J. SMART & CO. (CONTRACTORS) PLC
ANNUAL REPORT
AND
STATEMENT OF ACCOUNTS
TO
31s t JULY 2016
J. Smart & Co. (Contractors) PLC
DIRECTORS
John M Smart, Chairman and Managing Director
DaviD W Smart
alaSDair h roSS
John r Smart
COMPANY SECRETARY
Patricia Sweeney
REGISTERED OFFICE
28 cramonD roaD South,
eDinburgh,
eh4 6ab
SUBSIDIARY COMPANIES
mcgowan anD comPany (contractorS) limiteD
cramonD real eState comPany limiteD
thomaS menzieS (builDerS) limiteD
concrete ProDuctS (KirKcalDy) limiteD
c. & w. aSSetS limiteD
REGISTRARS AND TRANSFER OFFICE
equiniti limiteD,
34 South gyle creScent,
South gyle buSineSS ParK,
eDinburgh,
eh12 9eb
BANKERS
banK of ScotlanD,
38 St anDrew Square,
eDinburgh,
eh2 2yr
AUDITORS
french Duncan lLP,
chartereD accountantS,
133 finnieSton Street,
glaSgow,
g3 8hb
SOLICITORS
anDerSon Strathern llP,
1 rutlanD court,
eDinburgh,
eh3 8ey
1
J. Smart & Co. (Contractors) PLC
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 2016 at 12 noon, for the following purposes:
1. To receive and consider the Statement of Accounts for the year ended 31st July 2016 and the Report of the Directors
and the Report of the Auditors.
2. To approve the Directors’ Remuneration Report for the financial year ended 31st July 2016 as set out on pages 20 to
25 in the Annual Report.
3. To declare a Final Dividend of 2.15p per share.
4. To re-elect David W Smart as a Director, who retires in accordance with provision B.7.1 of the UK Corporate
Governance Code.
5. To re-elect French Duncan LLP as Auditors.
6. To authorise the Directors to determine the remuneration of the Auditors.
7. To authorise in accordance with sections 366 and 367 of Companies Act 2006, the Company and any company which is
or becomes its subsidiary at any time during the period for which this Resolution has effect to:
(i) make political donations to political parties, other political organisations and/or independent election candidates; and
(ii) incur other political expenditure,
providing such expenditure does not exceed £5,000 in aggregate for paragraphs (i) and (ii) above.
This authority shall expire immediately before the Company’s Annual General Meeting to be held in 2020.
8. To authorise the Company, via a special resolution, for the purposes of section 701 of the Companies Act 2006 to make
market purchases (as defined in section 693(4) of the Companies Act 2006) of its ordinary shares of 2p each (ordinary
shares) provided that:
(a)
the Company does not purchase under this authority more than 10% of the nominal value of the Company’s issued
share capital at the date of this notice;
the Company does not pay less than 2p (exclusive of expenses) for each ordinary share;
the Company does not pay for each ordinary share more than 105% (exclusive of expenses) of the average market
value of the Company’s equity shares for the five business days prior to the day the purchase is made according to
the Daily Official List of the London Stock Exchange and the higher of the price of the last independent trade and
the highest current independent bid.
(b)
(c)
This authority is to apply until the end of the next Annual General Meeting (or, if earlier, until the close of business
on 15th February 2018) but the Company may enter into a contract to purchase ordinary shares which will or may be
completed or executed wholly or partly after this authority ends, the Company may purchase these ordinary shares
pursuant to any contract as if the authority had not ended. Under this authority any shares purchased by the Company will
be cancelled.
9. To transact any other business of an Annual General Meeting.
Explanatory notes providing information in relation to each of the proposed resolutions in this Notice of Meeting can be
found on the Company’s website www.jsmart.co.uk.
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/her. 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
proxy.votes@equiniti.com. 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 Annual General Meeting
(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.
2
J. Smart & Co. (Contractors) PLC
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 OF DIRECTORS
Patricia Sweeney
Company Secretary
28 Cramond Road South,
Edinburgh
EH4 6AB
15th November 2016
3
J. Smart & Co. (Contractors) PLC
CHAIRMAN’S REVIEW
ACCOUNTS
Headline Group profit for the year before tax, including an unrealised surplus in revalued property as required by the
International Financial Reporting Standards was £3,752,000 compared with £3,544,000 last year. If the impact of revalued
property 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 £3,616,000 (including £186,000 profit from property sales) which compares with the
figure for underlying profit last year of £3,755,000 (including £1,318,000 profit from property sales and joint venture
property sales).
The Board is recommending a Final Dividend of 2.15p nett making a total for the year of 3.07p nett which compares with
3.02p nett for the previous year. After waivers by members holding over 50% of the shares, the Final Dividend will cost
the Company no more than £421,000.
TRADING ACTIVITIES
Group construction activities carried out including private residential sales increased by 42%. Disregarding private
residential sales Group construction activities increased by 23%. Own work capitalised increased by 125%. Group
revenue increased by 39% and headline Group profit before tax increased by 6%. Underlying Group profit before tax
excluding the unrealised surplus in revalued property decreased by 4%.
Turnover in contracting was more than last year and the loss was reduced. As forecast private residential sales were more
than the previous year. Sales and profit in precast concrete manufacture increased.
The two large mixed social housing and private residential developments at Seafield Street and Pilton Drive, Edinburgh,
continue to make satisfactory progress. A third phase of social housing at Pilton Drive and a further social housing
contract at Fleming Place (adjacent to Seafield Street) have commenced.
Occupancy levels at our industrial estates continue to be satisfactory. A joint venture industrial development at Gartcosh
near Glasgow is contemplated. Although interest in our commercial office premises has improved, take up of voids is still
slow.
FUTURE PROSPECTS
Work in hand in contracting is slightly less than at this time last year and there is little prospect of more work in the short
term. Accordingly, turnover in this sector will be down on last year. Prices remain competitive.
Private residential sales will be less than last year. It is by no means certain that current property valuation levels will be
maintained at the end of the current financial year.
At this early stage it is difficult to make an informed forecast of the outcome for the current year. However, bearing in
mind the foregoing circumstances and that the reduced turnover will impair the recovery of fixed overhead costs, it seems
unlikely that the profit for the current year will match last year’s profit.
15th November 2016
John M SMart
Chairman
4
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS
31st JULY 2016
The Directors present their Annual Report and the audited financial statements of the Group for the year ended
31st July 2016.
STRATEGIC REPORT
The Companies Act 2006 requires the Directors to prepare a Strategic Report which presents a fair review of the business
during the year to 31st July 2016 and of the position of the Group at the end of the financial year. The Strategic Report
also includes a description of the principal risks and uncertainties faced by the Group. The Strategic Report can be found
on pages 9 to 14 and is incorporated into the Report of the Directors by reference.
CORPORATE GOVERNANCE
The Company is required, as a premium listed company on the London Stock Exchange, to prepare a report on Corporate
Governance in accordance with the Financial Reporting Council’s UK Corporate Governance Code (the Code). The
information required by the Code and also the Disclosure and Transparency Rules and the Listing Rules can be found on
pages 16 to 19 and is incorporated into the Report of the Directors by reference.
RESULTS AND DIVIDENDS
The profit of the Group after tax for the year ended 31st July 2016 amounted to £3,488,000 (2015, £2,998,000).
During the year the Company paid on 21st December 2015 a final dividend for the year to 31st July 2015 of 2.10p per share
(2015, 2.04p) and paid on 31st May 2016 an interim dividend for the year to 31st July 2016 of 0.92p per share (2015, 0.92p).
The Directors recommend a proposed final dividend for the year of 2.15p per share, making a total for the year of 3.07p.
This final dividend is subject to approval by the shareholders at the Annual General Meeting in December 2016 and has
not been included as a liability in these financial accounts. If this dividend is approved it will be paid to the members on
the share register of the Company at the close of business on 25th November 2016. Dividend warrants will be posted on
20th December 2016.
DIRECTORS
The following were Directors of the Company during the financial year ended 31st July 2016:
−
−
−
−
John M Smart
David W Smart
Alasdair H Ross
John R Smart
Details of the Directors are given on page 15.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
The Company’s Articles of Association (the Company’s Articles) give the Directors the power to appoint or remove
any Director. Initial appointments must 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. In accordance with the Company’s
Articles, Directors are not required to retire by rotation, however, in accordance with provision B.7.1 of the UK Corporate
Governance Code, with the exception of the Managing Director, all Directors must retire and offer themselves for
re-election at the Annual General Meeting at least every three years.
5
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2016
DIRECTORS’ INTERESTS
Details of Directors’ interests in the ordinary share capital of the Company are given in the Directors’ Remuneration
Report. There have been no changes in Directors’ interests between 31st July 2016 and 21st October 2016.
No Director has a service contract with the Company and no Director has a material interest in any contract to which the
Company or any Subsidiary Company was a party to during the year.
DIRECTORS’ POWERS
The Company’s Articles states that the Directors may exercise all of the powers of the Company which also includes the
right of the Directors to buy back the Company’s shares based on the authority given by the shareholders following the
passing of a special resolution at the Company’s 2015 Annual General Meeting.
INDEMNIFICATION OF DIRECTORS
In accordance with the Company’s Articles and to the extent permitted by law, Directors are granted an indemnity by the
Company in respect of liabilities incurred as a result of their office. The Directors are also indemnified against the cost
of defending any proceedings whether criminal or civil in which judgement is given in favour of the Director or in which
the Director is acquitted or the charge is found not proven. The Company has maintained Directors’ and Officers’ liability
insurance cover throughout the financial year.
CAPITAL MANAGEMENT AND SHAREHOLDER INFORMATION
The capital structure of the Company consists of issued share capital, reserves and retained earnings represented
predominantly by investment properties, working capital and cash.
The Company’s issued ordinary share capital as at 31st July 2016 comprises a single class of ordinary share of 2p each.
Details of the issued share capital are shown in note 22 to the Accounts.
At the Annual General Meeting in 2015 the Company was authorised by the shareholders to purchase, in the market, up
to 10% of the Company’s issued share capital, as permitted under the Company’s Articles. The purpose of the market
purchase is to enhance the earnings per share and/or the equity shareholders’ funds per share. The Directors are seeking
renewal of this authority at the 2016 Annual General Meeting.
During the year the Company made market purchases of 670,000 ordinary shares of 2p under the existing authority, for a
total consideration of £704,000. The shares purchased were subsequently cancelled, and represented less than 2% of the
Company’s issued share capital at the start of the financial year.
All members who hold ordinary shares are entitled to attend and vote at a 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.
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 on the transfer of securities.
Details of substantial shareholders can be found in the Company’s Corporate Governance Report.
6
7
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2016
ARTICLES OF ASSOCIATION
The Company’s Articles can only be amended by a special resolution at a General Meeting. No amendments are proposed
to be made to the existing Company Articles at the 2016 Annual General Meeting.
CHANGE OF CONTROL
The Company is not party to any significant agreements which take effect, alter or terminate upon 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.
POLITICAL DONATIONS AND POLITICAL EXPENDITURE
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.
GREENHOUSE GAS EMISSIONS
The Companies Act 2006 (Strategic Report and Directors’ Report) Regulation 2013 requires all quoted companies to
report the greenhouse gas emissions for which they are responsible and on any environmental matters which are material
to the company’s operations.
Carbon emissions and energy use:
Emissions from:
Combustion of fuel and operation of facilities
Electricity, heat, steam and cooling purchased for own use
.
Total emissions
.
.
.
.
.
.
.
.
.
.
Group’s chosen intensity measurement:
Emissions reported above normalised to per full time equivalent employee
Emissions reported above normalised to per £million of revenues
.
2016
Tonnes of CO2e
2015
Tonnes of CO2e
1,412
329
1,741
5.842
59.979
1,300
379
1,679
6.825
80.647
Changes in the total greenhouse gas emissions by the Group over the year are a result of changes in the mix of construction
activities, contributing to the increase in emissions from fuel combustion and the decrease in emissions from purchased
electricity.
An increase in staff within construction activities has reduced the greenhouse gas emissions per employee metric and the
increase in revenue from construction activities has reduced the emissions normalised by revenue.
We have reported on all the emission sources required under the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013. These sources fall within our Statement of Accounts. We do not have responsibility for any
emission sources that are not included in our Statement of Accounts.
Our greenhouse gas emissions have been calculated using the GHG Protocol Corporate Accounting and Reporting
Standard (revised edition), data gathered to fulfil our requirements under these Regulations, and emission factors from the
UK Government’s GHG Conversion Factors for Company Reporting 2015 and 2016 for the respective years. Emissions
are calculated on the location based methodology.
WASTE MANAGEMENT
We manage waste in accordance with the waste hierarchy and ensure compliance with all applicable environmental
legislation across all our operations. Construction waste is managed through site waste management plans which ensure
waste arising is minimised, reused or recycled. Waste reduction is considered at the building design stage and any waste
arising in construction is segregated either on site or off site. Where possible, waste is reused on site and waste to landfill
is minimised with preference given to recycling or energy recovery. Training is provided to all staff and subcontractors
and waste champions are assigned to each site to ensure compliance with our waste policies and procedures.
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7
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2016
GOING CONCERN
The Group’s business activities, performance and principal risks and uncertainties are set out in the Strategic Report.
The Group has adequate financial resources and is not reliant on external funding, and the Directors believe that the
Group is well placed to manage its business risks successfully. After making enquires, the Directors have a reasonable
expectation 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 Annual Report and Statement of Accounts.
FUTURE DEVELOPMENTS
It is not anticipated that the activities of the Company and its Subsidiaries, as described in the Strategic Report, will
substantially change in the immediate future.
POST BALANCE SHEET EVENTS
There have been no events occurring after the Balance Sheet date that the Directors consider should be brought to the
attention of the shareholders.
AUDITORS
The Company’s auditors, French Duncan LLP, have expressed their willingness to continue in office. Resolutions to
re-appoint them as the Company’s auditors and to authorise the Directors to determine their remuneration will be proposed
at the Company’s forthcoming Annual General Meeting.
CAUTIONARY STATEMENT
The Chairman’s Review on page 4 and the Strategic Report on pages 9 to 14 have been prepared to provide additional
information to members of the Company to assess the Group’s strategy and the potential for the strategy to succeed. It
should not be relied on by any other party or for any other purpose.
This Annual Report and Statement of Accounts contain certain forward-looking statements relating to operations,
performance and financial status. By their nature, such statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and
business risk factors that could cause actual results or developments to differ materially from those expressed or implied
by these forward-looking statements. These statements are made by the Directors in good faith based on the information
available to them up to the time of their approval of this Report.
STATEMENT OF DISCLOSURE TO AUDITORS
The Directors who held office at the date of approval of the Report of the Directors, confirm that, so far as they are each
aware, there is no relevant audit information of which the Company’s Auditors is unaware; and each of the Directors has
taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and
to establish that the Company’s Auditors are aware of that information.
15th November 2016
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
8
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J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT
31st JULY 2016
The Directors present their Strategic Report of the Group for the year ended 31st July 2016.
The purpose of the Strategic Report is to provide the members of the Company with information to allow them to assess
how the Directors have performed their duty to promote the success of the Company and Group.
OUR BUSINESS MODEL, STRATEGY AND OBJECTIVES
The Company was established in 1947 and was listed on the London Stock Exchange in 1965.
The principal activities of the Group are building and civil engineering contracting, residential development for sale,
the development of industrial and commercial property for lease and sale and the manufacture of hydraulically pressed
concrete products. All the construction work involved in these activities is carried out by the Parent Company and its
Subsidiaries. Sub-contracting is kept to a minimum. The main area of operations is the central belt of Scotland.
The main construction activity undertaken by the Group is that of social housing for several housing associations and
registered social landlords predominately in the Edinburgh area and is undertaken by the Parent Company, J. Smart & Co.
(Contractors) PLC.
The Group has a portfolio of self-financed industrial and commercial properties which are owned and managed by
subsidiary company, C. & W. Assets Limited. The investment properties are located throughout the central belt of
Scotland but primarily in the Edinburgh area, this being the area of the country we are familiar with and understand. Our
portfolio currently extends to more than 1,000,000 sq ft.
The Group has four other subsidiaries. Thomas Menzies (Builders) Limited carries out small to medium sized building
and civil engineering work for a variety of clients. McGowan and Company (Contractors) Limited provides plumbing
support to the main construction companies. Concrete Products (Kirkcaldy) Limited manufactures hydraulically pressed
concrete products sold to the trade. Cramond Real Estate Company Limited, is the investment holding company of the
Group and holds the Group’s equity investments and monies on bank deposits.
The Group also has interests in a number of Joint Venture Companies which were established for purposes of property
development.
The Group operates out of premises in Edinburgh and Kirkcaldy, with the centralised administration and finance function
being at the head office in Edinburgh. Full support is given by the company Directors and the finance staff to all Group
companies based at the two locations.
We maintain a core employee base which is beneficial to the growth and success of the Group due to the fact that they have
the expertise to ensure the construction activities of the Group are efficiently run, achieve high level of quality of work
and retain control over operations. Employees who manage the Group’s investment property portfolio are fully aware of
current market conditions and ensure that there is appropriate marketing of the Group’s investment property portfolio. We
employ our own maintenance team thereby ensuring that our investment property portfolio is always in good condition
and ready for let.
Our objectives are to identify and exploit promising business opportunities as they arise to the benefit of the Group, its
shareholders and employees without over extending Group resources. While endeavouring to complete all our operations
as efficiently and to as high a standard as possible we do not set ourselves general performance yardsticks or volumetric
targets.
8
9
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2016
OUR BUSINESS MODEL, STRATEGY AND OBJECTIVES (continued)
To achieve these objectives our strategy is to continue to maintain and develop the relationships we have with social
housing providers, retain our core workforce and only use specialist subcontractors with proven track records in the
Group to ensure work quality. We will continue to build both our residential properties and investment property portfolio
within the central belt of Scotland, being the area of the country with which we are familiar. We will build up our
resources to ensure the Group has sufficient current working capital facilities and financing for future commercial and
private residential developments.
In achieving our objectives we aim to generate value by creating long-term and sustainable returns for our shareholders
by growing our income and profits and increasing the value of our investment portfolio and the net assets of the Group.
PERFORMANCE REVIEW
Construction activities
Revenue
Operating loss
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
30,682)
(102)
2015
£000
21,556)
(949)
Construction activities improved in the year over that of last year, due to the commencement of additional phases of work
and new contracts for our social housing developments and the work at our private housing development at Pilton Drive,
Edinburgh. We also started and completed in the year the construction of the first phase of a new industrial development.
Housing sales at our development at Pilton Drive progressed well in the year and at the year end there were only 4
properties still to be sold.
Although the Group continued to make a loss on construction activities it was at a considerably lower level than the
previous year, as the increased turnover helped to recover overhead costs.
The Directors continue to monitor, on a monthly basis, all construction contracts currently underway with regards to costs
incurred and the profitability of the contract.
Investment activities
.
Income from investment properties .
Profit on sale of investment properties
.
Net surplus/(deficit) on valuation of investment properties
.
Operating profit from investment properties
.
.
.
.
.
Income from available for sale financial assets
.
Profit on sale of available for sale financial assets .
Share of profits in Joint Ventures
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
5,520)
186)
136)
3,616)
2015
£000
5,241)
60)
(211)
2,958)
14)
–)
28)
1)
33)
1,306)
Income from the Group’s investment property portfolio has increased mainly due to increased occupancy of our industrial
units and improved occupancy in our commercial office properties. Occupancy levels in our industrial properties are
satisfactory with interest continuing to be shown in our vacant properties. Although there has been some improvement in
occupancy in our vacant commercial office properties there still remain substantial voids.
10
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2016
PERFORMANCE REVIEW (continued)
Investment activities (continued)
The increased revenue, surplus on valuation of the investment properties and the profit on sale of investment properties
has resulted in the increase in the profit earned.
One commercial property was sold in the year and one new industrial property was added to the investment property
portfolio. The Group continued to refurbish and improve the existing portfolio of properties to ensure that they are of a
standard expected by existing and new tenants.
The Group did not add to its portfolio of available for sale financial assets in the year and the dividends received in the
year were purely on those shares held at July 2015 and continued to be held at July 2016.
The Group’s share of profits in Joint Ventures is considerably lower than last year, as last year’s profit included the Group’s
half share of the profit on the sale by one of the Joint Venture Companies of its entire investment property portfolio.
Results and financial position
Profit before tax
Net bank position
Net assets
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
.
2016
£000
3,752
19,676
88,836
2015
£000
3,544
16,825
88,949
Although the Group reported a higher profit than that of last year, it continues to suffer losses in its construction activities
albeit at a significantly reduced level due to the increased turnover contributing to overhead recovery. Revenue levels and
profits in our investment activities continue to remain strong.
Our net bank position, which comprises monies held on deposit, cash and cash equivalents and the netting of our bank
overdraft has increased due the improved performance in our operating activities and including receipts from the sales of
the properties at our private housing development offset by expenditure on property, plant and equipment and investment
properties. The Group continues to remain debt free.
The Group’s net assets are impacted by the profit earned in the year, the movement in valuation of the Group’s available
for sale financial assets, the reduction in the Group’s retirement benefit surplus, primarily due to actuarial losses, the
shares bought back by the Company and the dividends paid in the year.
FINANCIAL INSTRUMENTS
The Group’s financial instruments consist of bank balances and cash, available for sale financial assets, trade receivables
and trade payables. The main purpose of the financial instruments are to provide working capital for the Group’s continuing
activities and provide funding for future activities whether in construction or investment. Given the nature of the Group’s
financial instruments the main risk associated with these is credit risk, however this is minimised due to the fact that
exposure is spread over a number of counterparties and customers. The Group is not exposed to interest rate risk as it
does not have any net debt but it does suffer from fallen interest rates on the amount we can earn on monies on deposit.
TOTAL DIVIDEND
The Directors are recommending a final dividend of 2.15p per share which taken with the interim dividend of 0.92p
already paid in the year gives a total dividend for the year of 3.07p (2015, 3.02p), being an increase of 2% on the dividend
rate for 2015.
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11
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2016
GREENHOUSE GAS EMISSIONS
The Group is required to report the greenhouse gas emissions for which it is responsible and on any environmental matters
which are material to the Group’s operations. Details of our emissions for the year to 31st July 2016 are set out in the
Report of the Directors on page 7.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group and the mitigating factors taken by the Group against these risks
are detailed below. The principal risks noted below are not all of the risks faced by the Group but are those risks which
the Group perceives as those which could have a significant impact on the Group’s performance and future prospects.
Area of principal risk or uncertainty and impact
Mitigating actions and controls
By focusing external construction activities on
the social housing sector any cuts in spending by
providers of social housing can reduce or suspend
the social housing programme thus impacting
on our workload and therefore the workforce
required by the Group.
Social housing sector is highly competitive with
tight margins.
• Maintain long term relationships with social housing providers,
resulting from high standards of service, quality and post
construction care thus giving the Group an advantage over other
builders when contracts are awarded on criteria other than cost
only.
• Identify potential build sites or include the provider within
private housing developments in relation to the element of
affordable housing required.
• When workload is reduced workforce can be diverted to the
Group’s own commercial and private residential developments.
• We are an ‘all trades’ contractor who employs our own personnel
in all basic building trades who are supervised by site agents
who are long serving employees of the Group, who have been
promoted through their trades, thus ensuring control of labour
costs on contracts.
• We have invested heavily in plant and the maintenance thereof
and therefore limit our costs on contracts by utilising own plant
as opposed to incurring higher costs of hiring plant.
• Subcontractors employed by the Group are specialists in their
fields and in the main subcontractors have previously been used
by the Group therefore quality of work and reliability is known.
No labour only subcontractors are employed.
• In house architectural technicians and surveyors provide pre-
contract design advice to resolve potential technical problems
with the build and therefore potential costs.
12
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2016
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Area of principal risk or uncertainty and impact
Mitigating actions and controls
Limited mortgage availability to home buyers
resulting in stalling of private house sales.
Reduction in rental demand for investment
properties may result in a fall in property
valuations.
• Providing a range of purchase assistance schemes to buyers
including partaking in the ‘Help to Buy (Scotland)’ scheme.
• Building developments in popular residential areas.
• Building high quality specification homes with attention to
detail which sets them apart from other new build homes and
therefore attractive to buyers.
• Building a range of homes within a development thus providing
choice to buyers.
• Providing sales incentives.
• Consider letting of homes at market rates until the market
improves.
• Only commence speculative developments after careful
assessment of the market.
• Restricting our operations to the central belt of Scotland being
the area of the country with which we are familiar.
• Continually maintain and refurbish existing properties to retain
existing tenants and attract new tenants.
• Provide necessary financial incentives to retain existing tenants
at end of current leases and attract new tenants.
Reduction in demand for UK real estate from
investors may result in a fall in valuations within
our investment property portfolio, this could
result in delays in investment decisions which
could impact on our activities.
• The Directors regularly review the property market to ascertain
if changes in the overall market present specific risks or
opportunities to the Group.
• Restricting our operations to the central belt of Scotland being
the area of the country with which we are familiar.
Political events and policies result in uncertainty
until final decisions have been made and the
impact of decisions are known, this could result
in delays in investment decisions which could
impact on our activities.
• Before any decisions are taken by the Directors in any area
of the Group’s activities the level of uncertainty and range of
potential outcomes arising from political events and policies are
considered.
Reduction of financial resources.
• Ensure resources are not over committed and only undertake
commercial and private housing developments after due
consideration of the financial impact on the Group financial
resources.
• Build up resources to ensure the Group has sufficient finance for
working capital requirements and financing of commercial and
private housing developments.
• Spread cash reserves over several banks taking account of the
strength of the bank and interest rates attainable.
• Invest resources in equities also taking account of the security of
the investment and the yields attainable.
13
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2016
VIABILITY STATEMENT
The Directors have assessed the viability of the Group over a three year period to July 2019, taking account of the Group’s
current financial strength, business model and strategy. The Directors have also taken account of the principal risks and
uncertainties facing the Group and the actions being taken to mitigate these risks as described above.
The assessment period of three years has been chosen as the Directors consider this period to be appropriate as it fits well
with the Group’s development and investment property cycles.
The Group’s financial planning process consists of cash flow projections based on the current financial position and
assumptions on future developments and investment property acquisitions and disposals. As the Group is net debt-free
the Directors are assessing the cash impact of their assumptions of future activity to ensure that this position is maintained.
The Directors vary their assumptions in terms of economic, investment and other factors to different scenarios to assess
the impact on the Group’s cash position. Even with these sensitivities applied the Group is net debt-free.
Based on this assessment the Directors have a reasonable expectation that the Group will continue in operation and meet
its liabilities as they fall due over the period to July 2019.
EMPLOYEES
The Group recognises the contribution of the staff to the success of the Group. The Group operates with a core employee
base who in the main have been with the Group for a considerable length of time and have gained a significant knowledge
of the sectors the Group operates in and of the companies within the Group. Where appropriate the Group promotes from
within whether that be the Directors, staff or site employees. The Group recognises the importance of retaining its core
staff to ensure its future success.
The Group does not have a specific Human Rights policy but it does have policies on recruitment and retention of
employees and communication with employees which are aimed at ensuring employees are fairly treated during their
employment with the Group.
The Group is committed to providing equal opportunities in recruitment and employment, full and fair consideration is
given to all applicants for employment and to all existing employees for promotion. Where employees become disabled
during their employment and are unable to fulfil current duties they are offered suitable alternative employment within
the Group, if feasible.
It is the Group’s policy that there should be effective communication with employees at all levels, on matters which affect
their current jobs or future prospects and all Directors and senior staff members make themselves available to all staff
to discuss any matters of concern. In achieving this policy, the Directors are aware of the need to take account of the
practical and commercial considerations of the Group, and the needs of the employees.
A breakdown by gender of Directors, senior managers and all employees is given below:
Directors
Senior Managers
Total Employees
Male
4
2
284
Female
-
1
14
15th November 2016
14
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
J. Smart & Co. (Contractors) PLC
DIRECTORS
John M Smart, Chairman and Managing Director Aged 72
Joined the Company in 1967
Appointed Director in 1978 and appointed Chairman in 1988
David W Smart Aged 43
Joined the Company in 1998
Appointed Director in 2010
Alasdair H Ross Aged 54
Joined the Company in 1989
Appointed Director in 2012
John R Smart Aged 46
Joined the Company in 2002
Appointed Director in 2013
15
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE
31st JULY 2016
STATEMENT OF COMPLIANCE
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 September 2014 (the Code). A copy
of the Code can be found on the Financial Reporting Council’s website, www.frc.org.uk.
The Board of Directors (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 as it has no non-executive Directors on the Board, no Nomination, Remuneration or Audit
Committees have been established and therefore the Company has not complied with any of the principles of the Code
relating to non-executive directors or the establishment and operations of these committees. Also, the Board recognises
that it has not fully complied with other principles of the Code relating to the division of responsibilities and evaluation
of the Board as a whole and the Directors individually. Details and explanations for all principles not complied with are
given below.
THE BOARD
The Company is led by the Board which comprises the executive management of the Company, being the Chairman and
three executive Directors, and thus maintains full control of the Company, sets the strategic aims of the Company and
ensures the Company has adequate financial and human resources to meet its objectives. All the Directors worked for
the Company prior to their appointments as Director and therefore have the appropriate skills, experience and knowledge
of the Company to ensure that the Board discharges its duties and responsibilities effectively. There were no changes in
Directors in the year.
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 2 formal Board Meetings in the year, John M Smart, Alasdair H Ross and John R Smart attended both of
these meetings and David W Smart attended one. During the year the Directors also met regularly on an ad hoc basis to
undertake the executive management of the Company and take decisions on all material matters quickly and effectively
thus exercising full direction and control of the Company. Given the way in which the Board and Company operates there
is no requirement for a 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 formal and ad hoc 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 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.
Information regarding the Directors’ interests in ordinary shares of the Company is given in the Directors’ Remuneration
Report.
The Chairman is also responsible for ensuring effective communication with shareholders and ensuring that their views
and concerns are brought to the attention of the Board.
16
17
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2016
THE BOARD (continued)
The Board considers that increasing the manning level of the Board by 50% by the appointment of two non-executive
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 or identified an independent Director.
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 this ensures that the skills, experience and knowledge
are retained in the Company and onto the Board. Due regard is taken of the benefits of diversity, including gender on the
Board when appointments are made. No formal tailored induction upon joining the Board is considered necessary. As the
Directors are all full-time employees of the Company they are fully committed to the Company and are able to allocate
sufficient time to the Company in discharging their duties and responsibilities effectively. 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, financial and other developments to enable them to fulfil their role effectively.
There is no formal system of performance evaluation of the Board or the Directors individually given the manner in which
the Board operates on a day to day basis.
The Company’s Articles of Association do not require that Directors retire by rotation, however, in accordance with
provision B.7.1 of the Code 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. Also in accordance with provision B.7.1 of the Code all new
Directors are subject to re-election at the first Annual General Meeting following their appointment.
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 a Director to receive entitlement to share
options nor are there any long term incentive schemes. Full details of the Company’s remuneration policy are given in
the Directors’ Remuneration Report.
FINANCIAL AND BUSINESS REPORTING
The Directors have sole responsibility for the preparation of the Annual Report and Statement of Accounts which taken
as a whole is fair, balanced and understandable and provides the information necessary for the shareholders to assess the
Company’s performance, business model and strategy. The Directors are also solely responsible for the preparation of
the Interim Report and other price-sensitive public reports in a fair, balanced and understandable manner. The basis on
which the Company creates and preserves value over the long term is described in the business model within the Strategic
Report.
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 current and 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 use 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 Statement of Directors’ Responsibilities is set out on page 26.
16
17
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2016
RISK MANAGEMENT AND INTERNAL CONTROL
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
Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, as detailed in the
Strategic Report, including those which threaten the business model, future performance, solvency and liquidity of the
Group.
The main features of the Group’s internal control and risk management systems in relation to the financial reporting
process are:
–
contracts, development projects, land purchases and acquisition of property, plant and equipment are
proceeded with after due consideration by the Directors;
monthly reports are prepared for each contract and development project for review by the Directors;
subsidiary Company reports are prepared for consideration by the Directors; and
treasury operations are carried out in accordance with policies and procedures already approved by
the Board.
−
−
−
AUDIT
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.
Currently there are no proposals to undertake a retendering of the Company’s external audit function. The Company’s
external auditors have held office since 1975 and there has been no audit tender since that appointment. The Board
continues to assess the independence and effectiveness of the external audit function to ensure the integrity of the audit
role provided by the current external auditors on behalf of the shareholders. The Board also takes into account the external
auditors own policies and procedures regarding their integrity and independence including their procedures for rotation of
audit partner and senior staff and the professional standards they have to adhere to. At this time the Board has concluded
that there is no requirement to place the external audit function out to tender.
Mandatory rotation of external auditors has become effective for all public limited companies following implementation
of an EU ruling which has become part of Companies Act 2006 via Statutory Instrument: The Statutory Auditors and
Third Country Auditors Regulations 2016. Given that our current external auditors have held office for over 20 years we
will be required to appoint new external auditors for the audit of the Group’s accounts for the year ending 31st July 2020.
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 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.
18
19
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2016
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
Given that there is no Audit Committee, it is the responsibility of the Board as a whole to consider areas of the financial
statements where there are significant areas of judgement regarding estimates and assumptions, which in turn have a
significant effect on the amounts recognised in the financial statements. In respect of the 2016 financial statements these
areas were:
−
Investment Property Valuations – the valuation of the investment property portfolio is completed
The valuation of the property portfolio is inherently subjective and requires
by the Directors.
significant judgements and assumptions to be made. The Directors appoint external valuers to value a
sample of properties in the portfolio to provide a sense check on their valuation. The valuations are
discussed with the Auditors.
Long-Term Contract Valuations and Provisions – the Directors consider contract performance to ensure
appropriate revenue recognition. Future revenue and contract performance are considered and loss
provisions determined where necessary. Both costs and revenues may require to be revised as future
events unfold and uncertainties are resolved.
−
The Board discusses fully all issues relevant to the above areas and obtains where possible information and advice from
external experts and our external Auditors and only when fully satisfied with the amounts associated with each area are
they incorporated into the financial statements.
RELATIONS WITH SHAREHOLDERS
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, against, and withheld for each resolution will be announced.
SUBSTANTIAL SHAREHOLDERS
As at 31st July 2016 and 21st October 2016, excluding holdings of Directors, the Company has been notified of the
following holdings of substantial voting rights in respect of the issued share capital of the Company:
Octet Investments Limited
.
A J Whitehead
.
.
.
.
.
.
.
.
.
.
.
.
.
Number
1,622,400
1,579,485
%
3.58
3.49
15th November 2016
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
18
19
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT
31st JULY 2016
ANNUAL STATEMENT
On behalf of the Board of Directors, I present the Directors’ Remuneration Report for the year ended 31st July 2016.
In addition to this statement the Report includes two other parts being the Policy Report and the Annual Report on
Remuneration, which have been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8
of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The
Report also meets the requirements of the UK Listing Authority’s Listing Rules and the Disclosure and Transparency
Rules.
The Policy Report has been developed taking account of the principles of the UK Corporate Governance Code 2014. The
shareholders approved the Policy at the 2014 Annual General Meeting (AGM) and the policy became effective for three
years from that date.
The Annual Report on Remuneration will be subject to a vote at the 2016 AGM. Our Auditors are required to report to
the shareholders on certain information contained in the Annual Report on Remuneration and that it has been prepared in
accordance with the Act and the Regulations. The information to be audited is appropriately marked.
There have been no substantial changes to Executive Directors’ remuneration in the year. Our policy continues to be to
provide remuneration packages that will retain and motivate the Directors to sustain the long term growth and value of
the Company.
15th November 2016
THE POLICY REPORT
John m Smart
Chairman
As stated in the Corporate Governance Statement the Company does not appoint non-executive Directors and therefore the
Company does not have a Remuneration Committee to set the Executive Directors’ Remuneration Policy. The Chairman
fulfils the function of the Remuneration Committee.
The Company’s remuneration policy is to provide remuneration packages that will retain and motivate the Directors to
sustain the long-term growth and value of the Company and is based on the scope of their duties and responsibilities.
The Directors are not entitled to any performance related remuneration, long term incentive schemes or share options.
The remuneration of the Directors is not performance related therefore no element of their remuneration is based on
performance measures.
The policy table below summarises the main components of Directors’ Remuneration:
ELEMENT
PURPOSE AND STRATEGY
OPERATION
BASE SALARY
To pay a fair salary commensurate with the
individual’s role, responsibilities and experience.
Reviewed annually in July taking account of the
individual’s role and experience and the salary
increases of employees throughout the Group as a
whole. No maximum level is set.
20
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2016
ELEMENT
PURPOSE AND STRATEGY
OPERATION
BENEFITS
To provide support to enable the Directors to carry out
their duties effectively.
PENSION
To provide appropriate levels of retirement benefits.
Benefits include cash in lieu of a company car and
private medical insurance. No maximum level is set
as the costs of providing benefits fluctuate over time;
however the costs are monitored to ensure they remain
reasonable.
Depending on when a Director first became an
employee of the Company will determine whether they
are members of the Company’s Defined Benefit Pension
Scheme or Defined Contribution Scheme.
Company contributions to the Defined Benefit Scheme
are currently 22.6% of base salary. Contribution levels
are set in agreement between the scheme trustees and
the Company and can therefore vary from time to time.
Company contributions to the Defined Contribution
Scheme are currently a minimum of 10% of base salary.
The Chairman retains the right to make minor amendments to the above policy, to take account of regulatory, tax,
legislative or administrative changes without obtaining shareholder approval for these amendments.
No share options or long term incentive schemes are operated by the Company.
Directors are entitled to claim relevant expenses incurred by them in respect of their duties.
There are no provisions for the recovery of sums paid to Directors or the withholding of the payment of any sums to
Directors.
As all remuneration of Directors is fixed remuneration there is no need to illustrate, via a bar chart, the expected values of
proposed remuneration as it does not contain any elements based on performance and therefore is not subject to change
based on either the Company’s or Director’s performance.
APPROACH TO RECRUITMENT OF DIRECTORS
The Company’s approach to appointing new Executive Directors is to appoint from within the Company. As such the
remuneration of the Director has already been set by the Company and the package held by the employee prior to
appointment as a Director will remain in place. Consideration will be made of the increased duties and responsibilities
that will apply post appointment as a Director and revision to their base salary may be made to reflect this.
SERVICE CONTRACTS AND POLICY ON CESSATION
No Director has a service contract with the Company, therefore periods of notice and termination payments would be
construed in accordance with current Employment Law.
CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN COMPANY
The Chairman when considering the remuneration of the Executive Directors takes into account the remuneration
of employees across the Group as a whole. However, the Chairman does not consult directly with employees on the
remuneration of the Executive Directors but is mindful of salary increases which are applied across the Group as a whole.
20
21
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2016
CONSIDERATION OF SHAREHOLDER VIEWS
The Chairman considers all views and concerns he receives from shareholders especially at the AGM when shareholders
have the opportunity to ask questions of the Board on all matters relating to the Company including Directors’
Remuneration, or at any other time throughout the year.
Although no direct communication was held by the Chairman with major shareholders prior to shaping the Remuneration
Policy he believes that it is a responsible approach to remuneration and its policies in the past and for the future as
evidenced by the level of approval of the 2015 Directors’ Remuneration Report at the 2015 AGM, details of which are
given in the Annual Report on Remuneration below.
ANNUAL REPORT ON REMUNERATION
The following provides details of how the remuneration policy was implemented in the year to 31st July 2016.
Single Total Figure of Remuneration for Executive Directors (Audited Information)
The following table presents the single figure for the total remuneration of each Executive Director for the year ended
31st July 2016 and the prior year:
Salary
£000
Taxable
Benefits
£000
.
.
90
.
.
6
.
.
44
.
.
.
.
6
.
.
96
.
.
3
.
.
.
.
96
.
.
53
.
.
47
.
.
.
.
.
.
88
.
.
.
.
–
.
.
.
.
.
.
.
.
105
105
104
101
104
101
104
101
10
10
9
9
9
9
9
9
Pension
£000
–
–
Total
£000
115
115
521 165
551
165
341
1081
12
12
147
218
125
122
John M Smart
2016
.
.
2015
David W Smart
2016
2015
.
.
.
.
.
.
Alasdair H Ross 90
2016
2015
.
.
.
.
John R Smart
2016
.
.
2015
.
.
1. Pension value represents the cash value of pension accrued over one year multiplied by 20 in line with new regulations with allowance for inflation and employee contributions.
22
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2016
DIRECTORS’ PENSION ENTITLEMENTS (AUDITED INFORMATION)
David W Smart and Alasdair H Ross are members of the Company’s Defined Benefit Pension Scheme whilst
John R Smart is a member of the Company’s Group Personal Pension Plan.
The Company’s Defined Benefit Pension Scheme was closed to new members in 2003. The normal date of retirement
based on the scheme rules is 65 and there is no automatic entitlement to early retirement. Contributions by the employer
under the scheme are 22.6% of pensionable salary.
Accrued pension
as at 31 July 2016
£000
30
38
Accrued pension
as at 31 July 2015
£000
27
37
David W Smart
Alasdair H Ross
.
.
.
.
.
.
.
.
.
.
.
.
.
.
SCHEME INTEREST AWARDS (AUDITED INFORMATION)
There were no scheme interests awarded in the year.
PAYMENTS TO PAST DIRECTORS (AUDITED INFORMATION)
No payments were made to past Directors in the year.
PAYMENTS FOR LOSS OF OFFICE (AUDITED INFORMATION)
No payments for loss of office were made to Directors in the year.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED INFORMATION)
The Company has no policy that Directors are required to own shares in the Company, although all Directors are currently
shareholders of the Company.
The interests of the Directors in the ordinary shares of the Company, including beneficial interests, are shown in the table
below:
Beneficial holdings
(including interests of the Director’s connected persons)
31 July 2016
31 July 2015
.
John M Smart
David W Smart
.
Alasdair H Ross .
.
John R Smart
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,198,500
11,863,500
100,000
11,863,500
1,198,500
11,863,500
100,000
11,863,500
There have been no changes in any Directors’ beneficial holdings between the year end and 21st October 2016.
23
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2016
PERFORMANCE GRAPH
The graph below shows a comparison of the total shareholder return for the Company’s shares for each of the last five
financial years against the total shareholder return for the companies comprised in the FTSE EPRA/NAREIT UK index
which the Company deems to be the most relevant to the Company as it includes companies in the same sector as the
Company.
The graph compares the value of £100 invested in J. Smart & Co. (Contractors) PLC, including re-invested dividends.
Total Shareholder Return over the last five financial years
£
200
150
100
50
0
J Smart & Co (Contractors) PLC
FTSE EPRA / NAREIT UK Index
GROUP CHIEF EXECUTIVE OFFICER’S TOTAL REMUNERATION
The following table details the Chief Executive Officer’s single figure of remuneration over the last five financial years:
2016
£000
115
2015
£000
115
2014
£000
119
2013
£000
133
2012
£000
130
John M Smart
GROUP CHIEF EXECUTIVE OFFICER’S CHANGE IN REMUNERATION
The following table compares the change in remuneration of the Group Chief Executive Officer and that of the remuneration
of the Group’s salaried employees. This group of employees was chosen as it represents the most comparable group.
CEO
% change 2015-2016
Other employees
% change 2015-2016
Base salary
Taxable benefits
.
.
.
.
.
.
.
.
.
– %
– %
5 %
– %
24
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2016
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table compares the total spend on remuneration of all employees of the Group, including Executive
Directors, and the total amounts paid in distributions to shareholders for the years to 31st July 2016 and 31st July 2015:
2016
£000
Remuneration of employees
Total distributions paid
(being dividends and share buy backs)
.
.
.
.
.
.
11,676
1,550
2015
£000
9,908
1,683
Difference in Difference as a
percentage
%
spend
£000
1,768
(133)
18
(8)
IMPLEMENTATION OF EXECUTIVE DIRECTOR REMUNERATION POLICY FOR 2017
After taking into consideration Group employees’ salary increases for the year to 31st July 2017, an increase of 3% of base
salary was awarded to all Directors, except John M Smart who did not receive any salary increase.
John M Smart
David W Smart
Alasdair H Ross
John R Smart
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Base salary from 1st July 2016
£
105,000
106,500
106,500
106,500
.
.
.
.
.
.
.
.
.
.
.
.
Base salary from 1st July 2015
£
105,000
103,500
103,500
103,500
CONSIDERATIONS BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION
The Chairman is responsible for determining Directors’ Remuneration. No advice was sought in the year in considering
Directors’ Remuneration.
SUMMARY OF SHAREHOLDER VOTING AT THE 2015 AGM
The 2015 Directors’ Remuneration Report was put to the shareholders for their approval at the 2015 AGM. The resolution
was passed on a show of hands.
Details of the proxy votes lodged, including those at the discretion of the Chairman, are as follows:
.
.
For
.
.
.
.
Against
Total votes cast (excluding votes withheld)
Votes withheld
.
.
Total votes cast (including votes withheld)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total number
of votes
26,523,925
4,000
26,527,925
–
26,527,925
.
.
.
.
.
% of votes cast
99
1
100
Votes withheld are not included in the proxy figures as they are not recognised as a vote in law.
15th November 2016
25
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
J. Smart & Co. (Contractors) PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
31st JULY 2016
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND STATEMENT OF ACCOUNTS
The Directors are responsible for preparing the Annual Report and the Group and Parent Company’s Statement of
Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year.
Under that law they are required to prepare the Group financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected
to prepare the Parent Company financial statements on the same basis.
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 period. In preparing
each of the Group and Parent Company financial statements, the Directors are required to:
−
−
−
−
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Group and the Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group
and Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group
and Parent Company and enable them to ensure that its financial statements comply with Companies Act 2006. They
have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing the Report of the Directors,
Strategic Report, Corporate Governance Statement and Directors’ Remuneration Report that complies with that law and
those 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.
DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors confirms to the best of their knowledge:
−
the financial statements, prepared in accordance with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
the Report of the Directors and the Strategic Report include a fair review of the development and
performance of the business and the position of the Company and undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face; and
the Annual Report and Statement of Accounts taken as a whole are fair, balanced and understandable
and provide the information necessary for the shareholders to assess the Group’s business model,
performance and strategy.
−
−
15th November 2016
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
26
27
J. Smart & Co. (Contractors) PLC
INDEPENDENT REPORT OF THE AUDITORS
31st JULY 2016
INDEPENDENT AUDITORS’ REPORT
to the memberS of J. Smart & co. (contractorS) Plc
We have audited the financial statements of J. Smart & Co. (Contractors) PLC for the year ended 31st July 2016 which
comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
and Company Statement of Changes in Equity, the Consolidated and Company Statement of Financial Position, the
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 as adopted by
the European Union (IFRSs as adopted by the EU) and, as regards the Parent Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s 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.
RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND AUDITORS
As explained more fully in the Statement of Directors Responsibilities set out on page 26, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with applicable law and International Standards
on Auditing (UK and Ireland) (ISAs (UK and Ireland)). Those standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of the financial statements. In addition we read all the
financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31st July 2016 and of the Group’s profit for the year then ended;
− the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
− the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU
and as applied in accordance with the provisions of the Companies Act 2006; and
− the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulations.
OUR ASSESSMENT OF RISK OF MATERIAL MISSTATEMENT
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest
effect on our audit strategy, the allocation of our resources in the audit and directing the efforts of the audit team, were the
valuation of the investment property portfolio, contract accounting estimates and revenue recognition.
26
27
J. Smart & Co. (Contractors) PLC
INDEPENDENT REPORT OF THE AUDITORS (continued)
31st JULY 2016
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements
on our audit and on the financial statements. For the purposes of determining whether the financial statements are free from
material misstatement we define materiality as the magnitude of misstatements that makes it probable that the economic
decisions of a reasonably knowledgeable person relying on the financial statements would be changed or influenced.
The materiality for the Group financial statements as a whole was set at £537,000. This has been determined with
reference to a benchmark of Group total assets (of which it represents 0.5%) which we consider to be one of the principal
considerations for members of the Company in assessing the financial position of the Group. We also considered the
overall property portfolio valuation and the extent and significance of the construction business in concluding on the
appropriate level of materiality.
We agreed with the Board of Directors to report to it all corrected and uncorrected misstatements we identified through
our audit with a value in excess of £27,000, in addition to other audit misstatements below that threshold that we believe
warranted reporting on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Group financial statements are a consolidation of the six trading entities including the Parent entity and the Group’s
four Joint Ventures. Except for the Joint Ventures where we focussed our work on the share of profits and net assets that
are recognised in the Group accounts, all entities were audited. In establishing the overall approach to the Group audit, we
determined the type of audit work required to enable us to conclude whether sufficient audit evidence had been obtained
as a basis for our opinion on the Group financial statements.
There were no changes to the scope of our audit in the current year.
The way in which we scoped our response to the risks identified above was as follows:
VALUATION OF THE INVESTMENT PROPERTY PORTFOLIO
Risk: The valuation of investment property requires significant judgement and estimates by management. Any input
inaccuracies or unreasonable bases used in these assumptions (such as in respect of estimated rental value and yield
profile applied) could result in a material misstatement of the Income Statement and Statement of Financial Position.
Our response: Our audit procedures included among others:
– Testing the integrity of the information used by the Directors in completing the valuation including agreement on a
sample basis back to underlying leases;
– Meeting with the Directors to challenge the valuation process, the performance of the portfolio and the significant
assumptions and critical judgement areas, including future income and yields;
– Reviewing the results of a valuation completed by a third party valuer of a sample of the property portfolio, comparing
this to the Directors’ valuation and discussing the results with the Directors.
CONTRACT ACCOUNTING ESTIMATES
Risk: Judgement is required in preparing suitable estimates of the forecast costs and revenue on contracts. An error in the
contract outcome could result in a material variance in the amount of profit or loss recognised to date and therefore also
in the current period.
Our response: Our audit procedures included among others:
– Substantive testing of contract revenues and costs;
– Meeting with the Directors to challenge key judgements inherent in the forecast costs to complete that are crucial in
determining revenue and margin to be recognised and the identification of loss making contracts and the quantum of
loss provisions;
– Performing site visits and reviewing contract terms for key contracts.
28
29
J. Smart & Co. (Contractors) PLC
INDEPENDENT REPORT OF THE AUDITORS (continued)
31st JULY 2016
AN OVERVIEW OF THE SCOPE OF OUR AUDIT (continued)
REVENUE RECOGNITION
Risk: Revenue recognition including the timing of revenue recognition on construction contracts, house sales and
property rental income, including rental incentives. Performance expectations may place pressure on management to
distort revenue recognition. This may result in the overstatement or deferral of revenues.
Our response: Our audit procedures included among others:
– Testing rental income to lease agreements, rental incentives and other property related income.
– Our approach to contract income is detailed above.
– Substantive testing and analytical procedures in connection with revenue balances, including private house sales, to
assess whether revenue has been recognised in the appropriate accounting period;
– Assessment of whether revenue recognition policies adopted complied with IFRSs as adopted by the EU.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
– the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006; and
− the information given in the Report of the Directors and the Strategic Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
− materially inconsistent with the information in the audited financial statements; or
− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the
course of performing our audit; or
− otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired
during the audit and the Directors’ Statement that they consider the Annual Report is fair, balanced and understandable
and whether the Annual Report appropriately discloses those matters that we communicated to the Board of Directors
which we consider should have been disclosed.
28
29
J. Smart & Co. (Contractors) PLC
INDEPENDENT REPORT OF THE AUDITORS (continued)
31st JULY 2016
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION (continued)
Under the Companies Act 2006 we are required to report to you if, in our opinion:
− adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
− the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
− certain disclosures of Directors’ Remuneration specified by law are not made; or
− we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
− the Directors’ statement set out on page 8, in relation to going concern; and
− the part of the Corporate Governance Statement relating to the Company’s compliance with the ten provisions of the
UK Corporate Governance Code specified for our review.
STATEMENT ON THE DIRECTORS’ ASSESSMENT OF THE PRINCIPAL RISKS THAT WOULD THREATEN THE SOLVENCY OR
LIQUIDITY OF THE ENTITY
Under the ISAs (UK and Ireland) we are required to give a statement as to whether we have anything material to add or
draw attention to in relation to:
− the Directors’ confirmation in the Annual Report and Statement of Accounts that they have carried out a robust
assessment of the principal risks facing the entity, including those that would threaten its business model, future
performance, solvency or liquidity;
− the disclosures in the Annual Report and Statement of Accounts that describe those risks and explain how they are
being managed or mitigated;
− the Directors’ statement in the financial statements about whether they consider it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to
continue to do so over the period of at least twelve months from the date of approval of the financial statements; and
− the Directors’ explanation in the Annual Report and Statement of Accounts as to how they have assessed the prospects
of the entity, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
We have nothing material to add or to draw attention to.
133 Finnieston Street
glasgow
G3 8HB
15th November 2016
Paula galloway
Senior Statutory Auditor
for and on behalf of FRENCH DUNCAN LLP
Statutory Auditor and Chartered Accountants
30
J. Smart & Co. (Contractors) PLC
CONSOLIDATED INCOME STATEMENT
for the year ended 31st JULY 2016
Group construction activities
.
Less: Own construction work capitalised
.
REVENUE
Cost of sales
GROSS PROFIT
.
.
.
.
.
.
Other operating income .
Net operating expenses .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
OPERATING PROFIT BEFORE PROFIT ON SALE AND NET SURPLUS / (DEFICIT)
ON VALUATION OF INVESTMENT PROPERTIES .
.
.
.
Profit on sale of investment properties .
Net surplus/(deficit) on valuation of investment properties
.
.
.
.
.
OPERATING PROFIT
Share of profits in Joint Ventures
.
Income from available for sale financial assets
Profit on sale of available for sale financial assets
.
Finance income .
.
.
.
.
.
PROFIT BEFORE TAX
Taxation
.
.
.
.
.
.
.
.
.
.
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS
EARNINGS PER SHARE – BASIC AND DILUTED
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
2016
£000
2015
£000
30,682
(1,655)
21,556
(737)
29,027
(25,260)
20,819
(18,061)
3,767
2,758
3
5,520
(6,095)
5,241
(5,839)
3,192
2,160)
186
136)
60
(211)
5
14
6
7
3,514 2,009)
1,306
28
1
191 200
33
14
–
3,752
3,544
8
(264)
(546)
9 3,488 2,998
11 7.61p 6.45p
All activities in both the current and previous year relate to continuing operations.
30
31
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st JULY 2016
2016
£000
2015
£000
3,488 2,998
(10)
(46)
(10)
(46)
(2,256)
215
(1,003)
201
(2,041)
(802)
(2,051) (848)
1,437 2,150)
1,437
2,150)
PROFIT FOR THE YEAR
.
.
.
.
.
.
OTHER COMPREHENSIVE LOSS
Items that may be subsequently reclassified to Income Statement:
Fair value adjustment of available for sale financial assets
.
TOTAL ITEMS WHICH MAY BE SUBSEQUENTLY
RECLASSIFIED TO INCOME STATEMENT .
.
.
.
.
.
.
Items that will not be subsequently reclassified to Income Statement:
.
Actuarial loss recognised in defined benefit pension scheme
.
.
Deferred taxation on actuarial loss
.
.
.
TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY
RECLASSIFIED TO INCOME STATEMENT .
.
TOTAL OTHER COMPREHENSIVE LOSS .
.
.
.
.
.
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
.
.
.
.
.
.
.
32
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31st JULY 2016
Capital
Share Redemption
Reserve
Capital
£000
£000
Fair Value
Reserve
Retained
Total
Earnings
£000 £000 £000
At 1st August 2014
.
.
.
936
72
– 87,474
88,482
Profit for the year
.
Other comprehensive loss
TOTAL COMPREHENSIVE (LOSS) / INCOME
.
FOR THE YEAR
.
.
.
.
.
.
.
–
– 2,998 2,998
– – (46) (802) (848)
–
– – (46) 2,196) 2,150)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(17)
–
–
–
17
–
.
.
.
–
–
–
(814)
(17)
(852)
(831)
–
(852)
TOTAL TRANSACTIONS WITH OWNERS .
(17)
17
–
(1,683)
(1,683)
At 31st July 2015 .
.
.
.
919
89
(46)
87,987
88,949
.
Profit for the year
.
Other comprehensive loss
.
TOTAL COMPREHENSIVE (LOSS) / INCOME
.
FOR THE YEAR
.
.
.
.
.
–
–
– –
–
(10)
3,488
(2,041)
3,488
(2,051)
–
–
(10)
1,447
1,437
2,436
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(13)
–
–
–
13
–
.
.
.
3,064
– (691)
(13)
–
(846)
–
(704)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
(13)
13
–
(1,550)
(1,550)
At 31st July 2016 .
.
.
.
906
102
(56)
87,884
88,836
33
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
as at 31st JULY 2016
Capital
Share Redemption
Reserve
£000
Capital
£000
Retained
Earnings
£000
Total
£000
936
72
12,953
13,961
At 1st August 2014
.
Profit for the year
.
Other comprehensive loss
.
.
.
.
.
.
.
.
.
–
–
–
–
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
– –
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
.
Shares purchased and cancelled
Transfer to Capital Redemption Reserve
.
Dividends
–
.
.
.
(17)
.
.
.
–
– 17
–
1,811)
(802)
1,009)
1,811)
(802)
1,009)
(814)
(17)
(852)
(831)
–
(852)
TOTAL TRANSACTIONS WITH OWNERS .
.
(17)
17
(1,683)
(1,683)
At 31st July 2015 .
.
Profit for the year
.
Other comprehensive loss
.
.
.
.
.
.
. 919 89
12,279 13,287
.
.
– –
–
–
310
(2,041)
310
(2,041)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
–
–
( 1,731)
(1,731)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(13)
–
–
.
.
.
.
.
.
–
13
–
(691)
(13)
(846)
(704)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
. (13)
13
(1,550)
(1,550)
At 31st July 2016 .
.
.
.
. 906
102
8,998
10,006
34
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31st JULY 2016
NON-CURRENT ASSETS
Property, plant and equipment .
Investment properties
.
.
Investments in Joint Ventures
Available for sale financial assets
.
Retirement benefit surplus
.
.
Deferred tax assets
.
.
CURRENT ASSETS
Inventories
.
Trade and other receivables
.
Current tax asset
Monies held on deposit
Cash and cash equivalents
TOTAL ASSETS
.
.
NON-CURRENT LIABILITIES
.
Deferred tax liabilities
CURRENT LIABILITIES
Trade and other payables
Corporation tax liability
.
Bank overdraft
TOTAL LIABILITIES
NET ASSETS
.
.
.
EQUITY
Called up share capital
Capital redemption reserve
Fair value reserve
Retained earnings
.
.
.
TOTAL EQUITY
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
12
13
14
15
26
21
16
17
18
18
21
19
22
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
1,382
64,728
263
326
33
41
2015
£000
1,382
63,231
267
337
1,472
27
66,773
66,716
2,684
6,369
–
5,519
26,785
5,735
4,508
995
3,502
26,047
41,357
40,787
108,130
107,503
1,389
1,830
5,134
143
12,628
4,000
–
12,724
17,905
16,724
19,294
18,554
88,836
88,949
906
102
(56)
87,884
919
89
(46)
87,987
88,836
88,949
The financial statements on pages 31 to 69 were approved by the Board of Directors and authorised for issue on
15th November 2016 and were signed on its behalf by:
John m Smart
Director
Company Number SC025130
DaviD w Smart
Director
35
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF FINANCIAL POSITION
as at 31st JULY 2016
NON-CURRENT ASSETS
Property, plant and equipment .
.
Investments in Subsidiaries and Joint Ventures
.
Retirement benefit surplus
.
.
.
CURRENT ASSETS
.
Inventories
Trade and other receivables
Current tax asset .
Cash and cash equivalents
.
.
TOTAL ASSETS
.
.
NON-CURRENT LIABILITIES
.
Deferred tax liabilities
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
NET ASSETS
.
.
.
EQUITY
Called up share capital
Capital redemption reserve
Retained earnings
.
.
TOTAL EQUITY
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
12
14
26
16
17
18
21
19
22
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
853
708
33
1,594
2,406
6,009
522
2,948
11,885
2015
£000
857
708
1,472
3,037
5,450
3,878
1,453
2,505
13,286
13,479
16,323
80
375
3,393
2,661
3,473
3,036
10,006
13,287
906
102
8,998
919
89
12,279
10,006
13,287
The financial statements on pages 31 to 69 were approved by the Board of Directors and authorised for issue
on 15th November 2016 and were signed on its behalf by:
John m Smart
Director
Company Number SC025130
DaviD w Smart
Director
36
37
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st JULY 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Tax received/(paid) .
.
.
.
.
.
NET CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
CASH FLOWS FROM INVESTING ACTIVITIES
.
Additions to property, plant and equipment
Additions to investment properties
.
Expenditure on own work capitalised - investment properties
.
.
.
Sale of property, plant and equipment .
.
.
Sale of investment properties
.
.
.
Purchase of available for sale financial assets
.
.
Proceeds of sale of available for sale financial assets
.
.
.
Increase in monies held on deposit
.
.
Interest received .
.
.
.
Dividend received from Joint Ventures .
.
.
.
.
.
NET CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares .
.
Dividends paid
.
.
.
.
.
.
.
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCREASE IN CASH AND CASH EQUIVALENTS .
.
.
.
.
.
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
.
.
.
.
.
.
Notes
. 23 (a)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
5,197
2015
£000
4,991
634)
(233)
5,831
4,758)
(488)
(45)
(1,655)
70
525
–)
(1)
(2,017)
125
37
(483)
(236)
(737)
78
1,000
(383)
3,997
(3,502)
117
2,327
(3,447)
2,178)
(704)
(846)
(831)
(852)
(1,550)
(1,683)
834
5,253
. 23 (b)
13,323
8,070
CASH AND CASH EQUIVALENTS AT END OF YEAR
.
.
. 23 (b)
14,157
13,323
36
37
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31st JULY 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Tax received
.
.
.
.
.
.
NET CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Sale of property, plant and equipment .
.
Interest received .
Dividend received from Joint Ventures
.
.
.
.
.
.
NET CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares .
.
Dividends paid
.
.
.
.
.
.
.
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCREASE IN CASH AND CASH EQUIVALENTS .
.
.
.
.
.
.
.
.
.
.
.
.
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
.
Notes
2016)
£000)
2015)
£000)
. 24 (a)
1,087)
3,101)
.
.
.
.
.
.
.
.
.
.
.
1,084)
588)
2,171)
3,689)
(286)
59
12
37)
(321)
54)
20)
2,327)
(178)
2,080)
(704)
(846)
(831)
(852)
(1,550)
(1,683)
443)
4,086)
. 24 (b)
2,505)
(1,581)
. 24 (b)
2,948)
2,505)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
38
39
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES
GENERAL INFORMATION
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.
STATEMENT OF COMPLIANCE
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) and
the
International Financial Reporting Interpretations Committee (IFRIC) Interpretations endorsed by
European Union (EU) and with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE YEAR TO 31st JULY 2016
There have been no new International Financial Reporting Standards or amendments to existing standards which
impact the Group’s financial statements in the year to 31st July 2016.
NEW STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS NOT YET APPLIED
The following new standards, amendments to standards and interpretations relevant to the Group have been issued
by the International Accounting Standards Board but are not yet effective for the Group and Company at the date
of these financial statements, and have not been adopted early:
• IFRS 7: Financial Instruments: Disclosures (effective in the year ending 31st July 2017).
• IFRS 9: Financial Instruments (effective in the year ending 31st July 2019).
• IFRS 15: Revenue from Contracts with Customers (effective in the year ending 31st July 2019).
• IFRS 16: Leases (effective in the year ending 31st July 2020).
The Directors are to fully consider the implications and impact on the financial statements of these Standards,
especially IFRS 15 and IFRS 16. It is not currently practical to anticipate the financial impact of these Standards
on the financial statements.
BASIS OF PREPARATION
The accounts have been prepared on a going concern basis and under the historical cost convention except where
the measurement of balances at fair value is required as noted below for investment properties, available for sale
financial assets and assets held by defined benefit pension scheme.
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.
38
39
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
INVESTMENT PROPERTIES
Investment properties are revalued annually by the Directors in accordance with the RICS Valuation Standards.
The valuations are subjective due to, among other factors, the individual nature of the property, its location and the
expected future rental income. As a result, the valuation of the Group’s investment property portfolio incorporated
into the financial statements is subject to a degree of uncertainty and is made on the basis of assumptions which
may prove to be inaccurate, particularly in periods of volatility or low transaction flow in the property market.
The assumptions used by the Directors are market standard assumptions in accordance with the RICS Valuation
Standards and include matters such as tenure and tenancy details, ground conditions of the properties and their
structural conditions, prevailing market yields and comparable market conditions. If any of the assumptions used
by the Directors prove to be incorrect this could result in the valuation of the Group’s investment property portfolio
differing from the valuation incorporated into the financial statements and the difference could have a material
effect on the financial statements.
LONG-TERM CONTRACT PROVISIONS
Judgement is required in the area of provisions for losses on long-term contracts. The Directors take into account
the estimated costs to complete and the percentage stage of completion of current contracts when determining the
provision for losses. The Directors consider adequate, but not excessive provisions have been made in this respect.
RETIREMENT BENEFIT OBLIGATION
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. If different assumptions were used then this could materially affect
the results disclosed in the financial statements. These are set out in note 26 to the Accounts.
BASIS OF CONSOLIDATION
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.
BUSINESS COMBINATIONS AND GOODWILL
Subsidiaries acquired in the year are accounted for using the acquisition method of accounting. Identifiable
assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The consideration
transferred for the acquisition is the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of
the identifiable net assets acquired is recorded as goodwill.
40
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
INVESTMENT IN JOINT VENTURES
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.
CAPITAL MANAGEMENT
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, working capital 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 12 and 13 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.
INVESTMENT PROPERTIES
Investment properties are properties, either owned by the Group or where the Group is a lessee under a finance
lease, which are held for long-term rental income or for capital appreciation or both. Also, properties held under
operating leases are accounted for as investment properties when the rest of the definition of an investment property
is met.
Investment properties, whether completed or under development, are initially recognised at cost and revalued at the
Balance Sheet date to fair value as determined by the Directors in accordance with the RICS Valuation Standards.
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.
PROPERTY, PLANT AND EQUIPMENT
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.
40
41
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
DEPRECIATION
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
Plant and machinery
Office furniture and fittings
Motor vehicles
- over 40 to 66 years
- 25% to 33 1⁄3% reducing balance
- 20% to 33 1⁄3% reducing balance
- 33 1⁄3% reducing balance
IMPAIRMENT REVIEWS
PROPERTY, PLANT AND EQUIPMENT
Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable
cash inflows independent of the cash inflows of other groups of assets.
The Group assesses at each Balance Sheet date whether there is an indication that an asset may be impaired. If an
indication exists the Group makes an estimate of the recoverable amount of each asset group, being the higher of
its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets. An impairment
loss is recognised where the recoverable amount is lower than the carrying value of assets.
If there is an indication that previously recognised impairment losses may have decreased or no longer exist, a
reversal of the loss may be made. The carrying amount of the asset is increased to its recoverable amount only up
to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for
the asset in prior years.
Impairment losses and any subsequent reversals are recognised in the Income Statement.
INVENTORIES AND WORK IN PROGRESS
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.
Variations and claims are included in Revenue where it is probable that the amount, which can be measured
reliably, will be recovered from the customer.
LONG-TERM CONTRACTS
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.
INCOME TAX
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.
42
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
DEFERRED TAXATION
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. The measurement of deferred tax reflects the
tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to
recover or settle the carrying amounts of its assets and liabilities for Investment Properties that are measured at
fair value.
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.
PENSIONS
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 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
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.
GROUP AS A LESSEE
In accordance with IAS 40: Investment Property, leases of investment property are assessed on a property
by property basis. Where future rentals are material, the properties are capitalised and treated as finance leases
in accordance with IAS 17: Leases, otherwise 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.
GROUP AS A LESSOR
Properties leased out under operating leases are included in investment property, with rental income recognised on
a straight line basis over the lease term.
43
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
REVENUE
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 amounts received and receivable for work done in the year.
The measurement and stage of completion of long-term contracts are based on valuations agreed with 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.
Revenue from private housing sales is recognised when transactions are legally completed.
Revenue from private housing sales under shared equity scheme are accounted for at fair value.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in 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.
AVAILABLE FOR SALE FINANCIAL ASSETS
Available for sale financial assets 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
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
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. For the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
MONIES HELD ON DEPOSIT
Monies held on deposit with original maturity dates exceeding three months are disclosed separately in the
Statement of Financial Position. As these monies originated from investing activities any movements in the year
on these monies are disclosed under Investing Activities in the Statement of Cash Flows.
TRADE AND OTHER PAYABLES
Trade and other payables are non-interest bearing and are recognised at invoiced amount.
44
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
MEASUREMENT OF FAIR VALUES
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the
fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during
which a change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
• Note 13 – Investment Properties;
• Note 15 – Available for Sale Financial Assets;
• Note 20 – Financial Instruments;
• Note 26 – Retirement Benefit Obligations.
DIVIDENDS
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.
45
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
2.
SEGMENTAL INFORMATION
IFRS 8: Operating Segments requires operating segments to be identified 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 results.
External
Revenue
Internal
Revenue
£000)
£000)
29,027)
5,520)
1,655)
–)
Total
Revenue
£000)
30,682)
5,520)
Operating
Profit / (Loss)
2016)
£000)
(102)
3,616)
2015)
£000)
–)
–)
34,547)
1,655)
36,202)
3,514)
–)
2016
Construction activities
Investment activities
2015
Construction activities
Investment activities
.
.
.
.
.
.
.
.
20,819)
5,241)
737) 21,556)
5,241)
–)
26,060)
737)
26,797)
OPERATING PROFIT
.
Share of results of Joint Ventures
Finance and investment income
.
.
.
.
.
.
.
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
–)
–)
–)
3,514
33
205)
3,752)
(949)
2,958)
2,009)
2,009)
1,306)
229)
3,544)
Internal revenue relates to own work capitalised, all other internal transactions are eliminated on consolidation.
The Group had sales from construction activities from two customers amounting to £14,467,000 (2015, sales from
construction activities from three customers amounting to £11,764,000).
46
47
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
2.
SEGMENTAL INFORMATION (continued)
OTHER SEGMENTAL INFORMATION
2016
Construction activities
Investment activities
Joint Ventures
.
.
.
.
.
.
.
.
.
.
Non-Current
Asset Additions Depreciation
£000
£000
488)
1,700)
–)
465)
–)
–)
Allocation of corporation tax debtor
.
.
.
.
.
.
.
2015
Construction activities
Investment activities
Joint Ventures
.
.
.
.
.
.
.
.
.
.
483)
973)
–)
450)
–)
–)
Allocation of corporation tax debtor
.
.
.
.
.
.
.
3.
OTHER OPERATING INCOME
Rental income
Service charges and insurance receivable
.
.
.
Direct property costs
Net rental income
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Segment
Segment
Assets Liabilities
£000
£000
16,860)
91,561)
263)
4,749)
15,099)
–)
108,684)
19,848)
(554)
(554)
108,130)
19,294)
20,241)
87,654)
267)
3,900)
15,313)
–)
108,162)
19,213)
(659)
(659)
107,503)
18,554)
2016)
£000)
2015)
£000
4,994)
526)
4,764)
477)
5,520)
5,241)
(2,164) (2,070)
3,171)
3,356)
Direct property costs included £914,000 (2015, £830,000) in respect of investment properties that did not generate
rental income in the year.
46
47
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
4.
STAFF COSTS AND DIRECTORS’ REMUNERATION
Staff costs during the year amounted to:
Wages, salaries and short term benefits.
.
.
Social security costs
.
Post-employment benefits
.
.
. .
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The average weekly number of employees during the year was made up as follows:
Construction and related services.
Office and management .
.
Directors’ remuneration:
– Salaries and short term benefits
.
– Post-employment benefits
.
.
.
.
. .
. .
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
2015)
£000)
9,784)
1,051)
843)
8,269)
850)
789)
11,678)
9,908)
No.)
No.)
275)
23)
224)
22)
298)
246)
£000)
454)
59)
£000)
445)
58)
513)
503)
David W Smart and Alasdair H Ross are members of the Group’s defined benefit pension scheme.
John R Smart is a member of the Group’s defined contribution Group Personal Pension Plan.
Key management is comprised solely of the Directors of the Company. Full details of Directors’ remuneration is
given in the Directors’ Remuneration Report on pages 20 to 25.
5.
OPERATING PROFIT
This is stated after charging/(crediting):
.
Cost of inventories recognised as an expense .
. .
.
Staff costs (per note 4) .
. .
.
Hire of plant and machinery
. .
Contingent rents .
.
.
. .
Depreciation of owned assets
Profit on disposal of property, plant and equipment
.
Auditors’ remuneration and expenses – audit services
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The auditors’ fees for the Parent Company are £50,000 (2015, £50,000).
6.
INCOME FROM INVESTMENTS
Dividend income from available for sale financial assets
.
7.
FINANCE INCOME
.
)
Income:
Interest on short term deposits .
.
.
Other interest
.
.
Net interest income on retirement benefit obligations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7,074)
11,678)
651)
75)
465)
(47)
104)
2,597)
9,908)
430)
68)
450)
(47)
110)
14)
28
111)
14)
66)
95)
22)
83)
191)
200)
48
49
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
8.
TAXATION
UK Corporation Tax
Current tax on income for the year
Corporation tax over provided in previous years
.
.
Deferred taxation (note 21)
.
.
Current Tax Reconciliation
Profit on ordinary activities before tax .
.
Share of profits of Joint Ventures
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Current tax at 20.00% (2015, 20.67%) .
Effects of:
Expenses not deductible for tax purposes
.
Other timing differences
.
Tangible asset differences
Non taxable income
.
.
Deferred tax asset not recognised
Effect of indexation allowances .
Effect of change in tax rate
.
Adjustments to corporation tax charge in respect of prior years
Adjustment to deferred tax charge in respect of prior years .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
2015)
£000)
512)
(8)
262)
(36)
504)
226)
(240)
320)
264)
546)
3,752)
(33)
3,544)
(1,306)
3,719)
2,238)
744)
463)
6)
10
–
(67)
–)
–)
(421)
(8)
–)
3)
–)
2)
(5)
48)
(17)
(10)
(36)
98)
264)
546)
The Finance Act 2015, which received Royal Assent on 26th March 2015 stated that the UK corporation tax
rate would reduce to 20% for financial years commencing 1st April 2015. The Finance (No.2) Act 2015, which
received Royal Assent on 18th November 2015, reduced the UK corporation tax rate to 19% for financial years
commencing 1st April 2017 to 1st April 2019 and to 18% for financial year commencing 1st April 2020. The
Finance Act 2016, which received Royal Assent on 15th September 2016, reduced the rate to 17% for financial
years commencing 1st April 2020.
The effective corporation tax rate is 20.00% (2015, 20.67%) being the average rate applicable over the period.
Deferred tax provisions have been calculated using the 18% rate.
In addition to amounts charged to the Income Statement, a deferred tax credit of £215,000 (2015, £201,000)
relating to actuarial losses on the defined benefit pension scheme has been recognised directly to Equity.
The value of the deferred tax asset in respect of Capital Losses not recognised in the financial statements amounted
to £1,340,000 (2015, £1,550,000).
There are no income tax consequences attached to dividends paid or proposed by the Company to its shareholders.
9.
PROFIT FOR THE FINANCIAL YEAR )
Dealt with in the accounts of the Parent Company
.
Retained by Subsidiary and Joint Venture Companies
.
.
.
.
.
.
.
.
310)
3,178)
(1,811)
1,187
3,488)
2,998)
48
49
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
10.
DIVIDENDS
2014 Final Dividend of 2.04p per share, after waivers
2015 Interim Dividend of 0.92p per share
.
2015 Final Dividend of 2.10p per share, after waivers
.
2016 Interim Dividend of 0.92p per share
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
2015)
£000)
–)
–)
425)
421)
428)
424)
–)
–)
846)
852)
The Board is proposing a Final Dividend of 2.15p per share (2015, 2.10p) which, after waivers will cost the
Company no more than £421,000.
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.
11.
EARNINGS PER SHARE
Profit)
attributable)
to Equity)
shareholders)
£000)
Basic)
Earnings)
per share)
Year to 31st July 2016
.
Year to 31st July 2015
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3,488)
7.61p
2,998)
6.45p
Basic earnings per share are calculated by dividing the profit attributable to equity shareholders by the weighted
average number of shares in issue during the year.
The weighted average number of shares for the year to 31st July 2016 amounted to 45,845,000 (2015, 46,516,000).
There is no difference between basic and diluted earnings per share.
50
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
12.
PROPERTY, PLANT AND EQUIPMENT
(a) GROUP
Cost:
At 1st August 2015
Additions
Disposals
.
.
At 31st July 2016
.
.
.
.
Depreciation:
At 1st August 2015
.
Provided during year .
.
Disposals
.
At 31st July 2016
Net book value:
At 31st July 2016
Cost:
At 1st August 2014
Additions
Disposals
.
.
At 31st July 2015
.
.
.
.
.
.
Depreciation:
.
At 1st August 2014
Provided during year .
.
Disposals
.
At 31st July 2015
Net book value:
At 31st July 2015
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Land and
buildings
Freehold
£000
Plant,)
equipment)
and vehicles)
£000)
Total)
£000)
896
–
–
5,760)
488)
(328)
6,656)
488
(328)
896
5,920)
6,816)
534
19
–
4,740)
446)
(305)
5,274)
465)
(305)
553
4,881)
5,434)
343
1,039)
1,382)
896
–
–
5,720)
483)
(443)
6,616)
483)
(443)
896
5,760)
6,656)
515
19
–
4,721)
431)
(412)
5,236)
450)
(412)
534
4,740)
5,274)
362
1,020)
1,382)
Included within Freehold Land and Buildings is land costing £13,000 (2015, £13,000) which is not depreciated.
50
51
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
Plant,)
Land and)
buildings)
equipment)
Freehold) and vehicles)
£000)
£000)
Total)
£000)
.
.
.
.
361)
–)
–)
–)
2,719)
286)
(230)
(46)
3,080)
286)
(230)
(46)
.
361)
2,729)
3,090)
.
.
.
.
110)
5)
–)
–)
2,113)
265)
(216)
(40)
2,223)
270)
(216)
(40)
.
.
115)
2,122)
2,237)
246)
607)
853)
.
.
.
361)
–)
–)
2,685)
321)
(287)
3,046)
321)
(287)
.
.
.
.
.
.
361)
2,719)
3,080)
105)
5)
–)
110)
2,114)
260)
(261)
2,219)
265)
(261)
2,113)
2,223)
251)
606)
857)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
12.
PROPERTY, PLANT AND EQUIPMENT (continued)
(b) COMPANY
Cost:
At 1st August 2015
.
Additions
Disposals
.
Group transfers
At 31st July 2016
.
.
.
.
.
Depreciation:
At 1st August 2015
.
Provided during year .
.
.
Disposals
.
Group transfers
At 31st July 2016
)
Net book value:
At 31st July 2016
Cost:
At 1st August 2014
Additions
Disposals
.
.
At 31st July 2015
.
.
.
.
.
.
Depreciation:
At 1st August 2014
.
Provided during year .
.
Disposals
.
At 31st July 2015
Net book value:
At 31st July 2015
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
52
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
13.
INVESTMENT PROPERTIES
Cost or valuation:
At 1st August 2015
Additions
Disposals
.
.
.
.
.
(Deficit)/surplus on valuation
.
.
.
At 31st July 2016
.
Cost or valuation:
At 1st August 2014
.
Additions
.
.
Disposals
Deficit on valuation .
.
.
At 31st July 2015
.
.
.
.
.
.
.
Land and)
buildings)
Freehold)
£000)
55,330)
1,664)
(339)
(25)
Land and)
buildings)
Leasehold)
£000)
Total
£000)
7,901)
36)
–)
161)
63,231)
1,700)
(339)
136)
56,630)
8,098)
64,728)
55,084)
431)
(135)
(50)
8,525)
542)
(1,005)
(161)
63,609)
973)
(1,140)
(211)
55,330)
7,901)
63,231)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Valuation Process
The Group’s investment properties are valued by John M Smart, MRICS and David W Smart, MRICS, who are
Directors of the Parent Company, on the basis of fair value, in accordance with the RICS Valuation – Professional
Standards (January 2014), Global and UK Edition. As in previous years, external valuers have reviewed a sample
of the Group’s investment properties and provided a report to the Group detailing the valuations they would have
placed on the sample of investment properties reviewed. The valuations prepared by the Directors and the external
valuers are compared to ensure that there are no material variations between the valuations.
Investment properties, excluding ongoing developments, are valued using the investment method of valuation.
This approach involves applying capitalisation yields to current and estimated future rental streams and then
allowing for voids arising from vacancies and rent free periods and associated running costs. The capitalisation
yields and rental values are based on comparable property and leasing transactions in the market, using the valuers’
professional judgment and market observations. Other factors taken into account in the valuations include the
tenure of the property, tenancy details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the residual method of valuation, which is the same as
the investment method, as described above, with a deduction for all costs necessary to complete the development,
together with a further allowance for remaining risk.
In accordance with IAS 40: Investment Property, net annual surpluses or deficits are taken to the Income Statement
and no depreciation is provided in respect of these properties.
53
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
13.
INVESTMENT PROPERTIES (continued)
The Group considers all of its investment properties fall within ‘Level 3’ of the fair value hierarchy as described
by IFRS 13: Fair Value Measurement. Level 3 valuations are those using inputs for the asset or liability that are
not based on observable market data. The main unobservable inputs relate to estimated rental value and equivalent
yield. There have been no transfers of properties in the fair value hierarchy in the financial year. The table below
summarises the key unobservable inputs used in the valuation of the Group’s investment properties as at 31st July
2016:
Fair Value
at 31 July
2016
£000
17,845
46,883
Investment
Commercial
Industrial
Estimated Rental Value
£ per sq ft
Low Average High
9.00
4.00
12.00
5.75
15.00
7.50
Equivalent Yield
%
High
Low Average
8.0
8.6
10.3
8.9
11.5
10.1
The following table illustrates the impact of changes in the key unobservable inputs (in isolation) on the fair value
of the Group’s investment properties as at 31st July 2016:
Fair Value
at 31 July
2016
£000
17,845
46,883
5% change in estimated
rental value
Decrease
£000
Increase
£000
25bps change in equivalent
yield
Increase
£000
Decrease
£000
906
2,257
(906)
(2,257)
494
1,289
(472)
(1,220)
Investment
Commercial
Industrial
The Group had obligations of £nil (2015, £1,269,000) in respect of developments and repair costs of investment
properties at the Balance Sheet date.
54
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
14.
INVESTMENTS
Shares in Subsidiaries at Cost .
.
Joint Ventures
.
.
Group
2016
£000
2015
£000
Company
2016)
£000)
2015)
£000)
.
.
.
.
.
.
–
263
–
267
708)
–)
708)
– )
263
267
708)
708)
(a) JOINT VENTURES
At 31st July 2015 the Directors considered Prestonfield Development Company Limited to be a material associate
and the following table summarises the financial information of that company as included in its own financial
statements, adjusted for differences in accounting policies for the year to 31st July 2015. At 31st July 2016
Prestonfield Development Company Limited is no longer considered to be a material associate.
Current assets (including cash and cash equivalents of £430,000)
.
Current liabilities (including current financial liabilities excluding trade
and other payables and provisions of £nil)
.
.
.
.
Net assets .
.
.
Group’s share of net assets
.
.
.
.
.
.
Revenue .
Profit on sale of investment property
.
Profit and total comprehensive income .
.
.
.
.
.
.
.
.
.
.
.
.
Group’s share of profit and total comprehensive income
Dividend received
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
454)
2015)
£000)
454)
(372)
(372)
82)
82)
41)
41)
388)
2,516)
2,533)
388)
2,516)
2,533)
1,267) 1,267)
(2,325)
(2,325)
(1,058)
(1,058)
At 31st July 2016 the Group’s interests in its Joint Venture Companies are not considered to be material and the
aggregate financial information for these associate companies is as follows:
Aggregate carrying amount of individually immaterial associates .
Aggregate carrying amount of the Group’s share of:
.
Profit from continuing activities
.
.
Total comprehensive income
Dividend received
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
20151
£000)
263)
226)
33)
39)
33)
39)
(37)
(4)
(2)
37)
1. Excludes Prestonfield Development Company Limited
The Group accounts for all Joint Ventures using the equity method of accounting.
55
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
14.
INVESTMENTS (continued)
(a) JOINT VENTURES (continued)
Name of Joint Venture
Prestonfield Development Company Limited
Northrigg Limited
Duff Street Limited
Invertiel Developments Limited
Registered in and
Principal Country
of Operation
Scotland
Scotland
Scotland
Scotland
J. Smart & Co. (Contractors) PLC
Interest in Joint Venture’s Capital
50%
50%
50%
50%
Name of Joint Venture
Jointly managed with
Issued Share capital
Prestonfield Development
Company Limited
Westerwood
Limited
Northrigg Limited
William Sanderson
Duff Street Limited
Kiltane Developments
Limited
Invertiel Developments
Limited
DKG Estates LLP
2 ordinary £1 shares
split equally into A & B
shares and ranking
equally in all respects
2 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
100 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
100 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
Issued shares held
by J. Smart & Co.
(Contractors) PLC
1 B Share
1 A Share
50 A Shares
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.
56
57
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
14.
INVESTMENTS (continued)
(b) SUBSIDIARIES
At 1st August 2015 and 31st July 2016
.
.
.
.
.
.
2016)
£000)
708)
2015)
£000)
708)
At 31st July 2016 the Company held the entire issued share capital of the following companies, all of which are
registered in and operate in Scotland:
McGowan and Company (Contractors) Limited Plumbing contractors
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
Concrete Products (Kirkcaldy) Limited
C. & W. Assets Limited
Investment holding
Civil Engineering contractors
Manufacture of concrete building products
Property company
15. AVAILABLE FOR SALE FINANCIAL ASSETS
Group
2016)
£000)
2015)
£000)
Listed investments
.
.
.
.
.
.
.
.
.
326)
337)
Fair value movement on shares held at 31st July 2016 before tax amounted to £(10,000) (2015, £(46,000)).
There has been no impairment adjustment on available for sale financial assets in this or the previous year.
As the Group’s available for sale financial assets consisted entirely of equities of companies listed on quoted markets
then these fall within ‘Level 1’ of the fair value hierarchy as described by IFRS 13: Fair Value Measurement. Level
1 valuations are those using inputs which are quoted prices (unadjusted) in active markets for identical assets or
liabilities the Company can access at the year end date.
56
57
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
16.
INVENTORIES
.
Long-term contract balances
.
Work in progress .
Land held for development
.
Raw materials and consumables
.
Finished goods
.
.
.
.
.
.
.
.
.
.
.
.
.
CONTRACTS IN PROGRESS AT
THE BALANCE SHEET DATE:
Aggregate amount of costs incurred and
recognised profits less recognised losses to date
.
Retentions outstanding .
.
.
Advances received
.
.
.
.
Net value of contracts in progress
.
17.
TRADE AND OTHER RECEIVABLES
.
CURRENT ASSETS:
Trade receivables
.
Amounts owed by Subsidiaries .
.
Other receivables
Prepayments and accrued income
Amounts recoverable on contracts
Loans to Joint Venture companies
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016)
£000)
55)
420)
1,953)
168)
88)
2,684)
Group
Company
2015)
£000)
113)
3,402)
1,908)
147)
165)
2016)
£000)
–)
420)
1,953)
33)
–)
2015)
£000)
107)
3,402)
1,908)
33)
–)
5,735)
2,406)
5,450)
20,948)
534)
(22,060)
13,106)
419)
(13,763)
19,471)
534)
(20,724)
12,009)
419)
(12,879)
(578)
(238)
(719)
(451)
2,342
–
147
381
2,402
1,097
6,369
1,182
–
168
417
1,645
1,096
454
1,688
163
291
2,316
1,097
105
779
152
308
1,438
1,096
4,508
6,009
3,878
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Trade receivables are shown net of provision for doubtful debts of £30,000 (2015, £56,000).
The ageing of past due but not impaired trade debtors is as follows:
Less than 30 days
30 to 60 days
Greater than 60 days
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,870
281
191
2,342
685
458
39
422
32
–
105
–
–
1,182
454
105
Trade receivables includes £220,000 (2015, £481,000) in respect of outstanding retentions.
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 Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
58
59
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
18.
BANK
Cash and cash equivalents comprise the following:
Group
Cash at bank and on hand
.
Short term deposits
.
.
.
.
.
.
.
.
2016
£000
13,837
12,948
2015
£000
11,220
14,827
Company
2016
£000
22,948
–
2015
£000
2,505
–
26,785
26,047
2,948
2,505
Monies held on deposit are held in bank accounts which have original maturity dates exceeding three months and
therefore do not meet the criteria of cash and cash equivalents as defined in IAS 7: Statement of Cash Flows.
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.
19.
TRADE AND OTHER PAYABLES
.
CURRENT LIABILITIES:
Trade payables
.
Amounts owed to Subsidiaries .
Other taxes and social security costs
Other creditors and accruals
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,629
–
498
3,007
5,134
1,382
–
282
2,336
893
118
172
2,210
877
122
166
1,496
4,000
3,393
2,661
20.
FINANCIAL INSTRUMENTS
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.
CREDIT RISK
In relation to the Group’s financial assets, the Group has no significant concentration of credit risk, as exposure is
spread over a number of counterparties and customers.
There is no significant impairment loss recognised or significant receivables that are past due but not impaired.
The Group has assessed that there is no significant credit risk in relation to loans to Joint Venture companies given
the underlying value of the assets held by these entities.
IFRS 7: Financial Instrument Disclosures requires a company
to undertake a sensitivity analysis
on its financial instruments which are affected by changes in interest rates. The Group financial
instruments affected by interest rate fluctuations are bank deposits and bank overdrafts. Based on the
Group’s net position at the year end, a 1% increase or decrease in the interest rates would change the
Group’s profit before tax by approximately £196,000 and £111,000 respectively (2015, £173,000 and £96,000
respectively).
58
59
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
21.
DEFERRED TAXATION
DEFERRED TAX ASSETS
GROUP
.
At 1st August 2014
Credited to Income Statement .
.
At 31st July 2015
.
.
Credited to Income Statement .
At 31st July 2016
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Other
£000
23
4)
27
14
41
Deferred tax assets arising in respect of valuation surpluses on Investment Properties of £1,340,000 (2015,
£1,550,000) have not been recognised because it is not probable that relevant future taxable profits will be available
against which the Group can use the benefits therefrom.
DEFERRED TAX LIABILITIES
GROUP
At 1st August 2014
Credited to Equity
Charged / (Credited) to Income Statement
.
.
.
.
.
.
At 31st July 2015
.
.
.
Credited to Equity
Credited to Income Statement .
.
At 31st July 2016
.
.
.
.
.
.
COMPANY
At 1st August 2014
Credited to Equity
Charged / (Credited) to Income Statement
.
.
.
.
.
.
At 31st July 2015
.
Credited to Equity
Credited to Income Statement
.
At 31st July 2016
.
.
.
.
.
.
.
.
Accelerated Retirement
Benefit
Capital
Other
Timing
Allowances Obligations Differences
£000
£000
£000
Total
£000
1,315
–)
163
326
(201)
169
66
–
(8)
1,707
(201)
324
1,478
294
58
1,830
–
(150)
(215)
(73)
–
(3)
(215)
(226)
1,328
6
55
1,389
Accelerated Retirement Other
Capital Benefit Timing
Allowances Obligations Differences
£000 £000 £000
10 326 52
(201) –
–
169 (7)
26
Total
£000
388
(201)
188
36
294
45 375
–
(5)
(215) –
(73) (2)
(215)
(80)
31
6
43 80
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
60
61
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
22.
SHARE CAPITAL
Issued and fully paid ordinary shares of 2p each
.
At 1st August 2015
.
.
Purchased and cancelled
.
.
.
.
At 31st July 2016
.
.
.
.
2016
2015
Number
£000
Number
£000
.
.
.
45,974,000
(670,000)
919
(13)
45,304,000
906
46,833,000
(859,000)
45,974,000
936
(17)
919
During the year to 31st July 2016 the Company purchased for cancellation 670,000 ordinary shares of 2p each with
a nominal value of £13,000 for a consideration of £704,000.
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 and each share attracts one
vote. There are no restrictions on the distribution of dividends or repayment of capital.
23. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
(a) RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Profit before tax .
Share of profits from Joint Ventures
Depreciation
.
.
Unrealised valuation (surplus)/deficit on investment properties
Profit on sale of property, plant and equipment
.
Profit on sale of investment properties .
Profit on sale of available for sale financial assets
Change in retirement benefits
Interest received .
Change in inventories
Change in receivables
Change in payables
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS
.
Cash and cash equivalents
.
.
Bank overdraft
.
.
Net position
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
2015
£000
3,752
(33)
465
(136)
(47)
(186)
–)
(817)
(125)
3,051
(1,861)
1,134)
3,544
(1,306)
450
211
(47)
(60)
(1)
(846)
(117)
711
(2,595)
(143)
5,197
4,991
£000)
26,785
(12,628)
14,157
£000
26,047
(12,724)
13,323
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(c) ANALYSIS OF NET FUNDS
Cash and cash equivalents
.
Bank overdraft
.
Net funds
.
.
.
.
.
.
.
.
.
.
.
.
.
.
61
At 1st
August 2015
£000
26,047
(12,724)
.
.
Cash
Flow
£000
738
96)
At 31st
July 2016
£000
26,785
(12,628)
.
13,323
834
14,157
.
.
.
.
.
.
60
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
24. NOTES TO THE COMPANY STATEMENT OF CASH FLOWS
(a) RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
Profit before tax .
Depreciation
.
.
Profit on sale of property, plant and equipment
.
Dividend received from Joint Ventures
.
.
Change in retirement benefits
.
.
Interest received .
.
.
Change in inventories
.
.
Change in receivables
.
Change in payables
.
.
CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS
.
Cash and cash equivalents
.
.
.
.
.
(c) ANALYSIS OF NET FUNDS
Cash and cash equivalents
.
.
.
.
.
.
25.
FUTURE CAPITAL EXPENDITURE
2016
£000
2015
£000
77
270
(39)
(37)
(817)
(12)
3,044
(2,131)
732)
1,087
(1,668)
265
(28)
(2,327)
(846)
(20)
493
(4,099)
(203)
3,101
.
.
.
.
.
.
.
.
.
.
.
2,948 2,505
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
At 1st
August 2015
£000
2,505)
.
Cash At 31st
Flow July 2016
£000
443)
£000
2,948)
There were no amounts of Capital Expenditure relating to Property, plant and equipment contracted for at 31st July
2016 or 31st July 2015.
The Group’s share of Capital Expenditure contracted for by its Joint Ventures as at 31st July 2016 amounted to
£nil (2015, £nil).
62
63
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
26.
RETIREMENT BENEFIT OBLIGATIONS
The Group operates a defined benefit pension scheme for certain active and former employees of the Group. The
scheme was closed to new members in the year to 31st July 2003. The scheme is subject to the funding legislation
outlined in the Pensions Act 2004 together with documents issued by the Pensions Regulator and Guidance Notes
adopted by the Financial Reporting Council.
The scheme is administered by a separate Board of Trustees which is composed of employer nominated
representatives and member nominated Trustees and is a separate legal entity. The assets of the scheme are held
separately from the assets of the Group and are administered and managed professionally under the supervision
of the Trustees. The Trustees are required by law to act in the best interests of all classes of beneficiaries to the
scheme and are responsible for the investment policy and the day-to-day running of the scheme. The Trustees
are also responsible for jointly agreeing with the employer the level of contributions due to the Pension scheme.
The scheme provides qualifying employees with an annual pension based on final pensionable salary on attainment
of a normal retirement age of 65. Active members also benefit from life assurance cover. However the payment of
these benefits are at the discretion of the Trustees of the scheme.
The pension scheme’s independent qualified Actuary carries out a triennial valuation using the Projected Unit
Credit Method to determine the level of the scheme’s surplus or deficit. The last completed triennial valuation was
as at 31st October 2012 which revealed a deficit of £3,092,000, representing a funding level of 89.7%. Following
the latest triennial valuation the Group and the scheme Trustees agreed that the employer contributions to the
scheme would increase to 68.8% of pensionable salaries and employee contributions would remain at 3%. The
triennial valuation as at 31st October 2015 is being prepared but as at the date of these financial statements it has
not yet been completed.
There were no outstanding contributions at the year end.
The Group expects to pay a contribution of £1,215,000 during the financial year to 31st July 2017.
ASSUMPTIONS
The financial assumptions used to calculate scheme liabilities under IAS 19 (amended): Employee Benefits are:
.
.
.
.
Valuation method
.
Discount rate
.
.
Inflation rate - Retail price index
.
Inflation rate - Consumer price index .
.
Salary increases .
.
Pension increases
.
.
.
.
2016
Projected Unit
2.3%
2.6%
1.7%
2.6%
1.5% – 3.0%
.
.
.
.
.
.
.
.
.
.
.
.
2015
Projected Unit
3.5%
3.0%
2.0%
3.0%
1.9% – 3.0%
2014
Projected Unit
4.1%
3.1%
2.3%
3.3%
2.2% – 3.1%
62
The mortality assumptions imply the following expectations of years of life from age 65:
2016
21.9
23.9
23.2
25.4
.
.
.
.
2015
22.0
24.3
23.3
25.8
2014
22.0
24.2
23.3
25.7
Man currently aged 65 .
Woman currently aged 65
Man currently aged 45 .
Woman currently aged 45
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
63
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
SENSITIVITY TO KEY ASSUMPTIONS
The scheme exposes the Group to actuarial risks, such as interest rate risk, inflation risk, longevity risk and
investment risk. The key assumptions used for IAS 19 are discount rate, inflation rates and mortality. If different
assumptions were used then this could materially affect the results disclosed in the financial statements. Movements
in the key assumptions would have the following effect on the level of the deficit:
Change in assumption
Discount rate
Inflation rate
Mortality rate
.
Decrease of 0.25%
Increase of 0.25%
.
Increase in life expectancy of 1 year
.
.
.
.
Increase in scheme liabilities
2015
£000
2016
£000
.
.
.
.
.
.
.
.
.
1,298
456
1,267
1,029
545
908
The sensitivity information has been prepared using the same methodology as the calculation of the current year
scheme obligations.
BALANCE SHEET DISCLOSURES
The investments held by the scheme and the reconciliation of the scheme assets and liabilities to the Balance Sheet
were:
EQUITIES
UK
.
Overseas
Multi-asset diversified funds
Absolute return funds
.
.
.
.
.
BONDS
Government
Corporate
OTHER
Cash
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Fair value of scheme assets
Present value of scheme liabilities
Scheme surplus
.
Deferred taxation
Net pension scheme surplus
.
.
.
.
.
Valuation
2016
£000
.
.
.
.
.
.
.
.
.
.
.
10,637
13,741
1,594
946
1,069
3,223
3,477
34,687
(34,654)
33
(6)
27
.
.
.
.
.
.
.
.
.
.
.
Valuation
2015
£000
9,336
13,342
2,547
–
166
2,813
3,530
31,734
(30,262)
1,472
(294)
1,178
Valuation
2014
£000
8,531
12,373
2,475
–
480
2,399
3,273
29,531
(27,902)
1,629
(326)
1,303
64
65
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
The assets of the scheme are invested in funds managed by Standard Life Wealth, in direct investments via Speirs
& Jeffrey, in insurance policies with companies belonging to the Royal London Group and in bank accounts.
The assets do not include any directly owned ordinary shares issued by J. Smart & Co. (Contractors) PLC. The
fair value of the assets of the pension scheme are determined based on publicly available market prices wherever
available.
2016
£000
2015
£000
.
(555)
(384)
1,113
.
. (1,047)
1,215
(1,132)
66
83
. 30,262
555
.
1,047
.
(60)
.
53
.
(1,153)
.
.
.
.
(157)
(447)
4,554
27,902
384
1,132
(34)
49
(976)
–
(28)
1,833
. 34,654
30,262
The following amounts are incorporated into the financial statements
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Analysis of amounts charged to operating profit:
.
Service cost
.
.
.
.
.
Analysis of amounts charged to net finance income:
Interest income
Interest costs
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Movement in present value of defined benefit obligations:
.
.
.
At 1st August 2015
.
.
.
Service cost
.
.
.
Interest cost
.
.
Charges paid
.
.
.
Employee contributions
.
.
.
Benefit payments
Actuarial movements due to scheme experiences
.
.
Actuarial movements due to changes in demographic assumptions .
.
Actuarial movements due to changes in financial assumptions
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2016
.
.
.
.
.
.
.
64
65
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
Movement in fair value of scheme assets:
.
.
At 1st August 2015
.
Interest income
.
.
Employer contributions .
.
Employee contributions .
.
.
Benefits paid
Charges paid
.
.
Return on plan assets excluding amount shown in interest income .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2016
.
.
.
.
.
Movement in scheme surplus:
.
.
At 1st August 2015
.
.
Current service cost
.
.
Contributions
Net finance income
.
.
Actuarial remeasurement of pension scheme liability
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2016
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Analysis of the actuarial loss included in the statement of comprehensive income:
Return on scheme assets excluding amounts shown in interest income
Changes in assumptions underlying present value of scheme liabilities
.
.
.
.
At 31st July 2016
.
.
.
.
.
.
.
.
.
2016
£000
2015
£000
31,734
1,113
1,306
53
(1,153)
(60)
1,694
29,531
1,215
1,147
49
(976)
(34)
802)
34,687
31,734
1,472
(555)
1,306
66
1,629
(384)
1,147
83
(2,256) (1,003)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
33
1,472
.
.
.
1,694
(3,950)
802)
(1,805)
(2,256)
(1,003)
History of experience gains and losses:
Return on scheme assets
Amount (£000)
.
Percentage of market value of scheme assets
Changes in assumptions underlying present value of
scheme liabilities
.
.
.
.
.
.
.
.
Amount (£000)
.
Percentage of market value of scheme liabilities .
Total amounts included in Consolidated Statement of
Comprehensive Income
Amount (£000)
.
Percentage of market value of scheme liabilities .
.
.
.
.
.
2016
1,694
4.9%
2015
2014
2013 2012
802
2.5%
(743)
2.5%
2,776 (1,574)
9.7% 6.3%
(3,950)
11.4%
(1,805)
6.0%
(1,050)
3.8%
446
122
1.7% 0.5%
(2,256)
6.5%
(1,003)
3.3%
(1,793)
6.4%
3,222 (4,517)
12.4% 17.0%
.
.
.
.
.
.
66
67
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
DEFINED CONTRIBUTION SCHEMES
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 £188,000 (2015, £164,000).
STAKEHOLDER SCHEMES
The Group has stakeholder pension arrangements for those employees not eligible for membership of either the
Defined Benefit or Defined Contribution schemes. The Group makes contributions to these schemes and has no
liability beyond these contributions. The contributions to these schemes in the year amounted to £70,000 (2015,
£57,000) and are expensed through the Income Statement as incurred.
MULTI EMPLOYER SCHEME
The Group is also a member of the multi-employer pension scheme, Plumbing & Mechanical Services (UK)
Industry Pension Scheme. The Group makes contributions to this scheme which in the year amounted to £30,000
(2015, £23,000) and are expensed through the Income Statement as incurred.
No provision has been made for amounts payable by the Group in respect of Section 75 pension liabilities relating
to the Group’s participation in this scheme given that, as at the date of these financial statements, any potential
liability has not yet been assessed.
At the last actuarial valuation of this scheme carried out as at 5th April 2014 the assets of the scheme covered 101%
of the scheme’s liabilities.
27.
CONTINGENT LIABILITIES
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. As at 31st July 2016 these
amounted to £3,665,000.
28. OPERATING LEASE ARRANGEMENTS
GROUP – AS LESSEE
Future minimum lease payments payable under non-cancellable operating leases:
Within one year .
.
In two – five years exclusively .
.
After five years .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
73
164
2015
£000
69
169
150 20
.
.
.
387
258
66
GROUP – AS LESSOR
Gross property rental income earned in the year amounted to £4,994,000 (2015, £4,764,000). 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 .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5,301
12,820
6,634
4,847
12,347
6,614
24,755
23,808
.
.
.
.
.
.
.
.
.
67
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
29.
RELATED PARTY TRANSACTIONS
(a) SUBSIDIARIES
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:
SUBSIDIARY
McGowan and Company (Contractors) Limited
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
.
Concrete Products (Kirkcaldy) Limited
.
C. & W. Assets Limited .
.
.
.
.
.
SUBSIDIARY
McGowan and Company (Contractors) Limited
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
.
Concrete Products (Kirkcaldy) Limited
.
C. & W. Assets Limited .
.
.
.
.
.
2016
£000
2015
£000
Sale of goods
and services
2016
£000
2015
£000
Purchase of goods
and services
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
134
–
72
40
139
–
96
56
2,455 1,605
1,357
–
4
50
796
–
9
20
– –
Amounts owed
by Subsidiaries
Amounts owed
to Subsidiaries
.
.
.
.
.
–
–
9
–
1,679
–
–
2
–
777
118
–
–
–
115
–
–
7
– –
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.
(b) JOINT VENTURE COMPANIES
Transactions between the Group and its Joint Venture Companies were the receipt of interest on a loan to one of
the joint venture companies of £6,000 (2015, £6,000) and receipt of dividends of £37,000 (2015, £2,327,000).
During the year the Group was repaid £nil (2015, £2,375,000) of outstanding loans to Joint Venture Companies and
advanced £1,000 (2015, £nil) to Joint Venture Companies.
As at 31st July 2016 loans outstanding from Joint Venture Companies amounted to £1,097,000 (2015, £1,096,000)
and the Group was due £3,000 in respect of loan interest charged from one of the Joint Venture Companies (2015,
£nil).
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 Venture Companies.
68
69
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2016
29.
RELATED PARTY TRANSACTIONS (continued)
(c) DIRECTORS’ INTEREST IN CONTRACTS
John M Smart, David W Smart and John 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.
During the year to 31st July 2016 the Group purchased materials amounting to £311,000 (2015, £320,000) from
these companies and sold materials and services amounting to £55,000 (2015, £70,000) to these companies.
All transactions were at normal commercial rates.
As at 31st July 2016 the Group owed these companies £9,000 (2015, £9,000) and was owed £33,000 (2015,
£3,000).
(d) DIRECTORS’ REMUNERATION
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 Directors’ Remuneration Report.
(e) DIRECTORS’ DIVIDENDS
During the year the Directors received dividends from the Company as follows:
.
John M Smart
David W Smart
.
Alasdair H Ross .
.
John R Smart
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(f) DIRECTORS’ TRANSACTIONS
2016
£000
11
109
3
109
The following Directors received goods and services from Group Companies in the year amounting to:
.
John M Smart
David W Smart
.
Alasdair H Ross .
.
John R Smart
2
2
8
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2015
£000
11
109
3
109
5
2
–
3
All transactions were at normal commercial rates.
(g) PENSION SCHEMES
Disclosures in relation to the pension schemes are included in note 26 to the Accounts.
68
69
Printed by Multiprint (Scotland) Limited, Kirkcaldy
70