Audited Financial Statements, year ended 31 December 2004
Directors:
P H P Stephens, Non-executive Chairman
C S Turpin, Chief Executive
J N Griggs
S J Massingham
G R Boot
R W Fender
T M Hearley, Non-executive
A P Clarke, Non-executive
Company Secretary:
G R Boot
Company Number:
3608522
Registered Office and Business Address:
Oakdene House, 34 Bell Street, Reigate, Surrey, RH2 7SL
Auditors:
UHY Hacker Young, St Alphage House, 2 Fore Street, London, EC2Y 5DH
Bankers:
Royal Bank of Scotland, Turnpike House, 123 High Street, Crawley, West Sussex, RH10 1DQ
Registrars:
Capita IRG, Bourne House, 34 Beckenham Road, Beckenham, BR3 4TU
Financial Public Relations:
Binns & Co PR Ltd., 9th Floor, Citypoint, 1 Ropemaker Street, London, EC2Y 9HT
Solicitors to the Company:
Norton Rose, Kempson House, Camomile Street, London, EC3A 7AN
Nominated Advisers and Brokers:
Seymour Pierce Ltd., Bucklersbury House, 3 Queen Victoria Street, London, EC4N 8EL
I am pleased to report that in the 12 months ended 31st December 2004, the Group achieved another year of significant progress.
The year was one of enormous change for the Company, starting with the successful placing of new shares and the admission of the entire issued share capital to AIM at the end of May. We paid our first dividend with the interim accounts and we completed the major acquisition of the Honeygrove Group in December.
Turnover increased by 79% to £21.4 million and pre-tax profits increased by 84% to £5.5 million in line with expectations. Earnings per share of 31.1p show an increase of 83% on last year. These are impressive results.
I am pleased to report that the Honeygrove Group has now been fully integrated within the Oakdene Homes plc framework. The head office of Honeygrove has been closed resulting in substantial cost savings in the current year.
Dividend
The Board is pleased to recommend a final dividend for the year ended 31st December 2004 of 1.5p per share which, subject to shareholders approval at the Annual General Meeting, will be paid on 17th June 2005 to the shareholders on the register at the close of business on 20th May 2005. When added to the interim dividend of 1p per share, the total for the year is 2.5p per share covered 12.4 times by the earnings per share of 31.1p.
Market Background and Penetration
The housing market, after a number of years of substantial price increases, experienced mixed fortunes in 2004. Although the first half of the year was strong and house price growth reached near record levels, the second half showed a substantial slow down, following a number of interest rate rises and press speculation suggesting that house prices would fall. The underlying position, however, is that there is a substantial lack of new housing stock in the United Kingdom and this is particularly true in the areas of our operations. Interest rates are still low and employment levels high, so consequently the level of affordability remains high.
Following the acquisition of Honeygrove, the Group’s demographic spread now covers a wider area. During the current year, it is our intention to consolidate our house building operations within the south-east of England, from the Hampshire borders through Surrey, East and West Sussex and Kent, and to dispose of a number of significant properties, acquired with the Honeygrove Group, which fall outside of these areas.
Financial Position
At the time of the acquisition of Honeygrove, we agreed a new five year revolving loan facility with Royal Bank of Scotland which secures our development financing requirement for the foreseeable future. As a result of this new borrowing, our gearing at the year end was 1.48 but this will be reduced by the sale of the Honeygrove properties referred to above. At the year end, we had £5.71m cash at bank included in net current assets of £53.5m.
Prospects
We have, in the year under review, invested significantly in technology which enables us to continue and to expand our operations without substantial increases in overheads. Housing sales in the first quarter have been relatively slow, but there are signs that activity is improving. We have a number of first class developments, both in the planning stage and the building stage and I am confident of being able to report further progress in the current year.
Directors and Staff
We are delighted to welcome Ron Fender to the Board following his appointment as a director on 27 April 2005. His experience in house design has been and will continue to be invaluable to the Company.
As always the staff of Oakdene have worked tirelessly throughout the year to produce these impressive results and on behalf of the Board I would like to thank everyone for their efforts.
Philip Stevens
Chairman
18 April 2005
I am delighted to review the year to 31st December 2004 and to look forward to the prospects for Oakdene in 2005.
2004 was a year of great change for Oakdene, commencing with our move to new offices in Reigate, and an increase in numbers of staff at both senior and intermediate level. The first major event in 2004 was listing on the Alternative Investment Market in May, at which time the Company raised the sum of £5m for additional working capital to enable the Group to expand its area of operation.
Following the successful Listing on AIM, the Company’s interim results showed strong profit growth and a maiden dividend of 1p was paid.
In the second half of the year, trading overall remained strong, but with a slow down in the final quarter of the year.
Early in the second half of the year, negotiations commenced for the acquisition of Honeygrove which was completed in December after the financial and legal due diligence was finalised.
Oakdene in 2004 changed significantly throughout the year, and is now in a strong position to move into 2005 with great confidence.
Financial Results
It gives me great pleasure to report another year of growth for Oakdene, resulting in increased turnover, up to £21.4m from £11.9m last year, a profit before tax of £5.5m up from £3.0m last year, an increase of 84%. During the year the company revised its banking terms and the group now has a £40m five year revolving credit facility with RBS NatWest which will allow for further expansion following the acquisition of Honeygrove plc.
Earnings per share were 31.1p compared with 17p in 2003. Once again a significant increase.
Land
Our land bank continues to expand, firstly as a result of land sourced directly by the company by way of conditional contracts or options, and of course the number of plots has increased significantly as a result of the acquisition of Honeygrove. As reported in the accounts last year, our geographic area of operation has expanded slightly and we now have developments close to the Hampshire border and in Kent, as far as Ashford.
Our policy of acquiring land by conditional contract, sourcing our own development sites, will continue. In the case of Honeygrove we will dispose of a number of sites that are not within our geographical area of operation.
Operational Review for 2004
It has been a busy and demanding year in which we have continued to produce high quality and exciting developments. The project at King Henry’s Road, Lewes is typical in comprising six new town houses and eight apartments, converted from an old office building surrounded by landscaped grounds. This use of a redundant commercial site required skilful design and careful integration into the existing environment.
With the integration of Ronald Fender Designs, our in-house team now comprises architects, designers and civil engineering skills. This enables us to react quickly to any opportunity or problem. Our design team have been able to build relationships with planning authorities, building control and building guarantee organisations, which ensures a consistent and confident approach.
We have continued with our usual practice of procuring contracts on a fixed price basis. In 2004 and as a result of our expanded work load, we have awarded contracts to a combination of contractors with whom we have worked previously and companies new to us. We are pleased to report that in all cases the projects have progressed well to completion on time and to a high standard.
Construction output grew 3.5% in 2004 and private housebuilding has re-taken its historic position as the biggest single construction sector. However, as a result of our policy of contractor and partnering arrangements, we have not seen a significant rise in building costs.
We are confident of producing a successful and high quality product, continual monitoring of our specification against developments in the industry is a necessity. For example, our development of apartments in Leatherhead contains a multi-room audio system. We are also reviewing specifications to reflect the current "green" and sustainability issues. We look forward to another strong performance in 2005 when our enhanced management and technical team will be in a position to provide more properties of the highest quality.
Sales and Marketing
We are delighted that our forecast for 2004 was met in terms of turnover and units sold.
Throughout 2004, new systems were introduced to monitor the tracking of all sales and this has proved to be very successful. During the year the company was operational on 15 sites, each of which was individually designed to aim at our target market within the catchment of the location.
Our level of specification has once again proved to be a success, the specification continues to evolve in line with market expectations and our own innovations. The Oakdene product range continues to expand and during the year the company built and sold a range from studio flats to five-bedroomed detached houses. We continued to use a blend of new and traditional styles which proves to be a successful formula for the company.
Market Outlook
During the final quarter of 2004 the market became more cautious following a succession of interest rate rises and the press speculation that house price inflation had abated. Oakdene are based in the south-east where the fundamentals of the market remain good. The UK economy continues to grow with low unemployment and a shortage of units in the south of England where Oakdene operates.
The planning system continues to be slow and therefore the shortage of units to be built in the short term will remain. Whilst we expect market conditions to be slower in 2005 we believe our sites are in good locations and our high quality product will enable us to make substantial strides forward in 2005.
Carl Turpin
Chief Executive
18 April 2005
The directors present their report, together with the audited financial statements of the Company and the Group, for the year ended 31 December 2004.
Principal Activity and Review of the Business
The principal activity of the Group is that of house builders. It operates primarily in Surrey, Sussex, Kent and the southern London Boroughs. It generally sources its own land on option or conditional contract and obtains planning permission for the most commercially advantageous development consistent with the environment. It undertakes the developments using external contractors on fixed price contracts.
In May 2004 the company acquired Ronald Fender Design to form the basis of an architectural department to deal with the design and planning applications on the Company’s developments. Also in May 2004 the Company’s shares were admitted to the Alternative Investment Market and 4,545,455 new shares were placed with investors.
In December 2004 the Company acquired another AIM company, Honeygrove Group Plc, which significantly expanded the Group’s land bank, particularly in Kent, and substantially reduced the combined overheads of the two groups. Shortly after the acquisition the Group sold part of one of Honeygrove’s development sites which did not readily fit with the profile of the expanded group. This disposal was negotiated by the Company during the period up to the date of acquisition and the sale was dependent on the acquisition taking place.
Results and Dividends
The results for the year are set out on page 13.
The directors recommend the payment of a final dividend of 1.5p per share.
Future developments
The company continues to seek out new opportunities for future development. The stock of development land is extremely promising as is the future for the Group.
Payment of Creditors
With respect to all of the suppliers, it is the policy of the Company:
to settle the terms of payment with suppliers when agreeing the terms of each transaction.
To ensure suppliers are made aware of the terms of payment, and
to abide by the terms of payment.
The number of days, which bears to the number of days in the period the same proportion as:
Aggregate amounts owed to trade creditors as at 31 December 2004
Aggregate amounts the Company was invoiced during the period
was 43 days (2003 - 49 days).
Charitable and Political Contributions
During the period the Company contributed £5,300 to charities.
Directors and their interests
The Company is managed by a Board of Directors and they have the necessary skills and experience to do so. The Board consists of a non-executive Chairman, a Chief Executive, two non-executive directors and three executive directors. The non-executive directors are considered to be independent.
Management information systems are in place to enable the Board to make informed decisions and properly discharge their duties.
The directors who served during the year and their interests in the Company are as stated below:
|
Ordinary shares |
||
|
31 December 2004 |
1 January 2004 |
|
|
C S Turpin (1) |
4,358,000 |
4,500,000 |
|
J N Griggs |
1,605,000 |
1,605,000 |
|
S J Massingham |
1,759,000 |
1,750,000 |
|
G R Boot |
21,600 |
- |
|
A P Clarke (2) |
21,200 |
- |
| P H P Stephens (appointed 1st February 2004) | 32,000 | - |
| T M Hearley (appointed 1st March 2004) | 11,364 | - |
(1) 80,000 Ordinary shares are registered in the name of Carl Turpin's son, Oscar Kristian Turpin
(2) 3,000 Ordinary shares are registered in the name of Philip Clarke's wife, Annette Jane Clarke
Mr C S Turpin, Mrs S Massingham, Mr J Griggs and Mr G R Boot have options to subscribe for 500,000 ordinary shares, 250,000 ordinary shares, 105,000 ordinary shares and 200,000 ordinary shares respectively, at a price of 43.5 pence per ordinary share exercisable up to May 2008.
Mr J N Griggs has options to subscribe for 145,000 ordinary shares at a price of 35 pence per ordinary share exercisable up to July 2006.
Remuneration Policy and Committee
The remuneration and terms and conditions of service of the executive directors are determined by the Board, based on the recommendations of the Remuneration Committee. The Board’s policy is to pay competitive salaries having regard to a director’s experience, the size and complexity of the role and any special factors which they consider to be relevant. The directors consider that the Company has taken account of the Combined Code.
The remuneration committee consists of the three non-executive directors and the Chief Executive. They meet at least twice per year to consider the scale and structure of the remuneration of the executive directors and senior staff and to recommend the grant of options under the Approved and Unapproved Share Option Schemes.
Substantial Interests
The company has been notified that as at 18 April 2005 the following shareholders, who are not directors, own or control more than 3% of the issued share capital :
| Number | Percent | |
| Mrs M Decker | 3,000,000 | 11.15 |
| Mr Nigel Wray | 2,166,675 | 8.05 |
Where practical for a company of its size, the Board complies voluntarily with the main provisions of the Principles of Good Governance and Code of Best Practice set out in the Combined Code.
The Board has also considered the guidance published by the Institute of Chartered Accountants in England and Wales concerning the internal control requirements of the Combined Code and, where practical, has established a process for identifying, evaluating and managing any significant risks faced by the Group.
Dialogue with Shareholders
The Company reports formally to shareholders twice per year when its half-year and full-year results are announced and reports are sent to shareholders. The Annual Report includes the notice of the Annual General Meeting of the Company at which the directors are available to answer any questions.
When matters arise of particular significance the Board arranges to hold an Extraordinary General Meeting of which notice is sent to shareholders and at which the directors are available to answer any questions.
Audit Committee
The Audit Committee comprises the three non-executive directors and the finance director. They meet at least twice per year and are responsible for ensuring that the financial performance of the Group is properly reported and monitored, and for meeting the auditors and reviewing reports from the auditors relating to financial statement and internal control systems.
Health and Safety
The directors are aware of their obligations under current health and safety regulations and at their monthly management meeting consider any matters that have been brought to their attention by the director responsible for the day to day management of health and safety issues. High standards of safety awareness are promoted throughout the Group and are required from all site contractors.
Environment
The Group pays particular attention to environmental issues. It takes great care to ensure that each development fits with the local environment and continually strives to ensure best practice in a commercially acceptable manner and compliance with regulatory obligations.
Employees
The Group recognises the benefit of keeping its employees informed of all relevant matters on a regular basis. The Group is an equal opportunities employer and all applications for employment are considered fully on the basis of the suitability for the job.
Going Concern
After making enquiries, the directors have formed a judgement at the time of approving the financial statements that there is an expectation that the Group has adequate working capital resources to continue its operations in the forseeable future. The financial statements have accordingly been prepared on a going concern basis.
Directors' responsibilities
Company law requires the directors to prepare financial statements for each financial period that give a true and fair view of the state of the affairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing these, the directors are required to:
select suitable accounting policies and apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statement
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Auditors
In accordance with Section 385 of the Companies Act 1985, a resolution proposing that UHY Hacker Young be reappointed as auditors of the Company will be put to the Annual General Meeting.
This report was approved by the Board on 18 April 2005 and signed on its behalf by
G R BOOT
Secretary
Independent Auditors' Report to the Shareholders of Oakdene Homes Plc
We have audited the financial statements of Oakdene Homes Plc on pages 13 to 38 for the year ended 31 December 2004. These financial statements have been prepared under the historical cost convention and the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the statement of directors’ responsibilities on page 11 the company’s directors are responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing
Standards.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions with the Company is not disclosed.
We read other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements within it.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the state of the Company and Group as at 31 December 2004 and of the profit of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985.
UHY Hacker Young, Chartered Accountants, Registered Auditors
18 April 2005
|
notes |
2004 |
2003 |
|||
|
£ |
£ |
£ |
£ |
||
|
Turnover |
2 |
||||
|
Continuing operations |
16,882,891 |
11,973,440 |
|||
|
Acquisitions |
4,544,170 |
- |
|||
 |
|
|
|
|
|
|
21,427,061 |
11,973,440 |
||||
|
Direct Cost of sales |
(13,422,550) |
(6,888,330) |
|||
|
|
|
|
|
|
|
8,004,511 |
5,085,110 |
||||
|
Amortisation of fair value adjustment on |
|||||
|
work in progress |
(2,138,044) |
(2,633,821) |
|||
|
Amortisation of negative goodwill |
1,430,356 |
1,762,032 |
|||
|
|
|
|
|
|
|
Gross Profit |
7,296,823 |
4,213,321 |
|||
|
Administrative expenses |
1,637,143) |
(1,112,027) |
|||
|
|
|
|
|
|
|
Operating Profit |
3 |
||||
|
Continuing operations |
2,603,539 |
3,101,294 |
|||
|
Acquisitions |
3,056,141 |
- |
|||
|
|
|
|
|
|
|
5,659,680 |
3,101,294 |
||||
|
Other Interest receivable and similar income |
4 |
28,329 |
517 |
||
|
Interest payable and similar charges |
5 |
(152,087) |
(91,323) |
||
|
|
|
|
|
|
|
Profit on ordinary activities before taxation |
5,535,922 |
3,010,488 |
|||
|
Tax on Profit on ordinary activities |
8(a) |
(951,200) |
(1,100,891) |
||
|
|
|
|
|
|
|
Profit on ordinary activities after taxation |
4,584,722 |
1,909,597 |
|||
| Dividends |
27 |
(566,529) |
- | ||
|
Retained profit for the group |
19 |
4,018,193 |
1,909,597 |
||
|
|
|
|
|
|
|
Earnings per share |
26 |
|
|
|
|
|
The weighted average number of shares in issue |
14,757,763 |
|
11,212,245 |
||
|
Basic |
31.1p |
|
17.0p |
||
|
Diluted |
28.4p |
|
15.0p |
||
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
|
2004 |
2003 |
|
|
£ |
£ |
|
|
Total recognised gains relating to the period |
4,018,193 |
1,909,597 |
|
Prior year adjustment |
- |
11,052 |
|
|
|
|
Total recognised gains since last annual report |
4,018,193 |
1,920,649 |
|
|
|
|
notes |
2004 |
2003 |
|||
|
£ |
£ |
£ |
£ |
||
|
Fixed assets |
|||||
|
Intangible assets |
10 |
13,178,998 |
(2,343,925) |
||
|
Tangible assets |
11 |
317,513 |
96,459 |
||
|
Investments |
12 |
1,100 |
- |
||
|
|
|
|
|
|
|
13,497,611 |
(2,247,466) |
||||
|
Current assets |
|||||
|
Stocks |
13 |
54,068,999 |
23,121,698 |
||
|
Debtors |
14 |
2,170,594 |
641,498 |
||
|
Cash at bank and in hand |
5,712,280 |
382,516 |
|||
|
|
|
|
|
|
|
61,951,873 |
24,145,712 |
||||
|
Creditors: amounts falling due |
|||||
|
within one year |
15 |
(8,509,672) |
(16,977,314) |
||
|
|
|
|
|
|
|
Net current assets |
53,442,201 |
7,168,398 |
|||
|
Total assets less current liabilities |
66,939,812 |
4,920,932 |
|||
|
Creditors: amounts falling due |
|||||
|
after more than one year |
16 |
(41,579,062) |
(1,014,665) |
||
|
|
|
|
|
|
|
Net assets |
25,360,750 |
3,906,267 |
|||
|
|
|
|
|
|
|
Capital and reserves |
|||||
|
Called up share capital |
17 |
256,143 |
115,693 |
||
|
Share premium account |
19 |
16,215,416 |
479,199 |
||
|
Reserve for own shares |
18 |
1,559,623 |
- |
||
|
Profit and loss account |
19 |
7,329,568 |
3,311,375 |
||
|
Equity shareholders’ funds |
20 |
|
25,360,750 |
|
3,906,267 |
|
notes |
2004 |
2003 |
|
|
£ |
£ |
||
|
Operating profit |
5,659,680 |
3,101,294 |
|
|
Depreciation of fixed assets |
55,633 |
22,483 |
|
|
Loss on disposal of fixed assets |
31,972 |
- |
|
| Depreciation of assets acquired | 26,612 | - | |
|
Amortisation |
(1,281,009) |
(1,638,696) |
|
|
Increase in stocks |
(501,308) |
(4,183,061) |
|
|
Decrease / (Increase) in debtors |
(867,788) |
1,724,075 |
|
|
(Decrease ) / Increase in creditors |
(1,656,883) |
(622,030) |
|
|
|
|
|
|
Net cash inflow (outflow) from operating activities |
1,466,909 |
(1,595,935) |
|
|
|
|
|
|
CASH FLOW STATEMENT |
|||
|
Net cash inflow (outflow) from |
|||
|
operating activities |
1,466,909 |
(1,595,935) |
|
|
Returns on investments and |
|||
|
servicing of finance |
23 |
(123,758) |
(90,806) |
|
Taxation |
23 |
(169,791) |
(228,985) |
|
Capital expenditure |
23 |
(197,180) |
(22,143) |
|
|
|
|
|
976,180 |
(1,937,869) |
||
|
Acquisitions and disposals |
23 |
(2,944,318) |
- |
|
Investments |
100,270 |
- |
|
|
Equity dividends paid |
(162,820) |
- |
|
|
|
|
|
|
(2,030,688) |
(1,937,869) |
||
|
Financing |
23 |
7,676,576 |
2,624,392 |
|
|
|
|
|
Increase in cash in the period |
5,645,888 |
686,523 |
|
|
|
|
|
|
Reconciliation of net cash flow to |
|||
|
movement in net debt |
|||
|
Increase in cash in the period |
5,645,888 |
686,523 |
|
|
Cash outflow from movements in debts |
(3,188,875) |
(2,325,142) |
|
|
|
|
|
|
Change in net funds resulting from cash flows |
2,457,013 |
(1,638,619) |
|
|
Loans and finance leases acquired with subsidiary |
(25,397,718) |
- |
|
|
New finance leases |
(12,453) |
- |
|
|
|
|
|
|
Movement in net debt in the period |
(22,953,158) |
(1,638,619) |
|
|
Net debt at 1 January 2004 |
(14,670,139) |
(13,031,520) |
|
|
|
|
|
|
Net debt at 31 December 2004 |
24 |
(37,623,297) |
(14,670,139) |
|
|
|
|
for the year ended 31 December 2004
1. Accounting Policies
1.1. Accounting convention
The financial statements are prepared under the historical cost convention and in accordance with applicable UK accounting and financial reporting standards.
1.2. Basis of Consolidation
The group financial statements consolidate the accounts of Oakdene Homes Plc and all its subsidiary undertakings made up to 31 December 2004; the group profit and loss account includes the results of all subsidiary undertakings for the year from the date of their acquisition and up to the date of disposal. The acquisition method of accounting has been used in all cases.
Subsidiaries which are management companies that own the freehold of developments where the leaseholds have been substantially sold and the company has undertaken to transfer the ownership of the subsidiary to the leaseholders are not consolidated.
Turnover and profits arising on trading between group companies are excluded.
1.3. Goodwill and intangible assets
When the fair value of the consideration for an acquired undertaking exceeds the fair value of its separate net assets, the difference is treated as purchased goodwill and is capitalised and amortised through the profit and loss account over its estimated useful life of three years.
Where the fair value of the separable net assets exceeds the fair value of the consideration for an acquired undertaking, the difference is treated as negative goodwill and is capitalised and amortised through he profit and loss account in the period which the non-monetary assets acquired are recovered. (See note 10.)
Intellectual property comprising designs and layout acquired on the acquisition of Ronald Fender Design is amortised over its estimated useful life of 10 years.
1.4. Turnover
Turnover represents the total invoice value, excluding value added tax, of sales made during the year.
1.5. Tangible fixed assets and depreciation
Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life, as follows:
Leasehold properties Plant and machinery Office furniture and equipment Motor vehicles Computer equipment |
Straight line over the life of the lease 25% Reducing balance 15% Reducing balance 25% Straight line 33% Reducing balance |
1.6. Leasing and Hire purchase commitments
Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce constant periodic rates of charge on the net obligations outstanding in each period.
Rentals payable under operating leases are charged against income on a straight-line basis over the lease term.
1.7. Work in progress
Work in progress is valued at the lower of cost or fair value and net realisable value. Interest on sums borrowed that finance specific work in progress projects is added to work in progress and written off to cost of sales as sales proceed.
During the year the Group decided to directly employ architects, engineers and project managers rather than employ external consultants. Time spent by technical personnel that is directly related to the cost of specific developments including design, planning, engineering and project management is added to work in progress and written off to cost of sales as sales proceed. (See note 6.)
1.8. Pensions
The pension costs charged in the financial statements represent the contributions payable by the group during the period. The Group operates a money purchase scheme for its employees and the funds are separate to those of the Group.
1.9. Deferred taxation
Full provision is made for deferred taxation on all timing differences which have arisen but which have not reversed at the balance sheet date.
1.10. Comparative figures
The comparative figures are for the 12 months to 31 December 2003.
2. Turnover
The total turnover of the group for the year has been derived from its principal activity wholly undertaken in the UK.
3. Operating profit
| 2004 | 2003 | |
| £ | £ | |
| Operating profit is stated after charging: | ||
| Depreciation of tangible assets | 87,605 | 22,483 |
| Amortisation of goodwill | (1,281,009) | (1,638,696) |
| Operating lease rentals - Land and buildings | 179,000 | 27,750 |
| Auditors' remunerations | 50,000 | 15,000 |
| Other remuneration paid to auditors | 92,500 | 25,000 |
|
|
|
| Acquisitions | ||
| The group operating profit includes the following relating to acquisitions: | ||
| Turnover | 4,544,170 | - |
| Cost of sales | (1,091,295) | - |
| Other administrative expenses | (396,734) | - |
|
|
|
| Operating profit | 3,056,141 | - |
|
|
|
| 4. Interest receivable and similar income | ||
| Group: | ||
| Other interest | 28,329 | 517 |
|
|
|
| 5. Interest payable and similar charges | ||
| Group: | ||
| On bank loans and overdrafts | 3,288,646 | 860,867 |
| Hire purchase interest | 847 | 1,258 |
| Interest transferred to work in progress | (3,137,406) | (770,802) |
|
|
|
| 152,087 | 91,323 | |
|
|
|
6. Employees
Number of employees
The average monthly numbers of employees during the period were:
| 2004 Number |
2003 ..Number |
|
| Administration | 8 | 6 |
| Production | 7 | 1 |
| Directors | 7 | 5 |
|
|
|
| Total | 22 | 12 |
|
|
|
| Employment costs including directors | ||
| £ | £ | |
| Wages and salaries | 1,039,114 | 521,812 |
| Social security costs | 110,120 | 25,144 |
| Other pension costs | 23,288 | 3,725 |
|
|
|
| 1,172,522 | 550,681 | |
| The amount transferred to work in progress in the year that relates to time spent by technical personnel on specific projects was £583,478. (note 1.7) | ||
|
|
|
The amount transferred to work in progress in the year that relates to time spent by technical personnel on specific projects was £583,478. (note 1.7)
6.1. Directors
| £ | £ | ||||
| Directors' emoluments Remuneration and other benefits |
623,219 | 421,207 | |||
|
|||||
| Consultancy | |||||
| Analysis by director | Salary | Fee (note 22) | Benefits | Total | 2003 |
| C S Turpin | 162,498 | 45,000 | 12,000 | 219,498 | 184,500 |
| S J Massingham | 107,497 | 30,000 | 9,000 | 146,497 | 118,330 |
| J N Griggs | 96,667 | 15,000 | 7,000 | 118,667 | 89,498 |
| G R Boot | 70,000 | 5,000 | 1,800 | 76,800 | 23,379 |
| P H P Stephens | 32,087 | - | - | 32,087 | - |
| T E Hearley | - | 16,670 | - | 16,670 | - |
| A P Clarke | - | 13,000 | - | 13,000 | 5,500 |
| 2004 | 2003 | ||||
| Number of directors who exercised share options this year | - | 3 | |||
7. Pension costs
The company operates a defined contribution pension scheme in respect of its employees. The scheme and its assets are held by independent managers. The pension charge represents contributions due from the company and amounted to £23,288 (2003- £3,725).
8. Taxation
a) Tax on profit on ordinary activities
| Analysis of charge in period | 2004 | 2003 |
| £ | £ | |
| UK current year taxation | ||
| UK Corporation Tax | 999,000 | 1,100,891 |
| Adjustment in respect of prior periods | (17,400) | - |
|
|
|
| Current tax charge for period | 981,600 | 1,100,891 |
| Deferred Tax | (30,400) | - |
|
||
| 951,200 | 1,100,891 | |
| b) Factors affecting tax change for the period | ||
| The tax assessed for the year is lower than the standard rate of corporation tax | ||
| in the UK (30%). The differences are explained below: | 2004 | 2003 |
| £ | £ | |
| Profit on ordinary activities before taxation | 5,535,922 | 3,010,488 |
|
|
|
| Profit on ordinary activities multiplied by standard rate of corporation tax | ||
| in the UK of 30% (2002 - 30%) | 1,660,777 | 903,146 |
| Effects of: | ||
| Expenses not deductible for tax purposes (primarily goodwill and | ||
| fair value adjustment amortisation) | 39,968 | 299,953 |
| Capital allowances for period in excess of depreciation | (18,249) | (814) |
| Utilisation of tax losses | (683,049) | (96,056) |
|
Marginal tax rates |
- |
(5,338) |
| Adjustment in respect of prior periods | (17,847) | - |
|
|
|
| Current tax charge for period | 981,600 | 1,100,891 |
|
|
|
) Factors that may affect future tax charges
There are no significant factors that may affect future tax charges.
9. Profit for the year attributable to shareholders
As permitted by Section 230 of the Companies Act 1985 the profit and loss account of Oakdene Homes Plc has not been presented with the financial statements.
The results after taxation of the company for year ended 31 December 2004 showed a loss of £595,772 (31 December 2003 - profit £694,080).
10. Intangible fixed assets
|
Group |
Intellectual Property |
Negative Goodwill |
Goodwill | Total |
| £ | £ | £ | £ | |
| Cost | ||||
| At 1 January 2004 as previously reported | - | (4,747,122) | 360,009 | (4,387,113) |
| Additions during year | 175,000 | - | 14,066,914 | 14,241,914 |
|
|
|
|
|
| As at 31 December 2004 | 175,000 | (4,747,122) | 14,426,923 | 9,854,801 |
|
|
|
|
|
| Amortisation | ||||
| At 1 January 2004 as previously reported | - | 2,197,358 | (154,170) | 2,043,188 |
| Credit/Charge for the period | (11,667) | 1,430,356 | (137,680) | 1,281,009 |
|
|
|
|
|
| At 31 December 2004 | (11,667) | 3,627,714 | (291,850) | 3,324,197 |
|
|
|
||
| Net book values | ||||
| At 31 December 2004 | 163,333 | (1,119,408) | 14,135,073 | 13,178,998 |
| At 31 December 2003 | - | (2,549,764) | 205,839 | (2,343,925) |
|
|
|
|
| Company | Intellectual Property |
| Cost | |
| At 1 January 2004 as previously reported | - |
| Additions during year | 175,000 |
|
|
| At 31 December 2004 | 175,000 | </