDINBURGH, EH1 2BU
ANDERSON STRATHERN LLP, 1 RUTLAND COURT, EDINBURGH, EH3 8EY
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will be held at the Registered Office, 28 Cramond Road South, Edinburgh on 15th December 2011 at 12 noon, for the following purposes:
A member entitled to attend and vote at this Meeting is entitled to appoint one or more proxies to attend and vote on a poll instead of him. A proxy need not be a member. Forms of proxy, if used, must be lodged with the Registrars of the Company at least 48 hours before the time fixed for the Meeting. Forms of proxy may also be lodged electronically by submitting a duly completed scanned copy of the proxy card to [email protected]. You may not use the electronic address provided either in this Notice of Meeting or any related documents (including the Form of Proxy) to communicate with the Company for any purpose other than that expressly stated.
In accordance with section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of the total number of shares in respect of which members are entitled to exercise voting rights at the AGM and, if applicable, any members' statements, members' resolutions or members' matters of business received by the Company after the date of this Notice will be available on the Company's website www.jsmart.co.uk.
Pursuant to section 319A of the Companies Act 2006, the Company must cause to be answered at the AGM any question relating to the business being dealt with at the AGM which is put by a member attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered or if to do so would involve the disclosure of confidential information.
BY ORDER OF THE BOARD A. D. MCCLURE, SECRETARY 28 Cramond Road South, Edinburgh EH4 6AB
15th November 2011
Note: The Dividend, if approved, will be paid on 19th December 2011 to shareholders on the Register at the close of business on 2nd December 2011.
As forecast in the interim report, headline Group profit for the year before tax, including an unrealised deficit in revalued property as required by International Financial Reporting Standards, turned out lower than last year at £656,000. This compares with a headline profit for last year of £3,984,000. If the impact of revalued property on the figures is disregarded then a truer reflection of Group performance emerges in the form of an underlying profit before tax for the year under review of £5,992,000 (including £1,929,000 profit from property sales) which compares with the corresponding figure for underlying profit last year of £4,588,000 (no property sales).
The value of investment properties at the beginning of the year was £74,560,000 (cost £48,247,000). The net deficit on the year end valuation was £5,336,000 leaving a value of £72,586,000 (cost £51,609,000).
The Board is recommending a Final Dividend of 9.70p nett making a total for the year of 14.30p nett, which compares with 14.10p nett for the previous year. The final dividend will cost the Company £978,000.
Profit adjusted for pension scheme surplus, dividends paid and fair value reserve adjustment when added to opening shareholders' funds brings the total equity of the Group to £97,560,000.
Group construction work carried out and share of Joint Ventures' turnover decreased by 17%, own work capitalised decreased by 3%, Group revenue decreased by 19% and headline Group profit decreased by 84%. Underlying Group profit excluding an unrealised deficit in revalued property increased by 31%.
Turnover in contracting was again lower, however a profit was achieved again. The slow pick up in private house sales since January mentioned in the interim report continued until the year end. Sales in precast concrete manufacture fell once more and a loss was incurred.
During the year we commenced a mixed commercial and predominantly private residential development at Robertson Avenue, Edinburgh and an industrial development at Bathgate. Commercial and industrial letting remains difficult.
At the end of December 2010 Mr Kenneth H Hastings, having attained his seniority, retired from the Board. Mr. Hastings served the Company for 36 years, 25 as a Director, during which time his hard work, loyalty, dedication and the consummate skills he demonstrated in the fields of Quantity Surveying and Property Development contributed very substantially to the Group's success. My sincerest personal thanks go to Ken for his sterling efforts on the Company's behalf, together with my wishes for a long and happy retirement.
The general outlook is still uncertain. Occupancy levels in our commercial and industrial space are eroding, albeit slowly. Rental income may be slightly lower than last year's figure.
The slow but steady progress in private house sales experienced in the second half of the year under review has now halted.
While we have an adequate amount of contracting work in hand at present, margins will be difficult to achieve.
The uncertainties generated by the recession make it impossible to forecast the outcome for the current financial year with any degree of accuracy, however it is likely that underlying profit will be less than last year.
15th November 2011 Chairman
J. M. SMART
J.M. Smart, Chairman and Managing Director Aged 67 Joined the Company in 1967 Appointed Director in 1978 and appointed Chairman in 1988
K.H. Hastings Aged 65 Joined the Company in 1974 Appointed Director in 1985 Retired as a Director on 20th December 2010
A.D. McClure Aged 65 Joined the Company in 1964 Appointed Director in 1987
L.E. Glenday Aged 63 Joined the Company in 1972 Appointed Director in 2001
D.W. Smart Aged 38 Joined the Company in 1998 Appointed Director on 20th December 2010
The Directors submit their Annual Report and Statement of Accounts for the year ended 31st July 2011.
| The profit of the Group for the year after charging taxation amounted to | £1,014,000 | ||
|---|---|---|---|
| The Directors have made the following appropriations: | |||
| Paying a Final Dividend for 2010 of 9.60p per share (2009, 9.35p) | £968,000 | ||
| Paying an Interim Dividend for 2011 of 4.60p per share (2010, 4.50p) | 464,000 | ||
| £1,432,000 |
The Directors recommend a Final Dividend for the year of 9.70p per share, making a total for the year of 14.30p.
The Final Dividend, if approved, will be paid to all Members on the Share Register of the Company at the close of business on 2nd December 2011. Dividend warrants will be posted on 16th December 2011.
The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) 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 Parent Company and of their profit or loss for that year.
In preparing those financial statements, the Directors are required to:
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and IFRS as adopted by the EU. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing the Report of the Directors, Report on Directors' Remuneration and Corporate Governance Statement that comply with that law and regulations.
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.
Each of the Directors confirms, to the best of their knowledge:
The principal activities of the Company and its Subsidiaries are building and civil engineering contracting of all types, building for sale of private houses, carrying out of industrial and commercial developments and redevelopments for sale or lease. Other activities of Subsidiaries are the manufacture for sale of concrete building products and investment holding.
The company has interests in Joint Venture Companies as follows:
| Name of Joint Venture Company | Percentage of interest held | Joint Venture Party |
|---|---|---|
| Edinburgh Industrial Estates Limited | 50% | EDI (Industrial) Limited |
| Prestonfield Development Company Limited | 50% | Westerwood Limited |
| Northrigg Limited | 50% | William Sanderson |
| Duff Street Limited | 50% | Kiltane Developments Limited |
| Invertiel Developments Limited | 50% | Macdonald Estates PLC |
| Primrose Development Company Limited | 50% | Macdonald Estates PLC |
Full details of the Joint Venture companies are given in note 14 to the accounts.
Group operations during the year were as follows:
The Company continues to undertake the construction of social housing for several housing associations within the Edinburgh area. During the year the Company completed one such contract and commenced three new contracts. The Company also commenced the construction of a private housing development within the city of Edinburgh.
During the year the company sold a further 8 dwellings in an existing private housing development.
The Company completed the construction of a commercial office development and commenced construction of new office and industrial developments on behalf of subsidiary company, C&W Assets Limited.
Thomas Menzies (Builders) Limited continues to undertake small to medium sized civil engineering contracts for Local Authorities, Enterprise Companies and private sector clients and provides emergency call-out and remedial works for The Coal Authority.
Concrete Products (Kirkcaldy) Limited continues to manufacture and sell hydraulically pressed concrete products for the building and home improvement industries.
McGowan & Co (Contractors) Limited continues to support Group companies with the provision of plumbing and heating services.
Rent, service charges recoverable and insurance premiums recharged are the main sources of investment income received by the Group on investment properties owned and managed by the subsidiary, C&W Assets Limited. The investment properties are located throughout the central belt of Scotland primarily within the Edinburgh area.
As noted above a commercial office development was completed during the year and construction commenced on new office and industrial developments, in addition the Company acquired an existing commercial development.
During the year the Company sold three properties, revenue received from these sales amounted to £4,054,000 and resulted in profit on sale of £1,929,000.
Other investing activities of the Group consists of dividends and interest received on a portfolio of equity investments and cash deposits.
Rents and service charges on industrial and residential properties remain the sources of income earned by the Joint Venture companies. During the year there was no change in the development activities of the Joint Ventures.
During the year an application to strike off Primrose Development Company Limited was submitted to the Registrar of Companies and the Company was formally dissolved on 11th November 2011. This Company had not traded in this or previous years.
| Profit | ||||||
|---|---|---|---|---|---|---|
| excluding | ||||||
| unrealised | ||||||
| deficit | ||||||
| in revalued | ||||||
| Revenue | Profit | property | ||||
| £000 | £000 | £000 | ||||
| Construction activities | 19,588 | 312 | 312 | |||
| Investment activities | 5,523 | 302 | 5,638 | |||
| Joint Ventures | – | 42 | 42 | |||
| 25,111 | 656 | 5,992 |
Group external construction revenue decreased from £21,022,000 to £17,001,000 a decrease of £4,021,000 and internal own work capitalised decreased from £2,668,000 to £2,587,000. Rental income from investment properties, excluding that from Joint Ventures, together with service charges and insurance receivable increased from £5,521,000 to £5,523,000.
During the year the Group sold investment properties resulting in profits of £1,929,000. The net deficit on valuation of investment properties as at 31st July 2011 amounted to £5,336,000 as compared to a net deficit for the previous year of £604,000.
The above movements have resulted in an Operating Profit for the Group for the year of £90,000 as compared to £3,787,000 in the previous year.
The Group's share of profits in Joint Ventures amounted to £42,000 a decrease of £159,000 from the previous year.
Income from financial assets including profit arising on sale of financial assets together with finance income less finance costs amounted to £524,000 as compared to £(4,000) for the previous year.
Group Profit before tax amounted to £656,000 for the year as compared to £3,984,000 for the previous year. If the unrealised net deficit on valuation of investment properties is excluded, the Group Profit before tax for the year would be £5,992,000 as compared to £4,588,000 for the previous year.
| 2011 | Movement | 2010 | ||||
|---|---|---|---|---|---|---|
| £000 | %/£000 | £000 | ||||
| Revenue | 17,001 | (19%) | 21,022 | |||
| Own work capitalised | 2,587 | (3%) | 2,668 | |||
| Other operating income (Group rental income including service charges) | 5,523 | – | 5,521 | |||
| Profit before tax | 656 | (84%) | 3,984 | |||
| Profit excluding unrealised deficit in revalued property | 5,992 | 31% | 4,588 | |||
| Group investment income including profit on sale of available for | ||||||
| sale financial assets | 524 | 528 | (4) | |||
| Share of Joint Ventures' profits | 42 | (79%) | 201 | |||
| Group Balance Sheet | 97,560 | 1% | 96,541 |
Main focus in contracting is on social housing which can be highly competitive putting pressure on turnover and margins (there have been material but unquantifiable increases in the risk and impact).
We believe the above measures ensure a high standard of service, quality and progress which permits our clients to employ us on a partnering "best value" basis where price is not the only criterion and repeat business results.
Cuts in funding reduce or suspend the social housing programme resulting in reduced contracting workload and substantial redundancies (there have been material but unquantifiable increases in the risk and impact).
Inability to find tenants for new development space and loss of existing tenants leads to reduction of revenue and capital resources.
Free availability of credit leads to rise in cost of developable land and property to unsustainable levels resulting in heavy losses or insolvency when the "bubble" bursts and credit is withdrawn.
Possible failure of bank threatens the Group's existence due to loss of cash reserves.
Massive reduction in bank and interest rates results in significant loss of Group revenue from cash on deposit.
Effect of recession and restriction on mortgage lending results in stalling of private house sales.
Note 27 to the accounts gives details of the most recent actuarial review of the Group's defined benefit pension scheme.
Full details of the movements in Property, plant and equipment and Investment properties during the year are given in notes 12 and 13 to the accounts.
At 31st July 2010 a valuation of the Group's non-investment heritable properties was carried out by K. H. Hastings, a Director of the Parent Company. This valuation, which has not been incorporated into these accounts, showed a net surplus over the cost of these properties after depreciation of £1,672,000 as at 31st July 2011.
It is not anticipated that the activities of the Company and its Subsidiaries, as described above, will substantially change in the immediate future.
It is Company policy that there should be effective communication with employees at all levels, on matters which affect their current jobs or future prospects. In achieving this policy, the Directors are aware of the need to take account of the practical and commercial considerations of the Company, and of the needs of employees.
The policy of the Company with regard to disabled persons is to give full and fair consideration to all applicants for employment and to all employees in relation to promotion. Wherever possible, employees who become disabled during their employment and are unable to fulfil current duties are offered suitable alternative employment.
During the year the Group made total charitable donations amounting to £35,000 (2010, £35,000). Donations to local causes amounted to £19,000 (2010, £19,000) and donations to national charities amounted to £16,000 (2010, £16,000).
It is the policy of the Group not to make donations for political purposes to EU Political Parties or incur EU Political Expenditure and accordingly neither the Company nor its Subsidiaries made donations or incurred such expenditure in the year.
The Companies Act 2006 prohibits companies from making any political donations to EU political organisations, independent candidates or incurring EU political expenditure unless authorised by shareholders in advance. The Company does not make, and does not intend to make, donations to EU political organisations or independent election candidates, nor does it incur any EU political expenditure.
The definitions of political donations, political organisations and political expenditure used in the Companies Act 2006 are very wide and can cover activities such as sponsorship, subscriptions, payment of expenses, paid leave for employees fulfilling certain public duties, and support for bodies representing the business community in policy review or reform. Shareholder approval is therefore being sought on a precautionary basis only, to allow the Company, and any Subsidiary Company, to continue to support the community and put forward its views to wider business and Government interests, without running the risk of being in breach of the legislation.
The Board is therefore seeking authority to make political donations to EU political organisations and independent election candidates not exceeding £5,000 in total and to incur EU political expenditure not exceeding £5,000 in total. In accordance with the Companies Act 2006 this resolution requires to be put to shareholders every four years. For the purposes of this resolution, the terms 'political donations', 'EU political organisations', 'independent election candidate' and 'EU political expenditure' shall have the meanings given to them in sections 363 to 365 of the Companies Act 2006.
The Group's policy concerning payment of trade creditors is to settle in accordance with accepted best practice in the building industry, i.e. payment is made by the end of the month following the month of supply or delivery. Further information relating to the policy on payment of creditors may be obtained from the Group's registered office. The average number of days taken to pay creditors is 20, based on the average daily amount invoiced by suppliers during the year and the creditors balance at the year end.
(i) The Directors at 31st July 2011 and their beneficial interests in the share capital of the Company were as follows:
| 1st August 2010 | 31st July 2011 | ||
|---|---|---|---|
| Ordinary shares of 10p each | Ordinary shares of 10p each | ||
| Beneficial holdings | Beneficial holdings | ||
| J. M. Smart | 239,700 | 239,700 | |
| A. D. McClure | 55,000 | 55,000 | |
| L. E. Glenday | 45,000 | 45,000 | |
| D. W. Smart | 2,372,700 | 2,372,700 |
K. H. Hastings retired as a Director on 20th December 2010. At 1st August 2010 he had a beneficial holding in 63,000 ordinary shares of the Company.
The Company's authorised and issued ordinary share capital as at 31st July 2011 comprises a single class of ordinary shares. During the year there has been no movement in the issued share capital of the Company.
As far as the Directors are aware, other than the Directors, the Company has been notified that as at 20th October 2011, the following have interests of more than 3% in the Company's issued share capital:
| Number | % | ||||||
|---|---|---|---|---|---|---|---|
| Octet Investments Limited | 324,480 | 3.22 | |||||
| A. J. Whitehead . | 315,897 | 3.13 | |||||
| J. R. Smart | 2,372,700 | 23.53 |
All members who hold ordinary shares are entitled to attend and vote at the Annual General Meeting. On a show of hands at a General Meeting every member present in person and every duly appointed proxy shall have one vote and on a poll, every member present in person or by proxy shall have one vote for every ordinary share held or represented. The Company is not aware of any agreements between shareholders that may result in restrictions on voting rights of shareholders.
Rights attached to ordinary shares may only be varied by special resolution at a General Meeting.
REPORT OF THE DIRECTORS (cond.) 31st JULY 2011
There are no specific restrictions on the transfer of securities in the Company, other than those imposed by prevailing legislation and the requirements of the Listing Rules in respect of Company Directors. The Company is not aware of any agreements between shareholders that may result in restrictions of the transfer of securities.
Initial appointments may be approved by the Board of Directors but anyone so appointed must be re-elected by ordinary resolution at the next Annual General Meeting of the Company. Directors, excluding the Managing Director, must retire and may offer themselves for re-election at the Annual General Meeting at least every three years.
The Company's Articles of Association can only be amended by a special resolution at a General Meeting.
The Company is not party to any significant agreements which take effect, alter or terminate upon the change of control of the Company following a takeover bid.
The Company does not have any agreements with any Director or employee that would provide compensation for loss of office or employment, whether through resignation, purported redundancy or otherwise resulting from a takeover bid.
On the information available, the Directors are of the opinion that the Company is not a Close Company within the provisions of the Corporation Tax Act 2010.
This statement details how your Company has applied the main and supporting principles of corporate governance as set out in the Financial Reporting Council's UK Corporate Governance Code issued in June 2010 (the Code). A copy of the Code can be found on the Financial Reporting Council's website, www.frc.org.uk.
The Board is committed to the principles of openness, integrity and accountability in dealing with the Company's affairs and believes it has always acted with probity in the best interests of the Company, its employees and shareholders without recourse to guidance or instruction from others and fully intends to continue to do so in the future.
The Board recognises that it has not complied throughout the year in whole or in part with the following provisions set out in Section 1 of the Code – A.1.1- A.1.2, A.2.1, A.3.1, A.4.1-A.4.3, B.1.1-B.1.2, B.2.1-B.2.4, B.3.1-B.3.2, B.6.1-B.6.3, B.7.1-B.7.2, C.3.1-C.3.6, D.1.1, D.1.5, D.2.1-D.2.2, E.1.1 and E.2.2-E.2.3, details and explanations for non-compliance are given below.
The Company is led by a Board of Directors which comprises the executive management of the Company, being the Chairman and three executive directors, and thus maintains full control of the Company. All the Directors worked for the Company prior to their appointments as Director. During the year K. H. Hastings retired from the Company, at the same time D. W. Smart was appointed as Director. Decisions are taken by the Board quickly and effectively following ad hoc consultation among the Directors concerned when any matter arises. Your Board takes the view that this direct and flexible approach is preferable to the more cumbersome procedures prevalent in larger organisations and has made a considerable contribution to your Company's continuing success and ensures that this approach best serves the interests of the Company and its shareholders.
The Board held 4 formal Board Meetings in the year, attendance at these meetings was as follows:
| J. M. Smart | 4 |
|---|---|
| K. H. Hastings (retired 20th December 2010) | 2 |
| A. D. McClure | 4 |
| L. E. Glenday | 3 |
| D. W. Smart (appointed 20th December 2010) | 1 |
Given that the Board is the executive management of the Company and takes decisions on all material matters and thereby exercises full direction and control, there is no formal schedule of matters reserved for the Board's decision.
The Chairman of the Company is also the Managing Director. Bearing in mind the size of the Company, the Board sees no value in splitting the role of the Chairman and Managing Director, a policy which has served your Company well over many years. The Chairman is responsible for the leadership of the Board, ensuring that all the Directors receive accurate, timely and clear information on issues arising at Board meetings, setting Board agendas and ensuring adequate time is given to discussion of the agenda points. The members of the Board have complete freedom to seek independent professional advice, at the Company's expense, when they feel it is appropriate to do so. All Directors have access to the advice and services of the Company Secretary, who is also a Director of the Company, and is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. All Directors openly express their views and make a valuable contribution to the running of the Company.
The Board considers that increasing the manning level of the Board by 50% by the appointment of two nonexecutive Directors would increase costs and impose an additional administrative burden for no discernible benefit and, accordingly, would serve no useful purpose. As a result of not appointing non-executive Directors, the Company has not established Nomination, Remuneration or Audit Committees.
REPORT OF THE DIRECTORS (cond.) 31st JULY 2011
As the Company does not have a Nomination Committee, nominations for appointment of new Directors to the Board are submitted by the Chairman for approval by the other members of the Board. As all the Directors of the Company were long-serving employees of the Company at the date of appointment, no formal tailored induction upon joining the Board was necessary. As the Directors are all full-time employees of the Company they are fully committed to the Company and to the discharge of their duties. The Directors are encouraged by the Board to receive any training they consider necessary to ensure they remain up-to-date with their skills, knowledge and familiarity of the Company's business and they remain aware of the risks associated with the Company and are also aware of regulatory, legal and financial and other developments to enable them to fulfil their role effectively.
There is no formal system of performance evaluation of the Board or its members.
The Company's Articles of Association require that all new Directors are subject to re-election at the first Annual General Meeting after their appointment and that all Directors, with the exception of the Managing Director, seek re-election at intervals of no more than three years at the Annual General Meeting.
As the Company does not have a Remuneration Committee, the Chairman is responsible for fixing the remuneration packages of the Directors which are based on their performance and the scope of their duties and responsibilities. No Director has a service contract with the Company and accordingly periods of notice and termination payments would be construed in accordance with Employment Law. There is no scheme in place for Directors to receive entitlement to share options nor are there any long term incentive schemes.
The Directors have sole responsibility for the preparation of the Annual Report and Statement of Accounts, the Half Yearly Financial Report, the Interim Management Reports and other price-sensitive public reports in a balanced and understandable manner.
In order to ensure that the Company and Group have adequate resources to ensure the continuing operations of the Company and Group for the foreseeable future the Directors consider future trading, investment property acquisitions and cash requirements. The Directors take account of available market conditions in all areas of the Group's activities and using their knowledge and experience relating to the Group's investment property portfolio. The Directors' opinion is that the Company and Group have adequate financial resources to allow the Company and Group to continue in operational existence for the foreseeable future and therefore considers the adoption of the going concern basis as appropriate for the preparation of the Accounts.
The Board is responsible for and annually reviews the Group's system of internal controls in relation to financial, operational, compliance and risk management to ensure their continued effectiveness. The systems adopted by the Board are designed to manage the risk of failure to achieve the Company's business objectives as opposed to eliminate them as any system of control can only provide reasonable but not absolute assurance against material misstatement or loss.
The Board, in accordance with the Code, has reviewed the effectiveness of the internal controls from the commencement of the accounting period to the date of approval of the Annual Report and Statement of Accounts. No significant failings or weaknesses have been identified in that period. There has also been a continual process of identification by the Directors of key areas of risk within the Group and appropriate action taken to mitigate and monitor such risks.
The main features of the Group's internal control and risk management systems in relation to the financial reporting process are:
As the Company does not have an Audit Committee, it is the responsibility of the Chairman and Company Secretary on a continuing basis to consider how the financial reporting and internal control principles apply to the Company, to maintain an appropriate relationship with the Group's Auditors and to review the scope and results of the audit and its cost effectiveness. The Board is responsible for setting the remuneration of the Auditors. In order to ensure the continued independence and objectivity of the Group's Auditors, the Board has established policies regarding the provision of non-audit services by the Auditors. In some cases, the nature of the non-audit advice may make it more timely and cost effective to select the Group's Auditors, who already have a good understanding of the Group. In other circumstances the decisions on the allocation of work are made on the basis of competence and cost effectiveness. The Group's Auditors are subject to professional standards which safeguard the integrity of the auditing role performed on behalf of the shareholders.
The Board has considered and for the time being has concluded that an internal audit function is not necessary. The Board will continue to review the need for such a function. As such there is no internal audit of the risks identified by the Board and the controls established by the Board to mitigate and monitor these risks.
The Board has in the past and will in the future continue to enter into dialogue with the shareholders wherever possible. The Chairman is responsible for ensuring that the views and concerns of the shareholders are communicated to the Board. The Chairman is also responsible for discussing governance and strategy matters with the shareholders.
As the Company has no non-executive Directors there is no opportunity for shareholders to meet with these Directors.
All shareholders have an opportunity at the Annual General Meeting to participate in questions and answers with the Board on matters relating to the Company.
At the Annual General Meeting separate resolutions will be proposed on each substantially separate issue and the number of proxy votes received for and against each resolution will be announced.
In accordance with section 489 of the Companies Act 2006, a resolution is to be proposed at the forthcoming Annual General Meeting for the re-appointment of French Duncan LLP as Auditors of the Company.
In the case of each of the Directors who were Directors at the date this Report was approved:
APPROVED BY THE BOARD OF DIRECTORS AND SIGNED ON ITS BEHALF BY A. D. MCCLURE, 15th November 2011 Secretary.
The Directors'Remuneration Report for the year to 31st July 2011 is set out below, in compliance with current Listing Rules and statutory reporting requirements.
The Listing Rules require a Company to include a statement in its Annual Report and Statement of Accounts as to whether or not it has complied with Section B of the Code of Best Practice annexed to the Listing Rules. These provisions require the Company to set up a Remuneration Committee consisting exclusively of non-executive Directors to determine the executive Directors' remuneration.
For reasons set out under Corporate Governance above, your Board has appointed no non-executive Directors and therefore no Remuneration Committee.
The Company's policy on Directors' remuneration for the current and future years is that individual rewards should reflect performance and the scope of their duties and responsibilities.
The following tables show an analysis of the various elements of remuneration receivable by those Directors who served during the year ended 31st July 2011.
(Audited Information)
| Salary and | Taxable | Total | Total | |||
|---|---|---|---|---|---|---|
| Fees | Benefits | 2011 | 2010 | |||
| £000 | £000 | £000 | £000 | |||
| J. M. Smart | 118 | 9 | 127 | 125 | ||
| K. H. Hastings | 204 | 4 | 208 | 128 | ||
| A. D. McClure | 118 | 9 | 127 | 125 | ||
| L. E. Glenday | 118 | 9 | 127 | 125 | ||
| D. W. Smart | 46 | – | 46 | – |
(Audited Information)
| Transfer Value Transfer Value | |||||||
|---|---|---|---|---|---|---|---|
| Gross increase Total accrued | of accrued | of accrued | Total change | ||||
| in accrued | pension | pension at | pension at | in value | |||
| pension | 31/7/11 | 31/7/11 | 31/7/10 during period | ||||
| £ | £ | £ | £ | £ | |||
| A. D. McClure | 4,754 | 75,713 | 1,470,916 | 1,294,237 | 173,155 | ||
| L. E. Glenday | 4,952 | 72,996 | 1,354,562 | 1,202,256 | 148,782 | ||
| D. W. Smart | 1,214 | 9,149 | 66,119 | 62,042 | 2,727 |
No Director holds share options and there is no scheme in place which could give such an entitlement, nor is there any long term incentive scheme.
No Director has a service contract with the Company and accordingly periods of notice and termination payments would be construed in accordance with Employment Law.
The graph below shows the total shareholder return performance of the Company's shares in comparison with the FTSE EPRA/NAREIT UK Index for the five years to 31st July 2011. For the purposes of the graph, total shareholder return has been calculated as the percentage change during the five year period in the market price of the shares, assuming that Dividends are reinvested.
This graph shows the value of £100 invested in J. Smart & Co. (Contractors) PLC over the last five financial years compared to £100 invested in the FTSE EPRA/NAREIT UK Index which the Directors believe is the most appropriate comparative index.
APPROVED BY THE BOARD OF DIRECTORS AND SIGNED ON ITS BEHALF BY A. D. MCCLURE, 15th November 2011 Secretary.
We have audited the financial statements of J. Smart & Co. (Contractors) PLC for the year ended 31st July 2011 which comprise Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated and Company Statement of Financial Position, Consolidated and Company Statement of Cash Flows and related notes to the accounts. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.
This report is made solely to the Company's shareholders, as a body, in accordance with sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's shareholders 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 shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
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 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 (APB's) Ethical Standards for Auditors.
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 our opinion:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
KEVIN G BOOTH 375 WEST GEORGE STREET, Senior Statutory Auditor GLASGOW G2 4LW. for and on behalf of FRENCH DUNCAN LLP 15th November 2011 Statutory Auditor and Chartered Accountants
| Notes | 2011 £000 |
2010 £000 |
||||
|---|---|---|---|---|---|---|
| Group construction work carried out and share of Joint Ventures' turnover | 19,588 | 23,690 | ||||
| Less: Share of Joint Ventures' turnover . Less: Own construction work capitalised. |
– (2,587) |
– (2,668) |
||||
| REVENUE . | 17,001 | 21,022 | ||||
| Cost of sales | (13,176) | (16,662) | ||||
| GROSS PROFIT | 3,825 | 4,360 | ||||
| Other operating income . Net operating expenses . |
3 | 5,523 (5,851) |
5,521 (5,490) |
|||
| OPERATING PROFIT BEFORE PROFIT ON SALE AND NET DEFICIT ON VALUATION OF INVESTMENT PROPERTIES . |
3,497 | 4,391 | ||||
| Profit on sale of investment properties . Net deficit on valuation of investment properties |
1,929 (5,336) |
– (604) |
||||
| OPERATING PROFIT | 5 | 90 | 3,787 | |||
| Share of profits in Joint Ventures Income from available for sale financial assets Profit on sale of available for sale financial assets Finance income . Finance costs |
14 6 7 7 |
42 140 – 384 – |
201 89 95 120 (308) |
|||
| PROFIT BEFORE TAX | 656 | 3,984 | ||||
| Taxation . | 8 | 358 | (250) | |||
| PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS | 9 | 1,014 | 3,734 | |||
| EARNINGS PER SHARE – BASIC AND DILUTED . | 11 | p 10.06 |
p 37.04 |
All activities in both the current and previous year relate to continuing operations.
| Notes | 2011 £000 |
2010 £000 |
|
|---|---|---|---|
| Actuarial gain recognised on defined benefit pension scheme | 27 | 1,847 | 2,489 |
| Deferred taxation on actuarial gain | 21 | (601) | (767) |
| NET SURPLUS RECOGNISED DIRECTLY IN EQUITY | 1,246 | 1,722 | |
| Profit for the year | 1,014 | 3,734 | |
| TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR | 2,260 | 5,456 | |
| ATTRIBUTABLE TO EQUITY SHAREHOLDERS | 2,260 | 5,456 |
| Share Capital £000 |
Fair Value Reserve £000 |
Retained Earnings £000 |
Total £000 |
|||
|---|---|---|---|---|---|---|
| As at 1st August 2009 | 1,008 | 41 | 91,258 | 92,307 | ||
| Total recognised Income and Expense . | — | — | 5,456 | 5,456 | ||
| Fair value adjustment | — | 217 | — | 217 | ||
| Tax on fair value adjustment | — | (42) | — | (42) | ||
| Dividends | — | — | (1,397) | (1,397) | ||
| As at 31st July 2010 | 1,008 | 216 | 95,317 | 96,541 | ||
| Total recognised Income and Expense . | — | — | 2,260 | 2,260 | ||
| Fair value adjustment | — | 236 | — | 236 | ||
| Tax on fair value adjustment | — | (45) | — | (45) | ||
| Dividends | — | — | (1,432) | (1,432) | ||
| As at 31st July 2011 | 1,008 | 407 | 96,145 | 97,560 |
| Notes | 2011 £000 |
2010 £000 |
||||
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Property, plant and equipment . | 12 | 1,290 | 1,391 | |||
| Investment properties | 13 | 72,586 | 74,560 | |||
| Investments in Joint Ventures | 14 | 1,012 | 1,635 | |||
| Available for sale financial assets | 15 | 3,018 | 2,604 | |||
| Retirement benefit surplus | 27 | 1,660 | — | |||
| Deferred tax asset | 21 | 253 | 719 | |||
| 79,819 | 80,909 | |||||
| CURRENT ASSETS | ||||||
| Inventories | 16 | 7,078 | 7,324 | |||
| Trade and other receivables | 17 | 7,375 | 6,632 | |||
| Corporation tax asset | — | 26 | ||||
| Cash at bank and in hand | 21,704 | 22,197 | ||||
| 36,157 | 36,179 | |||||
| TOTAL ASSETS | 115,976 | 117,088 | ||||
| NON-CURRENT LIABILITIES | ||||||
| Retirement benefit obligations . | 27 | – | 1,344 | |||
| Deferred tax liabilities . | 21 | 2,852 | 4,001 | |||
| 2,852 | 5,345 | |||||
| CURRENT LIABILITIES | ||||||
| Trade and other payables | 19 | 4,376 | 5,068 | |||
| Current tax liabilities | 234 | — | ||||
| Bank overdraft | 10,954 | 10,134 | ||||
| 15,564 | 15,202 | |||||
| TOTAL LIABILITIES . | 18,416 | 20,547 | ||||
| NET ASSETS | 97,560 | 96,541 | ||||
| EQUITY | ||||||
| Called up share capital . | 22 | 1,008 | 1,008 | |||
| Fair value reserve | 23 | 407 | 216 | |||
| Retained earnings | 23 | 96,145 | 95,317 | |||
| TOTAL EQUITY | 97,560 | 96,541 | ||||
| Approved by the Board on | J. M. SMART, Director |
15th November 2011 A. D. McCLURE, Director
Company Registration No. SC025130
| Notes | 2011 £000 |
2010 £000 |
||||
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS Property, plant and equipment . Investments in Subsidiaries and Joint Ventures Retirement benefit surplus Deferred tax asset |
12 14 27 21 |
613 733 1,660 56 |
628 733 — 570 |
|||
| 3,062 | 1,931 | |||||
| CURRENT ASSETS Inventories Trade and other receivables Current tax assets Cash at bank and in hand |
16 17 |
6,780 8,242 942 7,971 23,935 |
6,893 9,240 1,021 5,021 22,175 |
|||
| TOTAL ASSETS | 26,997 | 24,106 | ||||
| NON-CURRENT LIABILITIES Retirement benefit obligations . Deferred tax liabilities |
27 21 |
— 496 |
1,344 89 |
|||
| 496 | 1,433 | |||||
| CURRENT LIABILITIES Trade and other payables Bank overdraft |
19 | 2,733 — |
2,248 — |
|||
| TOTAL LIABILITIES | 2,733 3,229 |
2,248 3,681 |
||||
| NET ASSETS | 23,768 | 20,425 | ||||
| EQUITY Called up share capital . Retained earnings |
22 23 |
1,008 22,760 |
1,008 19,417 |
|||
| TOTAL EQUITY | 23,768 | 20,425 |
Approved by the Board on J. M. SMART, Director 15th November 2011 A. D. McCLURE, Director
Company Registration No. SC025130
| 24(a) 1,951 5,672 CASH FLOWS FROM OPERATING ACTIVITIES Tax paid on profits (710) (950) 1,241 4,722 NET CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (363) (304) Additions to investment properties (2,900) (1,418) Sale of property, plant and equipment . 54 77 Sale of investment properties 4,054 — Expenditure on own work capitalised - investment properties (2,587) (2,668) Purchase of available for sale financial assets (178) (597) Proceeds of sale of available for sale financial assets — 219 Interest received . 133 120 Interest paid — — Dividend received from Joint Venture . 665 850 (1,122) (3,721) NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (1,432) (1,397) (1,432) (1,397) NET CASH USED IN FINANCING ACTIVITIES DECREASE IN CASH, CASH EQUIVALENTS AND BANK . (1,313) (396) 24(b) 12,063 12,459 CASH, CASH EQUIVALENTS AND BANK AT BEGINNING OF YEAR 24(b) 10,750 12,063 CASH, CASH EQUIVALENTS AND BANK AT END OF YEAR |
Notes | 2011 £000 |
2010 £000 |
|---|---|---|---|
| Notes | 2011 £000 |
2010 £000 |
||
|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES | 25(a) | 4,316 | 3,564 | |
| Net credit for group tax payments. | 265 | 224 | ||
| NET CASH FLOWS FROM OPERATING ACTIVITIES . | 4,581 | 3,788 | ||
| CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Sale of property, plant and equipment . Interest received . NET CASH USED IN INVESTING ACTIVITIES |
(236) 27 10 (199) |
(165) 37 14 (114) |
||
| CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid |
(1,432) | (1,397) | ||
| NET CASH USED IN FINANCING ACTIVITIES | (1,432) | (1,397) | ||
| INCREASE IN CASH, CASH EQUIVALENTS AND BANK | 2,950 | 2,277 | ||
| CASH, CASH EQUIVALENTS AND BANK AT BEGINNING OF YEAR . | 25(b) | 5,021 | 2,744 | |
| CASH, CASH EQUIVALENTS AND BANK AT END OF YEAR | 25(b) | 7,971 | 5,021 |
J. Smart & Co. (Contractors) PLC which is the ultimate Parent Company of the J. Smart & Co. (Contractors) PLC Group is a public limited company registered in Scotland, incorporated in the United Kingdom and listed on the London Stock Exchange.
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) Interpretations endorsed by the European Union (EU) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The following new Standards, Amendments to Standards and Interpretations which were mandatory for the Company and Group for the year to 31st July 2011 were:
Also, there have been a number of changes to Standards resulting from the International Accounting Standard Board's 2009 and 2010 Annual Improvements programme, none of the amendments had a material impact on the Company or Group.
The following new Standards, Amendments to Standards and Interpretations have been issued by the International Accounting Standard Board but which are effective for the Company and Group after the date of these financial statements, and have not been adopted earlier:
The Directors are to fully consider the implications of these Standards, Amendments to Standards and Interpretations and their relevance and impact on the financial statements of the Company or Group. The Directors anticipate that there will be no material effect on the financial statements.
The accounts have been prepared under the historical cost convention except where the measurement of balances at fair value is required as noted below for investment properties and available for sale financial assets.
The accounting policies set out below have been consistently applied to all periods presented in these accounts.
The preparation of financial statements requires management to make estimates and assumptions concerning the future that may affect the application of accounting policies and the reported amounts of assets and liabilities and income and expenses. Management believes that the estimates and assumptions used in the preparation of these accounts are reasonable. However, actual outcomes may differ from those anticipated.
Investment properties are revalued annually by the Group Directors in accordance with the RICS Valuation Standards. The Directors use yields which they consider to be appropriate to the circumstances and nature of the Group's investment property portfolio. The Directors consider that any variances in yields would not result in significant changes in revaluation movements.
Judgement is required in the area of provisions for losses on long-term contracts. The Directors consider adequate, but not excessive provisions have been made in this respect.
The valuation of the retirement benefit obligation is dependent upon a series of assumptions, mainly discount rates, mortality rates, investment returns, salary inflation and the rate of pension increases, which are determined after taking expert advice from the Group's Actuary. These are set out in note 27 to the financial statements.
The Group accounts consolidate the accounts of J. Smart & Co. (Contractors) PLC and all of its Subsidiaries made up to 31st July each year. Subsidiaries are entities controlled by the Company. Control is assumed where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Intra-group balances and any income or expenses arising from intra-group transactions are eliminated in preparing the Group accounts.
No income statement is presented for the Parent Company as provided by section 408 of the Companies Act 2006.
Group objectives in managing capital are to safeguard the interests of the Company to operate as a net debt-free going concern, of its employees to maintain wherever possible security of employment, remuneration and retirement provisions and of its shareholders to maintain continuity of dividends and stability of share price.
The capital structure of the Group consists of issued share capital, reserves and retained earnings represented predominantly by investment properties, financial investments and cash.
These assets are purchased, managed and maintained by the Group's management and employees, advised where appropriate by independent outside professionals. Refer to pages 8 and 9 of this report for details of relevant risk factors and management measures.
The Group has sufficient cash reserves and readily realisable assets available to meet its foreseeable commitments.
Joint Ventures are those entities over which the Company has a 50% holding and exercises joint control under a contractual arrangement. The results of Joint Venture undertakings are accounted for using the equity method of accounting. Under this method the investment is initially recorded at cost and is subsequently adjusted to reflect the Group's share of the net profit or loss in the Joint Venture.
The Accounts of the Group's Joint Ventures have been prepared in accordance with UK GAAP. The Group's interest in the assets and liabilities of the Joint Ventures have only been restated in accordance with International Financial Reporting Standards where such restatement is considered material to an understanding of the Group's interest.
Investment properties are properties owned by the Group which are held for long-term rental income or for capital appreciation or both. Investment properties are initially recognised at cost and revalued at the Balance Sheet date to fair value as determined by Group Directors in accordance with the RICS Valuation Standards.
Properties under development are stated at cost including attributable overheads.
Gains or losses arising from the changes in fair value are included in the Income Statement in the year in which they arise. In accordance with IAS 40: Investment Property, as the Group uses the fair value model, no depreciation is provided in respect of investment properties including integral plant.
Additions to investment properties consist of costs of a capital nature and, in the case of investment properties under development, includes certain internal staff and associated costs directly attributable to the management of the developments under construction.
Where the Group redevelops an existing property for continued future use as an investment property, the property remains an investment property measured at fair value through the Income Statement.
Cost of construction of new investment properties are now accounted for under IAS 40: Investment Property following the May 2008 amendments to IFRSs. Properties under construction previously accounted for under IAS 16: Property, Plant and Equipment have been transferred to investment properties as at 1st August 2009. Properties under construction continue to be measured at cost and on completion of construction will be measured at fair value in accordance with IAS 40.
Items of property, plant and equipment are stated at cost less accumulated depreciation.
Subsequent costs are included in the asset's carrying value or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of them can be measured reliably. All other repairs and maintenance expenditure is charged to the Income Statement as incurred.
The Group assesses at each Balance Sheet date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. Where the carrying value exceeds its recoverable amount the asset is considered impaired and written down accordingly.
Depreciation is provided on all items of property, plant and equipment, other than investment properties and freehold land, at rates calculated to write off the cost of each asset over its expected useful life, as follows:
| Freehold buildings | - | over 40 to 66 years |
|---|---|---|
| Plant and machinery | - | 25% to 33 1⁄3% reducing balance |
| Office furniture and fittings | - | 20% to 33 1⁄3% reducing balance |
| Motor vehicles | - | 33 1⁄3% reducing balance |
Inventories are valued at the lower of cost and net realisable value.
Land held for development is included at the lower of cost and net realisable value.
Work in progress other than long-term contract work in progress is valued at the lower of cost and net realisable value.
Cost includes materials, on a first-in first-out basis and direct labour plus attributable overheads based on normal operating activity, where applicable. Net realisable value is the estimated selling price less anticipated disposal costs.
Amounts recoverable on contracts which are included in debtors are stated at cost as defined above, plus attributable profit to the extent that this is reasonably certain after making provision for maintenance costs, less any losses incurred or foreseen in bringing contracts to completion, and less amounts received as progress payments.
For any contracts where receipts exceed the book value of work done, the excess is included in trade and other payables as payments on account.
The charge for current UK corporation tax is based on results for the year as adjusted for items that are non-assessable or disallowed and any adjustments for tax payable in respect of previous years. It is calculated using rates that have been enacted or substantially enacted at the Balance Sheet date.
Deferred tax is provided using the liability method in respect of temporary differences between the carrying value of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is provided on all temporary differences, except in respect of investments in Subsidiaries and Joint Ventures where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is determined using tax rates that have been enacted or substantially enacted by the Balance Sheet date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the Income Statement except when it relates to items credited or charged directly to Equity, in which case the deferred tax is also dealt with in Equity.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
The Group operates a defined benefit pension scheme, which was closed to new members during the year to 31st July 2003 and which requires contributions to be made to an administered fund.
The obligations of the scheme represent benefits accruing to employees and are measured at discounted present value while scheme assets are measured at their fair value. The discount rate used is the yield on AA credit rated corporate bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method.
The operating and financial costs of such plans are recognised separately in the Income Statement, service costs are spread systematically over the working lives of the employees concerned and financing costs are recognised in the year in which they arise. Actuarial gains and losses, arising from either experience, differing from previous actuarial assumptions, or changes to those assumptions, are recognised immediately in the Consolidated Statement of Comprehensive Income.
The Group also operates a defined contribution Group Personal Pension Plan for eligible employees. The plan is externally administered and professionally managed. Contributions payable are expensed to the Income Statement as incurred.
Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases.
In accordance with IAS 40: Investment Property, leases of investment property are assessed on a property by property basis. The Group's investment properties are classified as operating leases and rentals payable are charged to the Income Statement on a straight line basis over the term of the lease.
Other leases are classified as operating leases and rentals payable are charged to the Income Statement on a straight line basis over the term of the lease.
Properties leased out under operating leases are included in investment property, with rental income recognised on a straight line basis over the lease term.
Revenue, which is stated net of value added tax, represents the invoiced value of goods sold, except in the case of long-term contracts where revenue represents the sales value of work done in the year. The measurement and stage of completion of long-term contracts are based on external valuations issued by the third party surveyors.
Profits on long-term contracts are calculated in accordance with International Financial Reporting Standards and do not relate directly to revenue. Profit on current contracts is only taken at a stage near enough to completion for that profit to be reasonably certain after making provision for contingencies, whilst provision is made for all losses incurred to the accounting date together with any further losses that are foreseen in bringing contracts to completion.
The value of construction work transferred to investment properties is excluded from revenue.
Revenue from investment properties comprises rental income, service charges, insurance receivable and other recoveries, and is disclosed as other operating income in the Income Statement.
Rental income from investment property leased out under an operating lease is recognised in the Income Statement on a straight line basis over the term of the lease.
Surrender premiums received from tenants vacating the property are deferred and released to revenue over the original lease term. When the unit is re-let all deferred amounts are released to revenue at that point.
Revenue from private house sales under shared ownership scheme are accounted for as instalments are received.
Financial assets and financial liabilities are recognised on the Group's Statement of Financial Position when the Group becomes a party to the contractual provision of the instrument. The principal treasury objective is to provide sufficient liquidity to meet operational cash requirements. The Group operates controlled treasury policies which are monitored by the Board to ensure that the needs of the Group are met as they arise.
Financial assets available for sale represent investments in quoted shares which are recognised at fair value at the year end. The movement in fair value is transferred directly to Equity and shown in a separately designated Fair Value Reserve.
Trade and other receivables are recognised at invoiced value less provisions for impairment. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables concerned.
Cash and cash equivalents comprise cash in hand, deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
Trade and other payables are non-interest bearing and are recognised at invoiced amount.
Final Dividends are recognised as a liability in the year in which they are approved by the Company's shareholders. Interim Dividends are recognised when they are paid.
IFRS 8: Operating Segments requires operating segments to be indentified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allow the allocation of resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Board of Directors.
All revenue arises from activities within the UK and therefore the Board of Directors does not consider the business from a geographical perspective. The operating segments are based on activity and performance of an operating segment is based on a measure of operating profit.
| External Revenue |
Internal Revenue |
Total Revenue |
Operating Profit | ||
|---|---|---|---|---|---|
| 2011 | £000 | £000 | £000 | 2011 £000 |
2010 £000 |
| Construction activities | 17,001 | 2,587 | 19,588 | 51 | — |
| Investment activities | 5,523 | — | 5,523 | 39 | — |
| 22,524 | 2,587 | 25,111 | 90 | — | |
| 2010 | |||||
| Construction activities | 21,022 | 2,668 | 23,690 | — | 679 |
| Investment activities | 5,521 | — | 5,521 | — | 3,108 |
| 26,543 | 2,668 | 29,211 | — | 3,787 | |
| OPERATING PROFIT | 90 | 3,787 | |||
| Share of results of Joint Ventures | 42 | 201 | |||
| Finance and investment income | 524 | 304 | |||
| Finance and investment costs | — | (308) | |||
| PROFIT ON ORDINARY ACTIVITIES BEFORE TAX | 656 | 3,984 |
Internal revenue relates to own work capitalised, all other internal transactions are eliminated on consolidation. The Company had sales under construction activities from two customers amounting to £8,606,000.
| Non-Current | Segment | Segment | |||
|---|---|---|---|---|---|
| Asset Additions | Depreciation | Assets | Liabilities | ||
| £000 | £000 | £000 | £000 | ||
| 2011 | |||||
| Construction activities | 363 | 426 | 26,796 | 4,267 | |
| Investment activities | 5,487 | — | 89,282 | 15,263 | |
| Joint Ventures | — | — | 1,012 | — | |
| 117,090 | 19,530 | ||||
| Allocation of corporation tax creditor | (1,114) | (1,114) | |||
| 115,976 | 18,416 | ||||
| 2010 | |||||
| Construction activities | 304 | 456 | 22,940 | 4,513 | |
| Investment activities | 4,086 | — | 93,721 | 17,242 | |
| Joint Ventures | — | — | 1,635 | — | |
| 118,296 | 21,755 | ||||
| Allocation of corporation tax debtor | (1,208) | (1,208) | |||
| 117,088 | 20,547 |
| 2011 £000 |
2010 £000 |
|||||
|---|---|---|---|---|---|---|
| Rental income . | 5,334 | 5,215 | ||||
| Less: Joint Ventures' income | (312) | (292) | ||||
| Service charges and insurance receivable | 5,022 501 |
4,923 598 |
||||
| Direct property costs | 5,523 (2,060) |
5,521 (1,797) |
||||
| Net rental income . | 3,463 | 3,724 |
Direct property costs included £569,000 (2010, £330,000) in respect of investment properties that did not generate rental income in the year.
| Staff costs during the year amounted to: | |||||
|---|---|---|---|---|---|
| Wages, salaries and short term benefits | 7,088 | 8,622 | |||
| Social security costs | 665 | 785 | |||
| Post-employment benefits | 836 | 842 | |||
| 8,589 | 10,249 |
The average weekly number of employees during the year was made up as follows:
| No. | No. | |||
|---|---|---|---|---|
| 187 | 244 | |||
| 24 | ||||
| 213 | 268 | |||
| £000 | £000 | |||
| 635 | 503 | |||
| 76 | 73 | |||
| — | — | |||
| 711 | 576 | |||
| 26 |
All of the Directors except J. M. Smart are members of the Group's defined benefit pension scheme. Key management is comprised solely of the Directors of the Company.
| 11,707 | ||||||
|---|---|---|---|---|---|---|
| 8,589 | 10,249 | |||||
| 451 | 571 | |||||
| 426 | 456 | |||||
| (16) | (37) | |||||
| 119 | 117 | |||||
| This is stated after charging/(crediting): | Cost of inventories recognised as an expense . | Profit on disposal of property, plant and equipment . Auditors' remuneration and expenses – audit services |
9,696 |
The auditors' fees for the Parent Company are £51,000 (2010, £51,000).
| 2011 £000 |
2010 £000 |
|||||
|---|---|---|---|---|---|---|
| Available for sale financial assets | 140 | 89 | ||||
| 7. | FINANCE INCOME AND FINANCE COSTS | |||||
| Receivable: | Interest on short term deposits . | 123 | 106 | |||
| Other interest Pension scheme . |
10 251 |
14 — |
||||
| 384 | 120 | |||||
| Payable: | Other interest | — | — | |||
| Pension scheme . | — | (308) | ||||
| — | (308) | |||||
| 8. | TAXATION | |||||
| UK Corporation Tax | Current tax on income for the year . Corporation tax over provided in previous years |
991 (20) |
815 (53) |
|||
| Deferred taxation (note 21) | 971 (1,329) |
762 (512) |
||||
| (358) | 250 | |||||
| Current Tax Reconciliation Profit on ordinary activities before tax |
656 | 3,984 | ||||
| Less: Share of profits of Joint Ventures | (42) | (201) | ||||
| 614 | 3,783 | |||||
| Effects of: | Current tax at 27.33% (2010, 28%) | 168 | 1,059 | |||
| Expenses not deductible for tax purposes | 5 | 4 | ||||
| Non taxable income | Depreciation in excess of capital allowances . | 32 (38) |
— (114) |
|||
| IBA adjustment . | (214) | (456) | ||||
| Effect of change on tax rate Adjustments to tax charge in respect of prior years |
(291) (20) |
(190) (53) |
||||
| (358) | 250 | |||||
In addition to amounts charged to the Income Statement, a deferred tax credit of £601,000 (2010, £767,000) relating to actuarial gains on defined benefit pension scheme has been recognised directly to Equity.
Also a deferred tax charge of £45,000 (2010, £42,000) relating to the movement in fair value of available for sale financial assets has been recognised directly to Equity.
There are no income tax consequences attached to dividends paid or proposed by the Company to its shareholders.
| 2011 £000 |
2010 £000 |
||||
|---|---|---|---|---|---|
| Dealt with in the accounts of the Parent Company Retained by Subsidiary and Joint Venture Companies |
3,529 (2,515) |
1,257 2,477 |
|||
| 1,014 | 3,734 | ||||
| 10. | DIVIDENDS | ||||
| 2009 Final Dividend of 9.35p per share | — | 943 | |||
| 2010 Interim Dividend of 4.50p per share | — | 454 | |||
| 2010 Final Dividend of 9.60p per share | 968 | — | |||
| 2011 Interim Dividend of 4.60p per share | 464 | — | |||
| 1,432 | 1,397 | ||||
| Proposed 2011 Final Dividend of 9.70p per share (2010, 9.60p) | 978 | 968 |
The proposed Final Dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
| Profit attributable to Equity shareholders £000 |
Basic Earnings per share |
|||||
|---|---|---|---|---|---|---|
| Year to 31st July 2011 | 1,014 | p 10.06 |
||||
| Year to 31st July 2010 | 3,734 | p 37.04 |
Basic earnings per share are calculated by dividing the profit attributable to Equity shareholders by the number of ordinary shares in issue, being 10,082,000 shares at the beginning and end of the financial year.
There is no difference between basic and diluted earnings per share.
| Land and buildings Freehold £000 |
Investment properties under construction £000 |
Plant, equipment and vehicles £000 |
Total £000 |
|||
|---|---|---|---|---|---|---|
| Cost: | ||||||
| At 1st August 2010 | 739 | — | 5,438 | 6,177 | ||
| Additions | — | — | 363 | 363 | ||
| Disposals | — | — | (349) | (349) | ||
| At 31st July 2011 | 739 | — | 5,452 | 6,191 | ||
| Depreciation: | ||||||
| At 1st August 2010 | 446 | — | 4,340 | 4,786 | ||
| Provided during year . | 16 | — | 410 | 426 | ||
| Disposals | — | — | (311) | (311) | ||
| At 31st July 2011 | 462 | — | 4,439 | 4,901 | ||
| Net book value: | ||||||
| At 31st July 2011 | 277 | — | 1,013 | 1,290 | ||
| Cost: | ||||||
| At 1st August 2009 | 739 | 5,132 | 5,835 | 11,706 | ||
| Transfer to Investment properties | — | (5,132) | — | (5,132) | ||
| Additions | — | — | 304 | 304 | ||
| Disposals | — | — | (701) | (701) | ||
| At 31st July 2010 | 739 | — | 5,438 | 6,177 | ||
| Depreciation: | ||||||
| At 1st August 2009 | 430 | — | 4,561 | 4,991 | ||
| Provided during year . | 16 | — | 440 | 456 | ||
| Disposals | — | — | (661) | (661) | ||
| At 31st July 2010 | 446 | — | 4,340 | 4,786 | ||
| Net book value: | ||||||
| At 31st July 2010 | 293 | — | 1,098 | 1,391 |
As referred to in the Report of the Directors, the Group's non-investment heritable properties were revalued at 31st July 2010. This revaluation has not been incorporated into these accounts.
| Land and buildings Freehold £000 |
Plant, equipment and vehicles £000 |
Total £000 |
||||
|---|---|---|---|---|---|---|
| Cost: | ||||||
| At 1st August 2010 | 179 | 2,404 | 2,583 | |||
| Additions | — | 236 | 236 | |||
| Disposals | — | (124) | (124) | |||
| At 31st July 2011 | 179 | 2,516 | 2,695 | |||
| Depreciation: | ||||||
| At 1st August 2010 | 89 | 1,866 | 1,955 | |||
| Provided during year . | 3 | 228 | 231 | |||
| Disposals | — | (104) | (104) | |||
| At 31st July 2011 | 92 | 1,990 | 2,082 | |||
| Net book value: | ||||||
| At 31st July 2011 | 87 | 526 | 613 | |||
| Cost: | ||||||
| At 1st August 2009 | 179 | 2,509 | 2,688 | |||
| Additions | — | 163 | 163 | |||
| Group transfers - addition | — | 14 | 14 | |||
| Group transfers - disposal | — | (27) | (27) | |||
| Disposals | — | (255) | (255) | |||
| At 31st July 2010 | 179 | 2,404 | 2,583 | |||
| Depreciation: | ||||||
| At 1st August 2009 | 86 | 1,864 | 1,950 | |||
| Provided during year . | 3 | 235 | 238 | |||
| Group transfers - addition | — | 12 | 12 | |||
| Group transfers - disposal | — | (19) | (19) | |||
| Disposals | — | (226) | (226) | |||
| At 31st July 2010 | 89 | 1,866 | 1,955 | |||
| Net book value: | ||||||
| At 31st July 2010 | 90 | 538 | 628 |
As referred to in the Report of the Directors, the Company's non-investment heritable properties were revalued at 31st July 2010. This revaluation has not been incorporated into these accounts.
| Freehold Leasehold £000 £000 |
Total £000 |
|---|---|
| Cost or valuation: | |
| At 1st August 2010 67,731 6,829 |
74,560 |
| Additions 4,456 1,031 |
5,487 |
| Disposals (2,125) |
— (2,125) |
| Transfers (42) |
42 — |
| Deficit on valuation (5,321) |
(15) (5,336) |
| At 31st July 2011 64,699 7,887 |
72,586 |
| Cost or valuation: | |
| At 1st August 2009 57,853 8,093 |
65,946 |
| Additions 4,086 |
— 4,086 |
| Transfer from Property, plant and equipment 5,132 |
— 5,132 |
| Transfers 1,155 (1,155) |
— |
| Deficit on valuation (495) |
(109) (604) |
| At 31st July 2010 67,731 6,829 |
74,560 |
The Group's completed investment properties were valued on the basis of market value on 31st July 2011 in accordance with the RICS Valuation Standards by J. M. Smart, MRICS and D. W. Smart, MRICS both of whom are Directors of the Parent Company. Open market value represents the estimated amount for which property should exchange on the date of valuation between a willing buyer and willing seller in an arm's length transaction, and does not account for costs of disposals.
In accordance with IAS 40: Investment Property, completed investment properties are revalued annually and the aggregate surplus or deficit is taken to the Income Statement and no depreciation is provided in respect of these properties.
| Group | Company | ||||||
|---|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||||
| £000 | £000 | £000 | £000 | ||||
| Shares in Subsidiaries at Cost | — | — | 708 | 708 | |||
| Joint Ventures | 1,012 | 1,635 | 25 | 25 | |||
| 1,012 | 1,635 | 733 | 733 | ||||
| (a) JOINT VENTURES | |||||||
| Group | |||||||
| 2011 | 2010 | ||||||
| £000 | £000 | ||||||
| Share of Assets: | |||||||
| Share of Non-Current Assets Share of Current Assets |
3,241 1,988 |
3,241 2,317 |
|||||
| 5,229 | 5,558 | ||||||
| Share of Liabilities: | |||||||
| Share of Non-Current Liabilities | — | — | |||||
| Share of Current Liabilities . | 4,217 | 3,923 | |||||
| 4,217 | 3,923 | ||||||
| Share of Net Assets . | 1,012 | 1,635 | |||||
| Turnover . | — | — | |||||
| Cost of Sales | (178) | — | |||||
| Net rental incomes | 312 | 292 | |||||
| Net operating expenses . | (35) | (31) | |||||
| Operating profit . | 99 | 261 | |||||
| Finance income . | 1 | 2 | |||||
| Finance costs | (4) | (5) | |||||
| Profit before tax . Taxation |
96 (54) |
258 (57) |
|||||
| Profit after tax | 42 | 201 |
The Group's share of retained profits in the Joint Ventures at 31st July 2011 amounted to £987,000 (2010, £1,610,000).
(a) JOINT VENTURES (contd.)
| Name of Joint Venture | Registered in and Principal Country of Operation |
J. Smart & Co. (Contractors) PLC Interest in Joint Venture's Capital |
||||
|---|---|---|---|---|---|---|
| Edinburgh Industrial Estates Limited Prestonfield Development Company Limited Northrigg Limited Duff Street Limited Invertiel Developments Limited Primrose Development Company Limited |
Scotland Scotland Scotland Scotland Scotland Scotland |
50% 50% 50% 50% 50% 50% |
||||
| Name of Joint Venture | Jointly managed with | Issued Share capital | Issued shares held by J. Smart & Co. (Contractors) PLC |
|||
| Edinburgh Industrial Estates Limited |
EDI (Industrial) Limited | 50,000 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
25,000 B Shares | |||
| Prestonfield Development Company Limited |
Westerwood Limited |
2 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
1 B Share | |||
| Northrigg Limited | William Sanderson | 2 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
1 A Share | |||
| Duff Street Limited | Kiltane Developments | Limited | 100 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
50 A Shares | ||
| Invertiel Developments Limited |
Macdonald Estates PLC | 100 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
50 A Shares | |||
| Primrose Development Company Limited |
Macdonald Estates PLC | 100 ordinary £1 shares split equally into A & B shares and ranking equally in all respects |
50 A Shares |
All of the Joint Venture companies were established for the purposes of property development and all have accounting years ending on 31st July.
As at 31st July 2011 an application to strike off Primrose Development Company Limited had been submitted to the Registrar of Companies and the Company was formally dissolved on 11th November 2011. This company had not traded in this or previous years.
At 31st July 2011 the Company held the entire issued share capital of the following companies, all of which are registered in and operate in Scotland:
McGowan & Co. (Contractors) Limited Plumbing contractors Cramond Real Estate Company Limited Investment holding Thomas Menzies (Builders) Limited Civil Engineering contractors C. & W. Assets Limited Property company
Nature of business Concrete Products (Kirkcaldy) Limited Manufacture of concrete building products
| Group | ||||||
|---|---|---|---|---|---|---|
| 2011 | 2010 | |||||
| £000 | £000 | |||||
| Listed investments | 3,018 | 2,604 |
Fair value movement on shares held at 31st July 2011 before tax amounted to £236,000 (2010, £255,000).
| Group | Company | ||||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||
| £000 | £000 | £000 | £000 | ||
| Long-term contract balances | 2,998 | 2,338 | 2,874 | 2,071 | |
| Land held for development | 3,880 | 4,797 | 3,880 | 4,797 | |
| Raw materials and consumables | 126 | 107 | 26 | 25 | |
| Finished goods | 74 | 82 | — | — | |
| 7,078 | 7,324 | 6,780 | 6,893 | ||
| CONTRACTS IN PROGRESS AT THE BALANCE SHEET DATE: Aggregate amount of costs incurred and recognised profits less recognised losses to date Advances received |
5,649 (5,691) |
8,633 (8,402) |
5,588 (5,256) |
7,554 (7,556) |
|
| Net value of contracts in progress | (42) | 231 | 332 | (2) |
| Company | ||||
|---|---|---|---|---|
| 2010 | ||||
| £000 | £000 | £000 | £000 | |
| 524 | ||||
| 3,890 | ||||
| 72 | ||||
| 364 | ||||
| 329 | ||||
| 4,361 | 4,061 | 4,361 | 4,061 | |
| 7,375 | 6,632 | 8,242 | 9,240 | |
| 2011 1,949 — 117 504 444 |
Group 2010 1,639 — 87 470 375 |
2011 565 2,624 4 432 256 |
The loans to Joint Venture companies (note 14(a)) are repayable on demand. The Group has charged interest on one loan to a Joint Venture Company at a rate of 1% above the Group's banker's base rate.
The bank has been granted guarantees and letters of offset by each member of the Group in favour of the bank on account of all other members of the Group as a continuing security for all monies, obligations and liabilities owing or incurred to the bank.
| Payments received on account . | 123 | — | 123 | — | |
|---|---|---|---|---|---|
| Trade creditors | 1,414 | 1,139 | 1,081 | 846 | |
| Amounts owed to Subsidiaries . | — | — | 37 | 79 | |
| Other taxes and social security costs | 342 | 215 | 139 | 135 | |
| Other creditors and accruals | 2,497 | 3,714 | 1,353 | 1,188 | |
| 4,376 | 5,068 | 2,733 | 2,248 | ||
Certain members of the Group have granted Standard Securities over certain investment properties. The Directors consider that there are no material restrictions which affect the realisability of these properties.
The Group's financial instruments comprise of bank balances and cash, available for sale financial assets, trade receivables and trade payables. The amounts presented in relation to trade receivables are net of allowances for doubtful receivables.
The carrying amount of these assets approximates to their fair value.
In relation to the Group's financial assets, the Group has no significant concentration of credit risk, as exposure is spread over a large number of counterparties and customers.
| GROUP | Retirement Benefit Obligations £000 |
Fair Value Reserve £000 |
Other £000 |
Total £000 |
|---|---|---|---|---|
| As at 1st August 2009 | 1,251 | 10 | 517 | 1,778 |
| Charged to Income Statement | (121) | — | (161) | (282) |
| Charged to Equity | (767) | (10) | — | (777) |
| As at 31st July 2010 | 363 | — | 356 | 719 |
| Credited/(Charged) to Income Statement | 1,519 | — | (103) | 1,416 |
| Charged to Equity | (1,882) | — | — | (1,882) |
| As at 31st July 2011 | — | — | 253 | 253 |
| Retirement Benefit Obligations |
Other | Total | ||||
|---|---|---|---|---|---|---|
| £000 | £000 | £000 | ||||
| As at 1st August 2009 | 1,251 | 364 | 1,615 | |||
| Charged to Income Statement | (121) | (157) | (278) | |||
| Charged to Equity | (767) | — | (767) | |||
| As at 31st July 2010 | 363 | 207 | 570 | |||
| Credited/(Charged) to Income Statement | 1,519 | (151) | 1,368 | |||
| Charged to Equity | (1,882) | — | (1,882) | |||
| As at 31st July 2011 | — | 56 | 56 |
| At 1st August 2009 Charged to Equity Credited to Income Statement . At 31st July 2010 Charged/(Credited) to Equity (Credited)/Charged to Income Statement |
1,641 — (92) 1,549 |
— 32 — 32 |
2,986 — (686) 2,300 |
— — — — |
136 — (16) 120 |
4,763 32 (794) 4,001 |
||
|---|---|---|---|---|---|---|---|---|
| — | 45 | — | (1,281) | — | (1,236) | |||
| (19) | — | (1,580) | 1,696 | (10) | 87 | |||
| At 31st July 2011 | 1,530 | 720 | 415 | 110 | 2,852 | |||
| 99 | ||||||||
| – | (10) | (10) | ||||||
| – | 89 | 89 | ||||||
| (1,281) 1,696 |
– (8) |
(1,281) 1,688 |
||||||
| 415 | 81 | 496 | ||||||
| COMPANY At 1st August 2009 At 31st July 2010. Credited to Equity At 31st July 2011. SHARE CAPITAL |
Credited to Income Statement . | Charged/(Credited) to Income Statement | 77 | – | 99 |
| 2011 £000 |
2010 £000 |
||
|---|---|---|---|
| Authorised 12,000,000 (2010, 12,000,000) ordinary shares of 10p each . |
1,200 | 1,200 | |
| Allotted called up and fully paid 10,082,000 (2010, 10,082,000) ordinary shares of 10p each . |
1,008 | 1,008 |
All shareholders of ordinary shares have a right to receive dividends paid by the Company in accordance with their shareholding. Each shareholder has the right to attend and vote at a General Meeting, each share attracts one vote. There are no restrictions on the distribution of dividends or repayment of capital.
| Share Capital £000 |
Fair Value Reserve £000 |
Retained Earnings £000 |
Total £000 |
||
|---|---|---|---|---|---|
| At 1st August 2009 | 1,008 | 41 | 91,258 | 92,307 | |
| Total recognised Income and Expense | — | — | 5,456 | 5,456 | |
| Fair value adjustment | — | 217 | — | 217 | |
| Tax on fair value adjustment | — | (42) | — | (42) | |
| Dividends | — | — | (1,397) | (1,397) | |
| At 31st July 2010 | 1,008 | 216 | 95,317 | 96,541 | |
| Total recognised Income and Expense . | — | — | 2,260 | 2,260 | |
| Fair value adjustment | — | 236 | — | 236 | |
| Tax on fair value adjustment | — | (45) | — | (45) | |
| Dividends | — | — | (1,432) | (1,432) | |
| At 31st July 2011 | 1,008 | 407 | 96,145 | 97,560 |
| Share | Retained | |||||
|---|---|---|---|---|---|---|
| Capital | Earnings | Total | ||||
| £000 | £000 | £000 | ||||
| At 1st August 2009 | 1,008 | 17,835 | 18,843 | |||
| Total recognised Income and Expense . | — | 2,979 | 2,979 | |||
| Dividends. | — | (1,397) | (1,397) | |||
| At 31st July 2010 | 1,008 | 19,417 | 20,425 | |||
| Total recognised Income and Expense . | — | 4,775 | 4,775 | |||
| Dividends. | — | (1,432) | (1,432) | |||
| At 31st July 2011 | 1,008 | 22,760 | 23,768 | |||
| Notes | |||
|---|---|---|---|
| Profit for financial year | 9 | 3,529 | |
| Actuarial gain on defined benefit pension scheme | 27 | 1,847 | |
| Deferred taxation on actuarial gain | 21 | (601) | |
| Total recognised Income and Expense . | 4,775 |
| (a) RECONCILIATION OF OPERATING PROFIT TO CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
|---|---|---|---|---|---|---|
| 2011 | 2010 | |||||
| £000 | £000 | |||||
| Profit before tax . | 656 | 3,984 | ||||
| Share of profits from Joint Ventures | (42) | (201) | ||||
| Depreciation | 426 | 456 | ||||
| Unrealised valuation deficit on investment properties | 5,336 | 604 | ||||
| Profit on sale of property, plant and equipment | (16) | (37) | ||||
| Profit on sale of investment properties . | (1,929) | — | ||||
| Profit on sale of available for sale financial assets | — | (95) | ||||
| Change in retirement benefits | (1,157) | (635) | ||||
| Interest received . | (133) | (120) | ||||
| Interest paid | — | — | ||||
| Change in inventories | 246 | 1,152 | ||||
| Change in receivables | (743) | 369 | ||||
| Change in payables | (693) | 195 | ||||
| NET CASH GENERATED FROM OPERATIONS | 1,951 | 5,672 | ||||
| (b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS | ||||||
| Cash and cash equivalents | 21,704 | 22,197 | ||||
| Bank overdraft | (10,954) | (10,134) |
| (c) ANALYSIS OF NET FUNDS | ||||||
|---|---|---|---|---|---|---|
| At 1st August | Cash | At 31st July | ||||
| 2010 | Flow | Other | 2011 | |||
| £000 | £000 | £000 | £000 | |||
| Cash and cash equivalents | 22,197 | (493) | — | 21,704 | ||
| Bank overdraft | (10,134) | (820) | — | (10,954) | ||
| Net funds | 12,063 | (1,313) | — | 10,750 | ||
Net position .... . . . . . 10,750 12,063
| (a) RECONCILIATION OF OPERATING PROFIT TO CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
|---|---|---|---|---|---|---|
| 2011 | 2010 | |||||
| £000 | £000 | |||||
| Profit before tax . | 3,662 | 1,333 | ||||
| Depreciation | 231 | 238 | ||||
| Profit on sale of property, plant and equipment | (7) | — | ||||
| Change in retirement benefits | (1,157) | (635) | ||||
| Interest received . | (10) | (14) | ||||
| Change in inventories | 113 | 1,289 | ||||
| Change in receivables | 998 | 3,056 | ||||
| Change in payables | 486 | (1,703) | ||||
| NET CASH GENERATED FROM OPERATIONS | 4,316 | 3,564 | ||||
| (b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS Cash and cash equivalents Bank overdraft |
7,971 — |
5,021 — |
||||
| 7,971 | 5,021 | |||||
| (c) ANALYSIS OF NET FUNDS | ||||||
| At 1st August | Cash | At 31st July | ||||
| 2010 | Flow | Other | 2011 | |||
| £000 | £000 | £000 | £000 | |||
| Cash and cash equivalents | 5,021 | 2,950 | — | 7,971 | ||
| Bank overdraft | — | — | — | — | ||
| 5,021 | 2,950 | — | 7,971 |
There were no amounts of Capital Expenditure relating to Property, plant and equipment contracted for at 31st July 2011 or 31st July 2010.
The Group's share of Capital Expenditure contracted for by its Joint Ventures as at 31st July 2011 amounted to £nil (2010, £nil).
NOTES TO THE ACCOUNTS (cond.) 31st JULY 2011
The Group operates a defined benefit scheme for its employees which was closed to new members during the year to 31st July 2003. The scheme's assets are held seperately from the assets of the Group and are administered and managed professionally. The last completed triennial actuarial valuation of the scheme was made at 1st November 2009 by an independent qualified Actuary. A Statement of Funding Principles has been agreed with the scheme trustees and based on these principles the technical provisions at this valuation reveals a deficit of £3,400,000, representing a funding level of 86.1%. It has also been agreed with the scheme trustees that the employer contributions to the scheme will continue at the level of 63.6% of pensionable salaries and employee contributions at 3%. The total net pension charge for the year was £654,000 (2010, £690,000). The actuarial valuation has been updated to take account of the requirements of IAS 19: Employee Benefits, in order to assess the assets and liabilities of the scheme at 31st July 2011.
The financial assumptions used to calculate scheme liabilities under IAS 19 are:
| 2011 | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| Valuation method | . Projected Unit | Projected Unit | Projected Unit | |||
| Discount rate | 5.3% | 5.4% | 6.0% | |||
| Inflation rate - Retail price index | 3.5% | 3.4% | 3.8% | |||
| Inflation rate - Consumer price index . | 3.0% | — | — | |||
| Salary increases . | 4.0% | 4.9% | 5.3% | |||
| Pension increases | 2.4%–3.5% | 2.4%–3.4% | 2.4%–3.8% |
The mortality assumptions imply the following expectations of years of life from age 65:
| Man currently aged 65 | 22.1 | 22.6 | 22.5 | ||
|---|---|---|---|---|---|
| Woman currently aged 65 | 24.2 | 25.5 | 25.4 | ||
| Man currently aged 45 | 23.5 | 24.6 | 24.5 | ||
| Woman currently aged 45 | 25.8 | 27.4 | 27.3 |
The expected rates of return on scheme assets are determined as the aggregate weighted return for the various classes of assets held by the scheme.
The rates of return for each class were determined as follows:
– equity returns are based on yields on Gilts Index plus a margin to allow for expected outperformance;
As at 31st July 2011 the actual return on plan assets amounted to £2,802,000 (2010, £2,367,000).
The assets of the scheme are invested in funds managed by Newton Investment Management Limited, in direct investments via Speirs & Jeffery, in insurance policies with companies belonging to the AEGON UK Group and in bank accounts. The assets do not include any directly owned ordinary shares issued by J Smart & Co (Contractors) PLC. The analysis of the underlying investments in these policies, the expected rates of returns and reconciliation of scheme assets and liabilities to the Balance Sheet were:
| Long term rate of return |
Long term rate of return |
Long term rate of return |
|||||
|---|---|---|---|---|---|---|---|
| expected at | Value at | expected at | Value at | expected at | Value at | ||
| 31st July 2011 | 31st July 2011 £000 |
31st July 2010 | 31st July 2010 £000 |
31st July 2009 | 31st July 2009 £000 |
||
| Equities | 8.3% | 19,706 | 8.6% | 16,386 | 7.9% | 12,329 | |
| Bonds | 5.3% | 1,726 | 5.4% | 2,040 | 6.0% | 2,177 | |
| Gilts | 3.9% | 1,006 | 4.2% | 517 | — | — | |
| Other | 0.5% | 2,172 | 0.5% | 2,689 | 0.5% | 4,015 | |
| Market value | |||||||
| of assets . | 24,610 | 21,632 | 18,521 | ||||
| Present value of | |||||||
| scheme liabilities | (22,950) | (22,976) | (22,989) | ||||
| Scheme surplus/(deficit) | 1,660 | (1,344) | (4,468) | ||||
| Related deferred tax | (415) | 363 | 1,251 | ||||
| Net pension | |||||||
| surplus/(liability) | 1,245 | (981) | (3,217) |
Investments are in mixed management funds, split being 80% equity investments and 20% bonds, gilts and cash.
The following amounts are incorporated into the financial statements:
| Amounts included in operating profit: Current service cost (577) Past service cost . — Total included within operating profit . (577) Amounts included in finance income/(cost): Expected return on assets 1,487 Interest cost (1,236) Total included as net finance income/(cost) 251 |
2011 £000 |
2010 £000 |
||||
|---|---|---|---|---|---|---|
| (620) | ||||||
| — | ||||||
| (620) | ||||||
| 1,083 | ||||||
| (1,391) | ||||||
| (308) |
NOTES TO THE ACCOUNTS (cond.) 31st JULY 2011
| RETIREMENT BENEFIT OBLIGATIONS (contd.) Amounts included in Consolidated Statement of Comprehensive Income: |
2011 £000 |
|||||
|---|---|---|---|---|---|---|
| Actual return less assumed return on assets | 1,315 | |||||
| Experience gains and losses arising on scheme liabilities | (480) | |||||
| Changes in assumptions underlying the valuation of liabilities | 1,012 | |||||
| Total actuarial gain | 1,847 | |||||
| Changes in the present value of the defined benefit obligations are as follows: | ||||||
| Present value of obligations at beginning of year | 22,976 | 22,989 | ||||
| Current service cost | 577 | |||||
| Interest cost | 1,236 | |||||
| Charges paid | (32) | |||||
| Benefit payments | (1,275) | |||||
| Actuarial gain | (532) | (1,205) | ||||
| Present value of obligations at end of year | 22,950 | 22,976 | ||||
| Changes in the fair value of plan assets are as follows: Fair value of plan assets at beginning of year . |
21,632 | 18,521 | ||||
| Employer contributions . | 1,416 | |||||
| Employee contributions . | 67 | |||||
| Benefits paid | (1,275) | |||||
| Charges paid | (32) | |||||
| Expected return on plan assets . | 1,487 | |||||
| Actuarial gain | 1,315 | |||||
| Fair value of plan assets at end of year . | 24,610 | 21,632 | ||||
| Analysis of movement in scheme surplus/(deficit): | ||||||
| As at 1st August 2010 | (1,344) | (4,468) | ||||
| Current service cost | (577) | |||||
| Past service cost . | — | |||||
| Contributions Other finance income/(cost) |
1,483 251 |
|||||
| Actuarial gain | 1,847 | |||||
| As at 31st July 2011 | 1,660 | (1,344) | ||||
| Cumulative actuarial gains and losses recognised in Equity: | ||||||
| At beginning of year | (501) | |||||
| (2,990) | ||||||
| Net actuarial gain recognised in year | 1,847 | |||||
| Cumulative gain/(loss) . | 1,346 |
| History of experience gains and losses: | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Difference between actual return and assumed return on assets |
|||||
| Amount (£000) | 1,315 | 1,284 | (1,086) | (1,193) | 969 |
| Percentage of market value of scheme assets | 5.3% | 5.9% | 5.9% | 6.9% | 6.7% |
| Experience gains and losses arising on scheme liabilities |
|||||
| Amount (£000) | (480) | 1,736 | (166) | (140) | (290) |
| Percentage of market value of scheme liabilities . | 2.1% | 7.6% | 0.7% | 0.8% | 1.5% |
| Total amounts included in Consolidated Statement of Comprehensive Income |
|||||
| Amount (£000) | 1,847 | 2,489 | (4,553) | 1,381 | 2,755 |
| Percentage of market value of scheme liabilities . | 8.1% | 10.8% | 19.8% | 7.5% | 14.0% |
The contribution expected to be paid by the Group during the financial year ending 31st July 2012 amounts to £1,317,000.
In the year to 31st July 2003 the Group commenced operation of a defined contribution Group Personal Pension Plan for eligible employees. The plan is externally administered and managed professionally by AEGON UK. The net contribution to the plan for the year was £108,000 (2010, £114,000).
The Company and certain of its Subsidiaries have, in the normal course of business, entered into counter-indemnities in respect of performance bonds relating to their contracts.
Future minimum lease payments payable under non-cancellable operating leases:
| 2010 | ||||
|---|---|---|---|---|
| £000 | £000 | |||
| 68 | ||||
| 194 | ||||
| 93 | 109 | |||
| 388 | 371 | |||
| In two – five years exclusively . | 2011 68 227 |
Gross property rental income earned in the year amounted to £5,334,000 (2010, £5,215,000). At the Balance Sheet date, the Group had contracted with its tenants for the following future minimum lease payments:
| Within one year . In two – five years exclusively . After five years . |
4,735 14,147 8,653 |
4,749 14,238 10,573 |
|||
|---|---|---|---|---|---|
| 27,535 | 29,560 |
Transactions between the Company and its Subsidiaries, which are related parties of the Company, have been eliminated on consolidation. Details of transactions between the Company and Subsidiaries are as follows:
| 2011 £000 |
2010 £000 |
2011 £000 |
2010 £000 |
|
|---|---|---|---|---|
| SUBSIDIARY | Sale of goods and services |
Purchase of goods and services |
||
| McGowan & Co. (Contractors) Limited | 117 | 92 | 636 | 1,292 |
| Cramond Real Estate Company Limited | — | — | — | — |
| Thomas Menzies (Builders) Limited | 67 | 120 | 30 | 61 |
| Concrete Products (Kirkcaldy) Limited | 38 | 48 | 7 | 26 |
| C. & W. Assets Limited . | 977 | 902 | — | — |
| Amounts owed | Amounts owed | |||
| SUBSIDIARY | by Subsidiaries | to Subsidiaries | ||
| McGowan & Co. (Contractors) Limited | — | — | 37 | 75 |
| Cramond Real Estate Company Limited | — | 155 | — | — |
| Thomas Menzies (Builders) Limited | 1 | — | — | 4 |
| Concrete Products (Kirkcaldy) Limited | — | 1 | — | — |
| C. & W. Assets Limited . | 2,623 | 3,734 | — | — |
The amounts outstanding are unsecured and will be settled for cash. No expense has been recognised in the year for bad or doubtful debts in respect of the amounts owed by Subsidiaries.
During the year to 31st July 2011, the Group carried out the following transactions with Joint Ventures:
| Name of Joint Venture | Nature of transaction | Amount £000 |
Amount owed by Joint Venture Company £000 |
|---|---|---|---|
| Prestonfield Development | |||
| Company Limited | Loan Dividend Received |
340 665 |
2,975 |
| Northrigg Limited | Loan | — | 176 |
| Duff Street Limited | Loan | (60) | 1,100 |
| Loan interest | 8 | 4 | |
| Construction Costs | 40 | ||
| Invertiel Developments | |||
| Limited | Loan | 20 | 110 |
The amounts outstanding are unsecured and will be settled for cash. No expense has been recognised in the year for bad or doubtful debts in respect of the amounts owed by Joint Ventures.
D. W. Smart and Subsidiary Company Director J. R. Smart, throughout the year had material beneficial interests in Plean Precast Limited, Sterling Precast Limited and The Roofing and Building Supply Co. Limited, which have interests in continuing contracts for the purchase of materials and services from and for the sale of materials and services to the Group. All transactions were at normal commercial rates.
During the year to 31st July 2011 the Group purchased materials amounting to £251,000 (2010 - £486,000) from these companies and sold materials and services amounting to £42,000 (2010 - £25,000) to these companies.
As at 31st July 2011 the Group owed these companies £31,000 (2010 - £10,000) and was owed £15,000 (2010 - £1,000).
The remuneration of the Directors, who are the only key management of the Company, is set out in note 4 to the accounts with further information contained in the audited part of the Report on Directors' Remuneration.
During the year the Directors received dividends from the Company as follows:
| £000 | |||||
|---|---|---|---|---|---|
| J. M. Smart | 34 | ||||
| K. H. Hastings | 6 | ||||
| A. D. McClure | 8 | ||||
| L. E. Glenday | 6 | ||||
| D. W. Smart | 109 |
Printed by Stewarts of Edinburgh
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.