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GROUP PLC
Clear direction,
effective
management
and a highly
professional
workforce
HIGGINS GROUP PLC
ANNUAL REPORT
2008
GROUP PLC
Higgins Group PLC Annual Report and Accounts 2008 1
DIRECTORS AND CORPORATE INfORmATION 2
CHAIRmAN’S STATEmENT 3
DIRECTORS' REPORT 4 - 5
DIRECTORS' RESPONSIBILITIES STATEmENT 6
INDEPENDENT AUDITOR’S REPORT 6 - 7
CONSOLIDATED PROfIT AND LOSS ACCOUNT 8
CONSOLIDATED BALANCE SHEET 9
COmPANY BALANCE SHEET 10
CONSOLIDATED CASH fLOW STATEmENT 11
STATEmENT Of TOTAL RECOGNISED GAINS AND LOSSES 11
NOTES TO THE ACCOUNTS 12 - 27
NOTICE Of mEETING 28
Awards
National Regeneration Awards Regeneration Contractor of the Year
National Regeneration Awards Best Community Regeneration Project
TPAS awards RLO of the Year for London and the South East
TPAS awardsNational RLO of the Year
The Daily Mail UK Property Awards Best Development in Sussex
The Daily Mail UK Property Awards Best Apartment in Essex
Daily Telegraph/Your New Homes AwardsBest Development for Family Living
HotProperty Awards Platinum Award for community (houses)
HotProperty Awards Peoples Choice Awards
HotProperty Awards Commutability Award
Daily Express New Homes Garden Awards Silver Award
GROUP PLC
Directors and Corporate Information
Directors
R G Higgins ACIOB (Chairman)S P Higgins BA
M J HigginsP H Lewellen BSc FCA
Secretary
P H Lewellen BSc FCA
Registered Office
One Langston RoadLoughtonEssex IG10 3SD
Registered no 2348986
Group Websites
www.higgins-group.co.uk www.higginshomes.co.ukwww.higginsconstruction.co.ukwww.bassettbusinessunits.co.uk
Auditor
KPMG LLP8 Salisbury SquareLondonEC4Y 8BB
Bankers
HSBC Bank PLCWest End Corporate Banking Centre2nd Floor, 70 Pall MallLondon SW1Y 5EZ
The Royal Bank of Scotland PLCCorporate Banking LondonProperty & Construction9th Floor280 BishopsgateLondon EC2M 4RB
Barclays Bank PLCProperty Finance TeamUK Banking – Larger BusinessFloor 27One Churchill PlaceLondon E14 5HP
The HBOS Group PLCEssex Corporate CentreLyttleton House64 Broomfield RoadChelmsfordEssex CM1 1SW
2 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
Whilst our private housebuilding activity has been significantly impacted by the restrictions on mortgage
availablility caused by the global market “credit crunch”, our contracting operation has increased sales by
15% due to the continued demand for affordable housing.
The overall Group result is a profit before taxation of £0.6 million from sales of £218 million. In current
market conditions this is a commendable achievement and evidences the benefit of having two strong
brands that are complementary at all stages of the economic cycle.
Higgins Construction PLC has a strong order book in terms of both new build and refurbishment contracts
with all areas providing a valuable contribution. The Group’s long standing relationships with its clients and
supply chain will provide many more opportunities in the social housing and education markets.
Higgins Homes PLC has maintained a healthy level of visitors and is well positioned when customer
confidence is restored. In the meantime the Group has taken steps to limit new production and is focused
on generating strong cashflow.
Higgins Group’s highly professional team remain fully focused on maintaining a sound financial base and
maximising all areas of its market activity.
R G Higgins AciOB
Chairman
28 October 2008
Chairman’s Statement
Higgins Group PLC Annual Report and Accounts 2008 3
GROUP PLC
introduction
The Directors submit their Annual Report and Financial Statements for the year ended 31 July 2008.
Principal activity
The principal activities of the Group during the period under review were that of building contracting and theacquisition and development of building land.
Review of the business
The Directors can announce that, despite market conditions, the Group achieved a positive contribution for theyear ended 31 July 2008. Turnover decreased by 5.6% to £218 million for the year ended 31 July 2008 (2007:£231 million) and generated profit before taxation of £0.6 million (2007: £10.5 million). Net assets stand at £52 million (2007: £54 million).
The contracting arm of the Group, Higgins Construction PLC, has maintained its share of the new build socialhousing market despite increasing competition. In addition, occupied refurbishment under the Government’s“Decent Homes” initiative continues to provide a valuable contribution.
Higgins Homes PLC holds a modest land bank and production will be phased in response to sustained demand.The level of visitors since the year end is encouraging and indicates an appreciation of the Company’s productand pricing structure. Limited mortgage availability and a lack of confidence prevents many of those visitorsfrom committing to a purchase decision but, as and when these obstacles are removed, the Directors expect agood take-up of the Company’s product. In the meantime the Directors are focused on generating positivecashflow and are operating comfortably within existing banking facilities.
The Directors are aware of the inherent risks within the Construction and Housebuilding industries. The Directorsmonitor and manage these risks through internal controls and maintaining awareness of the markets within whichthey operate. A careful and sensitive approach to pricing and tight cost management, together with themaintenance of strong relationships with clients and suppliers, will ensure that the Group can adapt to changingmarket conditions.
Directors and Directors’ interests
The names of the Directors who held office throughout the year and at the date of this report and theirinterests in the shares of the Company at the end of the year, were as follows:
Beneficial Interest at 31 July2008 2007
Number Number
R G Higgins 2,208,135 2,208,135S P Higgins 1,619,541 1,619,541M J Higgins 1,619,541 1,619,541P H Lewellen Nil Nil
Dividends
The Directors have not paid an interim or final dividend in the year (2007: no interim and final dividend).
Directors’ Report
4 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
creditor payment policy
The Group’s current policy concerning creditors is to:a) agree payment terms with its suppliers when it enters into binding purchase contracts; b) ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms incontracts; andc) abide by the payment terms agreed whenever it is satisfied that the supplier has provided the goods orservices in accordance with the contracts.
For the year to 31 July 2008 the Group’s average payment period from date of invoice or agreement ofvaluation was 22 days (2007: 19 days).
Banking Facilities
Since the balance sheet date, the Group has routinely renewed all its banking arrangements and hassufficient facilities in place to meet its projected cash requirements until the next review at the end ofOctober 2009. Whilst the Group’s development loans are technically repayable on demand, the Directorsexpect the facilities to continue to be available and to be renewed at that date.
Employment of disabled persons
It is the policy of the Group to employ disabled persons where they are suited to a particular vacancy andto develop their careers by means of training and promotion.
Employee involvement
The Group encourages disclosure of information and employee involvement in matters of concern to theiremployment. Special attention is paid to Health and Safety and Quality Assurance, accordingly industrialaccidents remain at a level well below the industry norm. The Group actively promotes trainingprogrammes, the employment of trade apprentices and the participation in other youth training schemes;particularly within the London Boroughs' neighbourhood centres.
Political and charitable contributions
During the year the Group made charitable contributions of £5,000 (2007: £13,000). The Group made nopolitical contributions during the year.
Auditor
In accordance with Section 384 of the Companies Act 1985, a resolution to re-appoint KPMG LLP asauditor of the Company is to be proposed at a forthcoming General Meeting.
Disclosure to Auditor
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as theyare each aware, there is no relevant audit information of which the Company's auditor is unaware; andeach Director has taken all the steps that he ought to have taken as a Director to make himself aware ofany relevant audit information and to establish that the Company's auditor is aware of that information.
By Order of the Board
P H Lewellen BSc FCA
Company Secretary28 October 2008
Directors’ Report
Higgins Group PLC Annual Report and Accounts 2008 5
GROUP PLC
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordancewith applicable law and regulations. Company law requires the Directors to prepare financial statementsfor each financial year. Under that law the Directors have elected to prepare the group and parent Companyfinancial statements in accordance with UK Accounting Standards and applicable law (UK Generally AcceptedAccounting Practice). The Group and parent Company financial statements are required by law to give a trueand fair view of the state of affairs of the group and the parent company and of the profit or loss for that year.
In preparing these financial statements, the Directors are required to: select suitable accounting policiesand then apply them consistently; make judgments and estimates that are reasonable and prudent; statewhether applicable accounting standards have been followed, subject to any material departures disclosedand explained in the financial statements; prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Group and the parent Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracyat any time the financial position of the parent Company and enable them to ensure that its financialstatements comply with the Companies Act 1985. They have general responsibility for taking such steps asare reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud andother irregularities.
Report of the independent Auditor
to the members of Higgins Group PLc
We have audited the Group and parent Company financial statements (the ‘‘financial statements’’) ofHiggins Group PLC for the year ended 31 July 2008 which comprise the Group Profit and Loss Account, theGroup and Company Balance Sheets, the Group Cash Flow Statement, the Group Statement of TotalRecognised Gains and Losses and the related notes. These financial statements have been prepared underthe accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of theCompanies Act 1985. Our audit work has been undertaken so that we might state to the Company’s membersthose matters we are required to state to them in an auditor’s report and for no other purpose. To the fullestextent permissible by law, we do not accept or assume responsibility to anyone other than the Company andthe Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Directors’ Responsibilities Statement and Independent Auditor’s Report
6 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
Respective responsibilities of Directors and Auditor
The directors’ responsibilities for preparing the Directors’ Report and the financial statements in accordancewith applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice) are set outin the Statement of Directors’ Responsibilities on page 6.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatoryrequirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and are properlyprepared in accordance with the Companies Act 1985. We also report to you whether in our opinion theinformation given in the Directors’ Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if wehave not received all the information and explanations we require for our audit, or if information specifiedby law regarding directors’ remuneration and other transactions is not disclosed.
We read the Directors’ Report and consider the implications for our report if we become aware of any apparentmisstatement within it.
Basis of audit opinion
We conducted our audit in accordance with International Standard on Auditing (UK and Ireland) issued bythe Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to theamounts and disclosures in the financial statements. It also includes an assessment of the significantestimates and judgements made by the directors in the preparation of the financial statements, and ofwhether the accounting policies are appropriate to the company's circumstances, consistently applied andadequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that thefinancial statements are free from material misstatement, whether caused by fraud or other irregularity orerror. In forming our opinion we also evaluated the overall adequacy of the presentation of information inthe financial statements.
Opinion
In our opinion:• the financial statements give a true and fair view, in accordance with UK Generally Accepted AccountingPractice, of the state of the company’s affairs as at 31 July 2008 and of its profit for the year then ended;• the financial statements have been properly prepared in accordance with the Companies Act 1985; and• the information given in the Directors’ Report is consistent with the financial statements.
KPMG LLP
Chartered Accountants/Registered Auditor, London28 October 2008
Independent Auditor’s Report continued
Higgins Group PLC Annual Report and Accounts 2008 7
GROUP PLC
Consolidated Profit and Loss AccountFor the year ended 31 July 2008
2008 2007Notes £’000 £’000
Turnover 2 217,752 231,048Cost of sales (198,406) (201,363)
Gross profit 19,346 29,685Administrative expenses (16,254) (16,774)
Operating profit 2/3 3,092 12,911Net interest payable 5 (2,683) (2,592)Net finance income – retirement benefits 4(j) 232 182
Profit on ordinary activities before taxation 641 10,501Taxation on profit on ordinary activities 6 (273) (3,025)
Profit on ordinary activities after taxation 15 368 7,476
Notes of Historical Cost profit
2008 2007£’000 £’000
Reported profit on ordinary activities before taxation 641
10,501Realisation of property revaluation gains of previous years 177 –
Historical cost profit on ordinary activities before taxation 818 10,501
Historical cost profit for the year retained after
taxation and dividends 545 7,476
All gains and losses arising in the year have been recognised in the profit and loss account shown above.
No activities were acquired or discontinued during the year.
The notes on pages 12 to 27 form an integral part of these financial statements.
8 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
2008 2007Notes £’000 £’000 £’000 £’000
Fixed assets
Tangible assets 7 31,665 31,364
current assets
Stocks 9 98,437 76,608Debtors 10 24,019 23,744Cash at bank and in hand 21,570 26,286
144,026 126,638creditors: amounts falling due within one year 11 (114,728) (96,933)
Net current assets 29,298 29,705
Total assets less current liabilities 60,963 61,069
creditors: amounts falling due after more than one year 12 (5,936)(6,712)
Provision for liabilities and charges 13 (143) (113)
Net assets excluding pension assets and liabilities 54,884 54,244
Defined benefit pension scheme assets 4 (e) 472 2,360Defined benefit pension scheme liabilities 4 (e) (3,177) (2,685)
Net assets 52,179 53,919
capital and reserves
Called up share capital 14 708 708Revaluation reserve 15(a) 9,046 8,698Other reserves 15(a) 94 94Profit and loss account 15(a) 42,331 44,419
Equity shareholders’ funds 52,179 53,919
These financial statements were approved by the Board of Directors on 28 October 2008.
R G Higgins ACIOB P H Lewellen BSC FCA
Director Director
The notes on pages 12 to 27 form an integral part of these financial statements
Consolidated Balance SheetAt 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 9
GROUP PLC
2008 2007Notes £’000 £’000 £’000 £’000
Fixed assets
Investment in subsidiaries 8 1,505 1,505
current assets
Debtors 10 28,617 23,181Cash at bank and in hand 10 –
28,627 23,181creditors: amounts falling due within one year 11 (19,490) (13,979)
Net current assets 9,137 9,202
Net assets 10,642 10,707
capital and reserves
Called up share capital 14 708 708Other reserves 15(b) 84 84Profit and loss account 15(b) 9,850 9,915
Equity shareholders’ funds 10,642 10,707
These financial statements were approved by the Board of Directors on 28 October 2008.
R G Higgins ACIOB P H Lewellen BSC FCA
Director Director
The notes on pages 12 to 27 form an integral part of these financial statements.
Company Balance SheetAt 31 July 2008
10 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
2008 2007Notes £’000 £’000 £’000 £’000
Net cash outflow from operating activities 17(a) (10,450) (1,935)
Returns on investment and servicing of finance
Interest received 1,278 762Interest paid (3,908) (3,169)
(2,630) (2,407)Taxation
Corporation tax paid (1,958) (2,857)
Dividends paid – –
capital expenditure and financial investment 17(b) (652) (1,506)
cash outflow before financing (15,690) (8,705)
Financing 17(c) 10,974 12,462
(Decrease)/increase in cash in the period 17(d) (4,716) 3,757
Statement of Total Recognised Gains and LossesFor the year ended 31 July 2008
2008 2007£’000 £’000
Profit for the financial year 368 7,476Unrealised surplus on re-valuation of properties 525 –Actuarial (loss)/gain recognised in the pension schemes (3,761) 1,484Deferred tax thereon 1,128 (445)
Total gains and (losses) recognised since last financial statements(1,740) 8,515
The notes on pages 12 to 27 form an integral part of these financial statements.
Consolidated Cash Flow StatementFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 11
GROUP PLC
1. Accounting policies
The following accounting policies have been applied consistently in dealing with items which areconsidered material in relation to the Group's financial statements.
(a) Basis of preparation
The financial statements have been prepared under the historical cost convention, modified to include therevaluation of certain freehold and leasehold properties, and in accordance with applicable accounting standards.
(b) Basis of consolidation
These consolidated accounts incorporate the accounts of the Company and all of its subsidiary undertakings.
As permitted by and in accordance with Section 230 of the Companies Act 1985, a separate profit and lossaccount of Higgins Group PLC, is not presented.
(c) Tangible fixed assets and depreciation
Freehold land and buildings and leasehold propertiesFreehold land and buildings and leasehold properties occupied by the Group and held as investments areincluded in fixed assets at their latest valuation plus subsequent additions at cost and surpluses or deficitson revaluations are included in the revaluation reserve. It is the policy of the Group to revalue freeholdand leasehold properties at least every five years. Provision for any impairment in the value of propertiesheld as fixed assets is made in the profit and loss account.
Depreciation is not provided in respect of freehold properties occupied or investment properties held by theGroup. Investment properties do not require depreciation in accordance with SSAP 19, Investment properties.Depreciation of occupied properties is not considered material. In accordance with FRS 11, Impairment offixed assets and goodwill, the assets are reviewed for impairment at the end of each reporting period.
Other tangible fixed assetsDepreciation is provided by the Group, on a reducing balance basis, to write off the cost, less the estimatedresidual value, of tangible fixed assets over their estimated useful economic lives as follows:
Leasehold properties – Period of the leasePlant and equipment – 25% per annumMotor vehicles – 25% per annumOffice equipment – 15% per annum
(d) Turnover
Turnover represents:(i) the invoiced value of certified construction and sub-contract work carried out;(ii) sales of the Group's development projects where the contract for sale has been completed.
Notes to the AccountsFor the year ended 31 July 2008
12 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
(e) Long-term contract balances
Amounts recoverable on contracts are stated at surveyors' valuations, including attributable profit estimatedto be earned to date less provision for any known or anticipated losses and are shown net of payments onaccount received or receivable. Attributable profit is based upon an assessment of the final outturn oncontracts which includes forecast costs to complete and final anticipated valuations. Claims receivable arerecognised as income once received or certified for payment.
(f) Stock of development land and properties
Stock of land and part completed properties is included at cost incurred to date less provisions for foreseeablelosses. Where individual plots of an overall development have been finished and sold, costs have beenattributed to these plots based on a proportion of the expected overall development costs on completion.
(g) Taxation
Corporation tax payable is provided on taxable profits at the current rate.Deferred taxation is provided on all timing differences that have originated but not reversed by the balancesheet date, except that:i) deferred tax is not recognised on the revaluation of land and buildings unless there is a binding agreementto sell the revalued property and it is probable that any taxable gain arising on the sale will not be rolledover into the purchase of another asset;ii) deferred tax assets are recognised only to the extent that they are considered recoverable.
(h) Pension costs
The Group operates two pension schemes. One provides benefits based on length of service and finalpensionable pay. The other has both defined contribution and defined benefit sections.
Contributions in respect of defined contribution pension schemes are charged to the profit and lossaccount when they are payable.
The expected cost to the Group of pensions in respect of the defined benefits pension schemes are chargedto the profit and loss account so as to spread the cost of pensions over the service lives of employees inthe scheme.
The obligations of the Group in respect of the schemes are calculated by estimating the amount of futurebenefit employees have earned in respect for their service. This is then discounted to present value anddeducted from the fair value of the scheme’s assets.
(i) Leases
Operating lease costs are charged to the profit and loss account on a straight line basis. Fixed assets heldunder finance leases are capitalised and depreciated over their expected useful lives. The finance chargesare allocated over the primary period of the lease in proportion to the capital outstanding.
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 13
GROUP PLC
2. Analysis of turnover, operating profit and net assets2008 2007
Operating Net assets/ Operating Net assets/Turnover profit/(loss) (liabilities) Turnover profit/(loss) (liabilities)
£’000 £’000 £’000 £’000 £’000 £’000
By activity:
Contracting 163,577 7,027 11,784 142,164 4,995 9,563Homes 54,175 (461) 66,493 88,884 11,144 52,900Head office costs – (3,474) 11,946 – (3,228) 13,810
217,752 3,092 90,223 231,048 12,911 76,273
Net debt (note 17(d)) (38,044) (22,354)
Net assets 52,179 53,919
All the Group’s activities are carried out in the United Kingdom.
3. Operating profit
Operating profit is stated after charging:2008 2007£’000 £’000
Aggregate Directors' emoluments (Note 4) 4,909 5,584Hire of plant and machinery 1,778 1,361Depreciation of tangible fixed assets 968 772Auditor’s remuneration – for audit work 65 59
and after crediting:Rents receivable 710 810Profit on sale of tangible fixed assets 102 13
Auditor’s remuneration for the Parent Company was £10,000 (2007: £8,000).The loss of the Parent Company transferred from reserves in the year is £65,000 (2007: profit of £1,303,000)
Notes to the AccountsFor the year ended 31 July 2008
14 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
4. Staff costs
(a) Staff numbers and costs
The average number of persons employed by the Group (including directors) during the year, analysed bycategory, was as follows:
Number of employees2008 2007
Office and management 198 184Contract staff 314 300
512 484
2008 2007£’000 £’000
Employee costs:
Wages and salaries 25,050 23,637Social security costs 2,634 2,501Other pension costs 1,403 1,442
29,087 27,580
The aggregate emoluments (excluding pension contributions) of the Chairman amounted to £1,303,182 (2007: £1,468,657). He has participated in a defined benefit pension scheme during the year and hisaccrued pensions at 31 July 2008 amounted to £314,583 per annum (2007: £286,276 per annum). For theyears ended 31 July 2008 and 2007 the highest paid Director was also Chairman.
(b) Pensions
The Group operates two Pension Schemes. The Higgins Group PLC Pension & Life Assurance Scheme (“Staff Scheme”) was a defined benefit only scheme until February 2002 from which date that part of thescheme was closed to new entrants who were invited to join a money purchase section. With effect from 1 September 2008 the money purchase section ceased to receive contributions which are now paid to theHiggins Group Personal Pension Scheme which is provided by Scottish Widows and whose assets aremanaged independently from the Group and the Staff Scheme Trustees. The Staff Scheme therefore hasboth defined benefit and money purchase sections. The Higgins Group PLC Founders Directors RetirementBenefit Scheme (“Founders Scheme”) is a defined benefit scheme.
(c) Money purchase contributions
Contributions amounting to £330,000 (2007: £241,000) were paid into the money purchase section of theStaff Scheme during the year. In addition the Group covers the cost of insured benefits.
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 15
GROUP PLC
4. Staff costs continued
(d) Defined benefit contributions
A schedule of minimum contributions for the Group’s defined benefit schemes is determined by an independentqualified actuary on the basis of triennial valuations – the most recent of which was at 30 April 2007. TheScheme Actuary has recommended that future “ordinary” contributions be made into the defined benefit sectionof the Staff Scheme at the rate of 17.5% of pensionable salaries as well as £47,000 per month for a period ofnine years with effect from 1st June 2008 to make good the funding shortfall arising from the latest actuarialvaluation. The Actuary has recommended that no contributions are necessary into the Founders Scheme. In addition the Group covers the cost of insured benefits and other expenses of both schemes.
Based on the current remuneration levels the Directors would expect the total employers contributions to be£1,300,000 for the financial period ended 31 July 2009.
(e) Defined benefit assets and liabilities
The market value of the defined benefit section of the Staff Scheme and the Founders Scheme assets at 31 July 2008 were sufficient to cover 79% (2007: 82%) and 106% (2007: 133%) of the respective Schemedefined benefit obligations at that date.
The principal actuarial assumptions are as follows:At 31 July At 31 July At 31 July
2008 2007 2006
Inflation 3.90% 3.35% 3.00%Discount rate 6.70% 5.90% 5.25%Salary increase – Staff Scheme 4.90% 4.35% 4.00%Salary increase – Founders Scheme 5.40% 4.85% 4.50%Pension in payment increase (1997-2006 accrual) 3.90% 3.35% 3.00%Pension in payment increase (post 2006 accrual) 3.00% 3.00% –
The adopted set of demographic assumptions are consistent with those used for the FRS17 disclosures as at31 July 2007 and for the formal funding valuations of the Schemes as at 30 April 2007.
Life expectancy is assumed to be in line with the PNXL00 life tables based on year of birth with a 120%scaling factor. The Medium Cohort improvements were adopted for future improvements until 2020.
The expected return on assets is based on the long term expectancies for each asset class at the beginningof the period. The expected return on assets is set by the Company having taken actuarial advice.
Notes to the AccountsFor the year ended 31 July 2008
16 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
On the basis of these assumptions the pension assets or liabilities and the expected long-term rates ofreturn were:
Expected long term rate of return Staff Scheme value2008 2007 2006 2005 2004 2008 2007 2006 2005 2004
% % % % % £’000 £’000 £’000 £’000 £’000
Other Equities 7.90 7.90 7.55 7.40 8.00 12,212 14,185 11,655 9,777 7,598Corporate Bonds 6.70 5.90 5.35 5.20 5.30 1,716 401 805 719 948Government Bonds 4.90 4.90 4.55 4.40 5.00 1,746 1,220 674 610 –Cash and other 5.00 5.50 4.50 4.50 4.50 1,896 1,931 1,904 1,500 858
Fair value of defined benefit assets 17,570 17,737 15,038 12,606 9,404Present value of defined benefit obligations (22,109) (21,572) (20,117) (16,290) (12,345)
Deficit (4,539) (3,835) (5,079) (3,684) (2,941)Related deferred tax asset 1,362 1,150 1,524 1,105 882
Pension liability (3,177) (2,685) (3,555) (2,579) (2,059)
Expected long term rate of return Founders Scheme value2008 2007 2006 2005 2004 2008 2007 2006 2005 2004
% % % % % £’000 £’000 £’000 £’000 £’000
Investment in HigginsGroup PLC 5.00 5.00 5.00 4.50 4.50 5,800 7,300 7,300 527 –Other Equities 7.90 7.90 7.55 7.40 8.00 3,896 3,553 3,093 4,569 3,828Corporate Bonds 6.70 5.90 5.35 5.20 5.30 – 100 214 202 2,397Government Bonds 4.90 4.90 4.55 4.40 5.00 1,898 2,118 2,020 1,933 –Cash and other 5.00 5.50 4.50 4.50 4.50 66 607 701 513 181
Fair value of defined benefit assets 11,660 13,678 13,328 7,744 6,406Present value of defined benefit obligations (10,986) (10,307) (10,422) (7,011) (6,015)
Surplus 674 3,371 2,906 733 391Related deferred tax liability (202) (1,011) (872) (220) (117)
Pension asset 472 2,360 2,034 513 274
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 17
GROUP PLC
4. Staff costs continued
(f) changes in the fair value of scheme assetsStaff Scheme Founders Scheme
2008 2007 2008 2007£’000 £’000 £’000 £’000
Opening fair value of scheme assets 17,737 15,038 13,678 13,328Expected return on assets 1,339 1,075 785 730Contributions by scheme participants 239 259 – –Contributions by the employer 1,097 1,050 – –Actuarial gains/(losses) (2,239) 672 (2,649) (234)Benefits paid (603) (357) (154) (146)
closing fair value of scheme assets 17,570 17,737 11,660 13,678
(g) Actual return of scheme assetsStaff Scheme Founders Scheme
2008 2007 2008 2007£’000 £’000 £’000 £’000
Expected return of scheme assets 1,339 1,075 785 730Actuarial gains/(losses) (2,239) 672 (2,649) (234)
Actual return of scheme assets (900) 1,747 (1,864) 496
(h) changes in the present value of scheme liabilitiesStaff Scheme Founders Scheme
2008 2007 2008 2007£’000 £’000 £’000 £’000
Opening present value of scheme liabilities 21,572 20,117 10,307 10,422Current service cost 879 1,006 – –Interest cost 1,288 1,080 604 543Contributions by plan participants 239 259 – –Actuarial losses/(gains) (1,266) (533) 139 (512)Past service cost – – 90 –Benefits paid (603) (357) (154) (146)
closing present value of scheme liabilities 22,109 21,572 10,986 10,307
Notes to the AccountsFor the year ended 31 July 2008
18 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
(i) changes in the fair value of defined benefit (liabilities)/assetsStaff Scheme Founders Scheme
2008 2007 2008 2007£’000 £’000 £’000 £’000
Pension (liabilities)/assets at beginning of year (2,685) (3,555) 2,360
2,034Movement in year:Past service cost – – (90) –Current service cost (879) (1,006) – –Contributions 1,097 1,050 – –Net finance income surplus/(deficit) 51 (5) 181 187Actuarial (loss)/gain (973) 1,206 (2,788) 278Deferred tax 212 (375) 809 (139)
Pension (liabilities)/assets at end of year (3,177) (2,685) 472
2,360
(j) Amounts recognised in profit and loss account
The amounts charged to profit and loss account in respect of defined benefit obligations are as follows:
Staff Scheme Founders Scheme 2008 2007 2008 2007£’000 £’000 £’000 £’000
Past service cost – – 90 –Current service cost 879 1,006 – –
Total operating charge 879 1,006 90 –
Expected return on pension scheme assets 1,339 1,075 785 730Interest on pension scheme liabilities (1,288) (1,080) (604) (543)
Net finance income/(cost) 51 (5) 181 187
As the defined benefit section of the Staff Scheme is closed to new entrants, the current service cost, under the projected unit method, will increase as the members of the scheme approach retirement.
(k) Actuarial gains and losses recognised in equity
The amounts that have been included within the statement of total recognised gains and losses are as follows:
Staff Scheme Founders Scheme 2008 2007 2008 2007£’000 £’000 £’000 £’000
Difference between expected and actual returns on assets (2,239) 673 (2,649) (234)Experience losses arising in the scheme liabilities (461) (343) (690) (201)Effects of changes in assumptions underlying the present value of scheme liabilities 1,727 876 551 713
Actuarial (loss)/gain (973) 1,206 (2,788) 278
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 19
GROUP PLC
4. Staff costs continued
(l) History of experience gains and losses2008 2007 2006 2005 2004
Staff Scheme £’000 £’000 £’000 £’000 £’000
Difference between expected and actual returns on scheme assets (2,239) 673 608 1,379 (150)Percentage of assets at year end 13% 4% 4% 11% 2%
Experience (losses)/gains on scheme liabilities (461) (343) (191) 78 (545)Percentage of liabilities at year end 2% 2% 1% 0% 4%
Total actuarial (losses)/gains (973) 1,206 (1,427) (739) (1,616)Percentage of liabilities at year end 4% 6% 7% 5% 13%
2008 2007 2006 2005 2004Founders Scheme £’000 £’000 £’000 £’000 £’000
Difference between expected and actual returns on scheme assets (2,649) (234) 5,564 910 806Percentage of assets at year end 23% 2% 42% 12% 13%
Experience (losses)/gains on scheme liabilities (690) (201) (3,235) 260 68Percentage of liabilities at year end 6% 2% 31% 4% 1%
Total actuarial gains/(losses) (139) 278 1,959 343 292Percentage of liabilities at year end 1% 3% 19% 5% 5%
5. Net interest payable
2008 2007£’000 £’000
Interest payable on bank loans and overdrafts 3,961 3,354Interest income (1,278) (762)
2,683 2,592
Notes to the AccountsFor the year ended 31 July 2008
20 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
6. Taxation on profit on ordinary activities
2008 2007£’000 £’000
Analysis of charge in year
UK corporation tax charge at 29% (2007: 30%) based on the profit for the year 108 2,980Under/(over) provision in respect of prior years 27 (47)
135 2,933Deferred taxation (see note 13) 30 24Deferred taxation – relating to retirement benefits 108 68
273 3,025
The Group is not aware of any factors that materially affect the tax charge for the year or future tax charges.
Factors affecting the tax charge for the current period
The current tax charge for the period is lower (2007: lower) than the standard rate of corporation tax in the UKof 29% (2007: 30%). The differences are explained below:
2008 2007£’000 £’000
current Tax Reconciliation
Profit on ordinary activities before tax 641 10,501
Current tax at 29% (2007: 30%) 188 3,150Effects of:
Expenses not deductible for tax purposes 154 117Capital allowances for period in excess of depreciation (126) (221)Utilisation of tax losses – 2Tax relief on pension contributions in excess of amounts expensed (108) (68)Adjustments to tax charge in respect of previous periods 27 (47)
Total current tax charge 135 2,933
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 21
GROUP PLC
7. Tangible fixed assetsFreeholdland and Leasehold Plant & Motorbuildings properties equipment vehicles Total
£’000 £’000 £’000 £’000 £’000
cost or valuation
At beginning of year 25,669 1,815 6,852 1,333 35,669Additions – 23 842 315 1,180Disposals (380) – (102) (130) (612)Revaluation 257 88 – – 345
At end of year 25,546 1,926 7,592 1,518 36,582
Depreciation
At beginning of year 68 94 3,418 725 4,305Charge for year – 8 739 221 968Revaluation (68) (102) – – (170)On disposals – – (96) (90) (186)
At end of year – – 4,061 856 4,917
Net Book Amount
At 31 July 2008 25,546 1,926 3,531 662 31,665
At 31 July 2007 25,601 1,721 3,434 608 31,364
The following freehold properties were professionally valued by Chartered Surveyors as at 31 July 2008 on anopen market basis in compliance with RICS Statement of Asset Valuation Practice and Guidance Notes:
ValuationName of Property £ Name of ValuerConnaught House, High Road, Loughton 3,270,000 Glenny LLPCharter House, High Street, Great Dunmow 530,000 Kemsley, Whiteley & FerrisConnaught Mews, Loughton 345,000 Glenny LLPLa Tasca, High Street, Brentwood 1,400,000 Savills (L&P) LimitedOne Langston Road, Loughton 20,000,000 Savills (L&P) Limited
The historical cost of freehold properties is £17,119,000 (2007: £17,321,000).
The following investment leasehold properties were professionally valued by Chartered Surveyors as at 31 July 2008on an open market basis in compliance with RICS Statement of Asset Valuation Practice and Guidance Notes:
ValuationName of Property £ Name of ValuerBassett Business Units, North Weald 1,500,000 Glenny LLPUnits 2-3, Lockside Marina, Chelmsford 255,000 Kemsley, Whiteley & Ferris
The historical cost of leasehold properties is £1,437,000 (2007: £1,414,000).
Notes to the AccountsFor the year ended 31 July 2008
22 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
8. Fixed assets - investments
company – investments2008 2007£’000 £’000
Shares in Group Undertakings:Net book amount at beginning of year and end of year 1,505 1,505
The list of companies in which the Company has a participating interest, all of which are 100% subsidiaryundertakings registered in England and Wales, is as follows:Subsidiary Undertakings Principal Activity
Higgins Homes PLC House building Higgins Construction PLC ContractingHiggins Investments PLC Property investmentsBassett Business Units Limited Managing business units†
Higgins City Limited DormantD J Higgins Investments Limited DormantHiggins Group Services Limited DormantD J Higgins Construction Limited Dormant*D J Higgins Building Works Limited Dormant*D J Higgins Plant Limited Dormant*Station Garage (Loughton) Limited Dormant*
* All these companies are 100% subsidiary undertakings of Higgins Construction PLC.†This company is a 100% subsidiary of Higgins Investments PLCAll other companies are 100% subsidiary undertakings of the Company.
9. Stocks2008 2007£’000 £’000
Residential development land and buildings 96,809 75,933Contracting stock and work in progress 1,628 675
98,437 76,608
10. Debtors2008 2007
Group Company Group Company£’000 £’000 £’000 £’000
Trade debtors 19,694 – 20,578 –Amounts recoverable on contracts 3,077 – 1,732 –Amounts owed by subsidiaries – 28,480 – 22,935Other debtors 789 1 559 1Prepayments and accrued income 459 136 875 245
24,019 28,617 23,744 23,181
Included in trade debtors are amounts falling due after more than one year of £2,653,000 (2007: £2,053,000).
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 23
GROUP PLC
11. creditors: amounts falling due within one year2008 2007
Group Company Group Company£’000 £’000 £’000 £’000
Bank loans and overdrafts 53,678 – 41,928 36Trade creditors 19,432 – 8,623 –Payments on account 14,553 – 15,323 –Amounts owed to subsidiaries – 18,715 – 13,788Corporation tax payable – – 1,781 –Other taxation and social security 1,677 – 1,225 13Other creditors 567 – 584 –Accruals and deferred income 24,821 775 27,469 142
114,728 19,490 96,933 13,979
The bank loans and overdrafts are secured on:(i) certain freehold and leasehold properties retained as tangible fixed assets and (ii) certain properties within the stock of development land.
Since the balance sheet date, the Group has routinely renewed all its banking arrangements and hassufficient facilities in place to meet its projected cash requirements until the next review at the end ofOctober 2009. Whilst the Group’s development loans are technically repayable on demand, the Directorsexpect the facilities to continue to be available and to be renewed at that date.
12. creditors: amounts falling due after more than one year2008 2007£’000 £’000
Bank Loan 5,936 6,712
5,936 6,712
The bank loan is repayable by instalments as follows:2008 2007£’000 £’000
Bank loan
Amounts due:Between 1 and 2 years 1,251 1,186Between 2 and 5 years 3,753 3,556After 5 years 932 1,970
5,936 6,712
The bank loans are secured on:(i) a freehold and leasehold properties retained as a tangible fixed assets and(ii) certain properties within the stock of development land.The bank loan is repayable by monthly instalments. Interest is charged at a rate linked to bank base lending rate.
Notes to the AccountsFor the year ended 31 July 2008
24 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
13. Provision for liabilities and charges
Deferred Tax – Group2008 2007£’000 £’000
Balance at beginning of year 113 89Profit and loss account (see note 6) 30 24
Balance at end of year 143 113
Deferred taxation provided in the accounts is as follows:2008 2007£’000 £’000
Accelerated capital allowances 257 231Short-term timing differences (114) (118)
143 113
The Group has trading losses carried forward of £32,000 (2007: £32,000) which have not been reflected in other timing differences.
In addition, a deferred tax asset of £1,021,000 arose in the year (2007: liability of £513,000) in relation to theGroup’s defined benefit schemes. In accordance with FRS17, pension assets and liabilities arising are net ofattributable deferred tax (note 4 (e)).
14. called up share capital2008 2007£’000 £’000
Authorised:50,000,000 Ordinary Shares of 10 pence each 5,000 5,000
Share Capital allotted, and fully paid:7,083,902 Ordinary Shares of 10 pence each 708 708
Notes to the AccountsFor the year ended 31 July 2008
Higgins Group PLC Annual Report and Accounts 2008 25
GROUP PLC
15. Statement of movements on reservesProfit
Revaluation Other and lossreserve reserves account Total£’000 £’000 £’000 £’000
(a) GroupAt beginning of year 8,698 94 44,419 53,211Profit for financial year – – 368 368Revaluation in the period 525 – – 525Realisation of revaluation reserve on sale of property (177) – 177 –Actuarial loss arising in the year – – (3,761) (3,761)Deferred tax arising thereon – – 1,128 1,128
At end of year 9,046 94 42,331 51,471
(b) CompanyAt beginning of year – 84 9,915 9,999Loss for financial year – – (65) (65)
At end of year – 84 9,850 9,934
16. Guarantees and commitments
(a) The Company has entered into guarantee arrangements on behalf of certain subsidiary undertakings inthe normal course of business.
(b) Capital commitments of the Group at 31July 2008 for which no provision has been made in thesefinancial statements, were as follows:
2008 2007£’000 £’000
Contracted 13 327Authorised but not contracted – 86
13 413
(c) At 31 July 2008 the Group had annual commitments (Company: £nil) under non-cancellable operatingleases and contract hire agreements as follows:
Contract ContractProperty hire Total Property hire Total
2008 2008 2008 2007 2007 2007£’000 £’000 £’000 £’000 £’000 £’000
Leases which expire:Within 1 year – 242 242 – 116 116In 2 to 5 years – 729 729 – 787 787Over 5 years 41 – 41 28 – 28
41 971 1,012 28 903 931
Notes to the AccountsFor the year ended 31 July 2008
26 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
17. Notes to the cash flow statement
(a) Reconciliation of operating profit to operating cash flows2008 2007£’000 £’000
Operating profit 3,092 12,911Depreciation charges 968 772Reduction in valuation 10 –Profit on sale of tangible fixed assets (102) (13)Defined benefit pension scheme contributions paid (1,097) (1,050)Defined benefit pension scheme service cost accrued 968 1,006(Increase) in stocks (21,829) (15,968)(Increase) in debtors (233) (5,645)Increase in creditors 7,773 6,052
Net cash outflow from operating activities (10,450) (1,935)
(b) Analysis of capital expenditure and financial investment2008 2007£’000 £’000
Purchase of tangible fixed assets (1,180) (1,598)Sale of tangible fixed assets 528 92
Net cash outflow for capital expenditure and financial investment (652) (1,506)
(c) Financing2008 2007£’000 £’000
Drawdown of loans 10,974 12,462
(d) Analysis of net debtAt At
1 August Cash 31 July2007 flow 2008£’000 £’000 £’000
Cash at bank and in hand 26,286 (4,716) 21,570Bank loans due within 1 year (41,928) (11,750) (53,678)Bank loans due after 1 year (6,712) 776 (5,936)
(22,354) (15,690) (38,044)
Notes to the AccountsFor the year ended 31 July 2008
GROUP PLC
Higgins Group PLC Annual Report and Accounts 2008 27
Short notice, having been approved is hereby given that the Annual General Meeting of Higgins Group PLCwill be held at One Langston Road, Loughton, Essex on 25 November 2008 at 11.00am to transact thefollowing business:
1. To receive and approve the consolidated Annual Report and Accounts for the year ended 31 July 2008 and the reports of Directors and Auditor thereon.
2. To appoint KPMG LLP as auditor of the Company and to authorise the Directors to fix their remuneration.
3. To transact any other business which may be transacted at an Annual General Meeting.
By Order of the Board
P H Lewellen BSc FCA
Company Secretary
28 October 2008
The Register of Directors and interests in the Company’s shares are available for inspection at theRegistered Office of the Company during usual business hours (weekends and public holidays excepted) andat the meeting from 15 minutes prior to and during the meeting.
Notice of Meeting
GROUP PLC
Des
igne
d an
d Pr
oduc
ed by B
UCKLEY
DEAN
EW
AKEFIE
LD
020 7
454 1
919
28 Higgins Group PLC Annual Report and Accounts 2008
GROUP PLC
HIGGINS GROUP PLCOne Langston RoadLoughtonEssexIG10 3SD Telephone 020 8508 5555Fax 020 8508 7078E-mail [email protected]