Trafalgar Property Group plc
Annual Report 2015

Plain-text annual report

TRAFALGAR NEW HOMES PLC ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2015 Company Registration No. 04340125 TABLE OF CONTENTS Officers and Professional Advisers Chairman's Statement Strategic Report Directors' Report Corporate Governance Statement Independent Auditor's Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Accounting Policies for the Consolidated Financial Statements Notes to the Consolidated Financial Statements Company Balance Sheet Company Statement of Cash Flows Notes to Company Statement of Cash Flows Accounting Policies for the Company Financial Statements Notes to the Company Financial Statements Explanation of resolutions at the Annual General Meeting Notice of Annual General Meeting 1 2 3 -5 6 -8 9 10 - 11 12 13 14 15 16 - 21 22 - 29 30 31 32 - 33 34 35 – 38 39 40 – 42 OFFICERS AND PROFESSIONAL ADVISERS DIRECTORS SECRETARY REGISTERED OFFICE C C Johnson J Dubois A Johnson N Lott N Narraway Chequers Barn Bough Beech Edenbridge Kent TN8 7PD REGISTERED NUMBER: 04340125 AUDITOR NOMINATED ADVISER AND BROKER REGISTRARS PUBLIC RELATIONS Crowe Clark Whitehill LLP St Bride's House 10 Salisbury Square London EC4Y 8EH Allenby Capital Ltd 3 St Helen’s Place London EC3A 6AB Neville Registrars Ltd Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Yellow Jersey PR 76 Great Suffolk Street London SE1 0BL P a g e | 1 P a g e | 1 CHAIRMAN'S STATEMENT TRAFALGAR NEW HOMES PLC CHAIRMAN’S STATEMENT The period under review has been disappointing, as much of our recent efforts have been devoted to our Staplehurst site where we have, unfortunately, been refused planning permission to date. However, we are confident that we will in due course be able to use this land for a major development. We have also experienced significant delays and cost over-runs during this past year on the completion of our Oakhurst Park Gardens development in Kent. The Group incurred a substantial increase in construction cost (due to the liquidation of the building contractor and the requirement to replace it with others to complete the development) and an additional and substantial increase in the financing cost of the development due to the time delays. The banking finance cost of this development amounted to circa £1,300,000, a figure considerably greater than anticipated. During the period under review we sold a total of seven of the remaining eight units, leaving one unsold at the year-end. Business Environment The Group continues to specialise in small developments in Kent, Surrey, Sussex and the M25 ring south of London, a strategy that positions us in a niche market place, between local builders and larger house building companies in the high demand area of the South East. The Directors are confident that the demand for new housing in the areas in which we operate remains strong. Now that the Election has passed, we are looking forward to a period of sustained stability for the residential property market. The Board believes we are well positioned to undertake some selected profitable developments over the next few years. Financials The year under review saw Group turnover at £3,898,250 (2014: £3,368,500), with a loss before tax of £619,106 (2014: Loss £305,049). The underlying loss for the year was £620,641 (2014: Loss £205,843). The cash in bank at the end of the period was £490,770 (31 March 2014: £1,216,471). Outlook Additional land has been acquired to enable our development programme, as the Group seeks to return to profitability in 2016 and 2017. We are currently building at Ticehurst and Borough Green and we have two further development sites about to start. Further details of our existing developments are set out in the Strategic Report below. We look forward to the future with increasing confidence. James Dubois Chairman 16th July 2015 P a g e | 2 STRATEGIC REPORT TRAFALGAR NEW HOMES PLC STRATEGIC REPORT Business review, results and dividends The Consolidated Results of the year’s trading, presented on the basis of accounting, are shown below. The Consolidated loss for the year amounted to £ 619,106 (2014: Loss £305,049). Principal risks & uncertainties Set out below are certain risk factors which could have an impact on the Group's long term performance. The factors discussed below should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing the Group. The principal risks and uncertainties facing the Group are: 1. Any possibility that lending criteria from the Group’s bankers may harden with little prior notice. 2. Construction costs may escalate and eat into gross profit margins. 3. Heavy overheads may be incurred especially when projects have been completed and before others have been commenced. 4. The Group could pay too much for land acquisitions. 5. The Group might fail to adhere to good corporate governance policies. 6. The Group’s reliance on key members of staff. The Group considers that it mitigates these risks with the following policies and actions: 1. The Group affords its bankers and other lenders a strong level of asset and income cover and maintains good relationships with a range of funding sources from which it is able to secure finance on favourable terms. 2. Construction costs are outsourced on a fixed price contract basis, thereby passing on to the contractor all risk of development cost overspend, including from increased material, labour or other costs. 3. Most other professional services are also outsourced, thus providing a known fixed cost before any project is taken forward and avoiding the risk that can arise in employing in-house professionals of a high unproductive overhead at times when activity is slack. 4. Land buying decisions are taken at board level, after careful research by the Directors personally, who have substantial experience of the house building industry, potential construction issues and the local market. The Group focuses on a niche market sector of new home developments in the range of 4 to 20 units. Within this unit size, competition to purchase development sites from land buyers is relatively weak, as this size is unattractive to major national and regional house builders who require a larger scale to justify their administration and overheads, whilst being too many units for the jobbing builder to finance or undertake as a project. Within this market, there are opportunities to negotiate land acquisitions on favourable terms. Many competitors who also focus on this niche have yet to recapitalise and are unable to raise finance. 5. The Group has a rigorous corporate governance policy appropriate for a publicly quoted company now listed on AIM. 6. Many of the activities are outsourced and each of the Directors is fully aware of the activities of all members of staff enabling adequate cover when needed. P a g e | 3 STRATEGIC REPORT Operations review The expected turnover of the Group during the year was based upon the completion of the construction and sale of all eight of the remaining houses at its site at Oakhurst Park Gardens, Bank Lane, Hildenborough, Kent. In the event, seven of the eight were sold, leaving one house unsold at the year end. A summary of the results for the year is as follows:- Revenue for the year Gross (loss) /profit Loss after taxation 2015 £ 3,898,250 (290,791) (619,106) 2014 £ 3,368,500 293,466 (305,049) The revenue from the sales during the year of £3,898,250, reflects a gross sales income on the Oakhurst Park Gardens site of £ 6,498,250 and since the year end the final unit has been transferred to Christopher Johnson for £525,000 for repayment on his outstanding loans. It is anticipated that the gross sales revenue from this development will be circa £7,023,250, which is in excess of that anticipated at the outset. Unfortunately, and as previously reported, the profitability of the site was substantially reduced because of the factors outlined in my previous Strategic Report which accompanied our results for the year ended 31/3/2014. The Group incurred a substantial increase in construction cost (due to the liquidation of the building contractor and the requirement to replace it with others to complete the development) and an additional and substantial increase in the financing cost of the development due to the time delays. The banking finance cost of this development amounted to circa £1,300,000, a figure considerably greater than anticipated. As a result of the above, the Company recorded a loss for the year of £ 619,106. On a positive note, work is well under way on our sites at Ticehurst, East Sussex and Borough Green, Kent and will shortly commence on our site at Tunbridge Wells, Kent. We have secured funding for all three sites on sensible commercial terms with the development funders (Coutts/Commercial Acceptances/Ratesetter) and having funded the early build stages on the Ticehurst site out of our own resources, we now have arrangements in place giving us 100% build finance on all three of the ongoing development sites mentioned above. On the Sheerness site we have secured bank funding (Lloyds) for the construction of the development, again on a 100% of the build cost basis, and work will commence when we have chosen a building contractor for this site. As can be seen our development programme (which will result in a mix of houses and luxury apartments in this current financial year) is well under way and fully funded which is encouraging and should result in a successful year. Looking ahead, on our flagship site, situated in Staplehurst, Kent, we have experienced severe planning delays/refusals and non-determinations which has been very frustrating. We are currently working on a further application for planning permission for residential development on this site and, provided we are successful, this site will contribute to the profitability of the Group over the two years ending 31/03/2017 and 31/03/2018. For 2017 and beyond, in addition to the Staplehurst and Sheerness sites, we have agreed to purchase a site in Edenbridge, Kent which has a planning permission for residential development of three houses. We continue to make offers for other sites on a regular basis, as we have no shortness of opportunities presented to us. As before, though, we are concerned to ensure that any site we are interested in, shows a sensible return on capital employed and our offers for such sites are pitched accordingly. All of the sites we consider fall within our chosen area of operation, i.e. Kent, Sussex, Surrey and the southern outer London M25 ring, our favoured area of operation. P a g e | 4 STRATEGIC REPORT Again, we are unable to pay a dividend this year but the Group remains committed to the declaration and payment of a dividend as soon as possible. As before, the losses carried forward from previous year will continue to be available to mitigate future tax charges. Our bankers continue their financial support for the Group and that, coupled with the loans from our private investors and your Directors, means that we have sufficient funds to fulfil our development programme to generate profitability for the Group going forward. Financial instruments The Group's principal financial instruments comprise cash at bank, bank loans, other loans and various items within current assets and current liabilities that arise directly from its operations. The Directors consider that the key financial risk is liquidity. This risk is explained in the section headed Principal Risks and Uncertainties in the annual report and accounts. Christopher Johnson Director 16th July 2015 P a g e | 5 DIRECTORS’ REPORT TRAFALGAR NEW HOMES PLC DIRECTORS’ REPORT The Directors present their Report and Audited Financial Statements for the year ended 31 March 2015. Principal activities The principal activity of the Company is that of a Holding Company. The principal activity of the principal subsidiary undertakings, Combe Bank Homes Limited, Combe Bank Homes (Oakhurst) Limited and Combe Homes (Borough Green) Limited, continued to be that of home building and property development. Results and dividends The results for the year are set out on page 12. The Directors do not recommend the payment of a final dividend for the year (2014: nil). Directors The following Directors have held office since 1 April 2014 and have all served for the entire accounting year:- C C Johnson A Johnson N Lott J Dubois Conflicts of interest Under the articles of association of the company and in accordance with the provisions of the Companies Act 2006, a Director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company's interests. However, the Directors may authorise conflicts and potential conflicts, as they deem appropriate. As a safeguard, only Directors who have no interest in the matter being considered will be able to take the relevant decision, and the Directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate. During the financial year ended 31 March 2015, the Directors have authorised no such conflicts or potential conflicts. Directors’ interests in shares Directors' interests in the shares of the Company, including family interests, at 31 March 2015 were as follows:- 31.03.2015 31.03.2014 Ordinary shares of 1p each Ordinary shares of 1p each 186,815,803 1,868 186,815,803 1,868 C C Johnson A Johnson Shareholdings of other directors On admission to AIM in July 2013, the non-executive Directors subscribed for new shares at the placing price of 2p per share:- J Dubois N Lott 1,500,000 500,000 P a g e | 6 DIRECTORS’ REPORT Other substantial shareholdings As at 10th July 2015, being the latest practicable date before the issue of these financial statements, the company had been notified of the following shareholdings which constitute 3% or more of the total issued shares of the company. Ordinary shares No. Shareholding % Mr C.C. Johnson 186,815,803 78.4 Statement of directors’ responsibilities The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). 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 of the profit or loss of the Group for that year. In preparing these 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 applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom. The maintenance and integrity of the Group website is the responsibility of the Directors; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility or any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions. Financial Instruments Information relating to the financial instruments is now included in the Strategic report on page 5. Future Developments Information relating to future developments is included in the Strategic report on page 5. P a g e | 7 DIRECTORS’ REPORT Provision of information to auditors Each of the persons who are Directors at the time when this Directors’ Report is approved has confirmed that:   so far as that Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and that Director has taken all the steps that ought to have been taken as a Director in order to be aware of any information need by the Group’s auditors in connection with preparing their report and to establish that the Group’s auditors are aware of the information. Auditor The auditors, Crowe Clark Whitehill LLP, will be proposed for re-appointment in accordance with Section 489 of the Companies Act 2006. This report was approved by the board and signed on its behalf. Christopher Johnson Director 16th July 2015 P a g e | 8 Trafalgar New Homes Plc CORPORATE GOVERNANCE STATEMENT The Board of Trafalgar New Homes Plc appreciate the value of good corporate governance and the requirements of the UK Corporate Governance Code (“the Code”). Companies on AIM are not required to comply with the Code, however the company has implemented corporate governance procedures appropriate for the present size of the entity having given due regard to the Corporate Governance code. Board Structure The Board consists of four Directors of which two are executive and two non-executive. The Board meets as and when required and is satisfied that it is provided with information in an appropriate form and quality to enable it to discharge its duties. All Directors are required to retire by rotation with one third of the board seeking re-election each year. Due to the current size of the Group, the duties that would normally be attributed to The Nomination Committee, have been undertaken by the board as a whole. The board has undertaken a formal assessment of the auditor's independence and will continue to do so at least annually. This assessment includes:   a review of non-audit services provided to the company and the related fees; a review of the auditor's own procedures for ensuring the independence of the audit firm and parties and staff involved in the audit, including regular rotation of the audit partner; and  obtaining confirmation from the auditor that, in their professional judgement, they are independent. Internal Controls The Board is responsible for the Group's system of internal controls and for reviewing their effectiveness. The internal controls are designed to ensure the reliability of financial information for both internal and external purposes. The Directors are satisfied that the current controls are effective with regard to the size of the Group. Any internal control system can only provide reasonable, but not absolute assurance against material mis-statement or loss. Given the size of the Group, the Board has assessed that there is currently no need for an internal audit function. P a g e | 9 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TRAFALGAR NEW HOMES PLC We have audited the financial statements of Trafalgar New Homes Plc for the year ended 31st March 2015 which comprise the Group Statement of Comprehensive Income, the Group Statement of Financial Position, the Group Statement of Changes in Equity, the Group Statement of Cash Flows, the Parent Company Balance Sheet, the Parent Company Statement of Cash Flows, the related notes numbered 1 to 17 for the Group and the related notes numbered 1 to 12 for the Parent Company. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors' Responsibilities, 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). 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 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 Strategic Report and the Directors’ Report and any other surround information 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 affairs and parent company’s affairs as at 31st March 2015 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and  the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. P a g e | 10 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TRAFALGAR NEW HOMES PLC Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:    adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial 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. Leo Malkin Senior Statutory Auditor For and on behalf of Crowe Clark Whitehill LLP Statutory Auditor St Bride's House 10 Salisbury Square London EC4Y 8EH 16th July 2015 P a g e | 11 Trafalgar New Homes Plc CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 March 2015 Revenue Cost of sales Gross (loss)/profit Administrative expenses Underlying operating (loss)/profit* AIM transaction costs Operating (loss) (Loss) before interest Other interest receivable and similar income Interest payable and similar charges (Loss) before taxation Tax payable on (loss)/profit on ordinary activities (Loss) after taxation for the year attributable to equity holders of the parent Other comprehensive income attributable to equity holders of the parent Total comprehensive income for the year (Loss)/profit attributable to: Equity holders of the Parent Total comprehensive (loss)/income for the year attributable to: Equity holders of the Parent (LOSS)/PROFIT PER ORDINARY SHARE; Basic/diluted *Operating profit before AIM transaction costs. Year ended Year ended Note 31 March 2015 £ 31 March 2014 £ 3,898,250 3,368,500 4,189,041 3,075,034 (290,791) 293,466 329,850 248,656 (620,641) 44,810 - 250,653 (620,641) (205,843) (620,641) (205,843) 1,535 794 - 100,000 (619,106) (305,049) - - (619,106) (305,049) - (619,106) - (305,049) (619,106) (305,049) (619,106) (305,049) 2 5 6 7 (0.26p) (0.14p) All results in the current and preceding financial year derive from continuing operations. The notes on pages 16 to 29 are an integral part of these consolidated financial statements. P a g e | 12 Trafalgar New Homes Plc CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 March 2015 Non-current assets Property, plant and equipment Current assets Inventory Trade and other receivables Cash at bank and in hand Total assets Liabilities: amounts falling due within one year Trade and other payables Borrowings Net current assets Non-current liabilities Borrowings Net liabilities Capital and reserves Called up share capital Share premium account Reverse acquisition reserve Profit & loss account Equity – attributable to the owners of the Parent 31 March 31 March Note 2015 £ 2014 £ 8 11 9 10 648 648 863 863 1,884,250 81,244 490,770 2,456,264 5,070,454 2,425,257 1,216,471 8,712,182 2,456,912 8,713,045 12 13 (70,777) (381,450) (741,090) (574,503) 2,004,037 7,396,589 13 (3,331,961) (8,295,572) (1,327,276) (898,120) 14 15 2,383,752 1,165,463 (2,817,633) (2,058,858) (1,327,276) 2,283,752 1,075,513 (2,817,633) (1,439,752) (898,120) These financial statements were approved by the Board of Directors and authorised for issue on 16th July 2015 and are signed on its behalf by: C C Johnson J Dubois P a g e | 13 Trafalgar New Homes Plc CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2015 Re Share capital Share premium £ £ Reverse acquisition reserve £ Retained profits /(losses) £ Total equity £ At 1 April 2013 2,143,752 961,128 (2,817,633) (1,134,703) (847,456) Loss for the year Total comprehensive income for the year - - - - Issue of shares 140,000 140,000 Share issue costs - (25,615) - - - - (305,049) (305,049) 305,049 305,049 - - 280,000 (25,615) At 31 March 2014 2,283,752 1,075,513 (2,817,633) (1,439,752) (898,120) At 31 March 2014 2,283,752 1,075,513 (2,817,633) (1,439,752) (898,120) Loss for year Total comprehensive income for the year - - - - Issue of shares 100,000 100,000 Share issue costs - (10,050) - - - - (619,106) (619,106) (619,106) (619,106) - - 200,000 (10,050) At 31 March 2015 2,383,752 1,165,463 (2,817,633) (2,058,858) (1,327,276) For the purpose of preparing the consolidated financial statement of the Group, the share capital represents the nominal value of the issued share capital of 1p per share. Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue. P a g e | 14 Trafalgar New Homes Plc CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 March 2015 Cash flow from operating activities Operating (loss)/profit Depreciation Decrease in stocks Decrease/(Increase) in debtors (Decrease)/Increase in creditors Interest received Rental income received Net cash (outflow) / inflow from operating activities Investing activities Purchase of tangible fixed assets Net cash used in investing activities Taxation Financing activities (Loan repayments)/New loans in year (net) Issue of shares (net of direct costs) Director loan repayments Interest paid Net cash inflow/(outflow) from financing Note 2015 £ 2014 £ (620,641) 215 3,186,204 2,344,241 (670,542) 174 1,361 (205,843) 287 (1,190,930 (1,103,394) 378,238 794 - 4,241,012 261,012 - - - - - (89,483) (4,092,216) 189,950 (1,064,447) - (4,966,713) 900,631 254,370 (403,981) 100,000 (651,020) (Decrease)Increase in cash and cash equivalents in the year (725,701) 822,549 Cash and cash equivalents at the beginning of the year 1,216,471 393,922 Cash and cash equivalents at the end of the year 490,770 1,216,471 P a g e | 15 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 BASIS OF ACCOUNTING These financial statements are for Trafalgar New Homes Plc (“the Company”) and its subsidiary undertakings. The Company is incorporated in England and Wales. The nature of the Company’s operations and its principal activities are set out in the Directors Report on page 6. BASIS OF PREPARATION The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the European Union (“EU”) and as applied in accordance with the provisions of the Companies Act 2006. These financial statements are for the year ended 31 March 2015 and are presented in pounds sterling (“GBP”). The comparative year is for the year to 31 March 2014. The financial statements have been prepared under the historical cost basis, as modified by valuing financial assets and financial liabilities at fair value through the Statement of Comprehensive Income. The principal accounting policies adopted are set out below. GOING CONCERN The Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with appropriate regard for the current economic environment and the particular circumstances in which the Group operates. These were prepared with reference to historical and current industry knowledge, taking into account future strategy of the Group. The existing operations have been generating funds to meet short-term operating cash requirements. As a result of these considerations, at the time of approving the financial statements, the Directors consider that the Company and the Group have sufficient resources to continue in operational existence for the foreseeable future. It is appropriate to adopt the going concern basis in the preparation of the financial statements. Mr Johnson confirms that he will continue to support the Group for its anticipated needs and will not recall the balances owed to him, for the next two years. As with all business forecasts, the Directors’ statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events. REVENUE RECOGNITION Revenue represents the amounts receivable from the sale of properties during the year and other income directly associated with property development. Revenue from the sale of properties is recognised when the amounts of revenue and cost can be measured reliably, the significant risks and rewards of ownership have been transferred to the buyer, neither continuing managerial involvement nor effective control of the property is retained and it is probable that the economic benefits associated with the sale will flow to the group/company. In the majority of cases properties are treated as sold and profits are recognised when contracts are exchanged and the building work is physically complete. This complies with the relevant accounting standard for the preparation of group financial statements under International Financial Reporting Standards (IFRS) entitled IAS 18 – Revenue. The Directors are of the opinion that this accounting policy accurately reflects commercial reality and the recording of revenue for the group. P a g e | 16 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 STANDARDS ISSUED BUT NOT YET EFFECTIVE There are no standards not yet effective that would have a material impact on the financial statements. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of Trafalgar New Homes Plc and its subsidiaries. On 11 November 2011, Trafalgar New Homes plc became the legal holding company of Combe Bank Homes Limited and its subsidiaries via a share for share exchange. This transaction is deemed outside the scope of IFRS 3 (Revised 2008) and not considered a business combination because the Directors have made a judgement that prior to the transaction, Trafalgar New Homes plc was not a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3.B7- B12 due to Trafalgar New Homes plc being a shell company that had no processes or capability for outputs (IFRS 3.B7). On this basis, the Directors have developed an accounting policy for this transaction, applying the principles set out in IAS 8.10-12, in that the policy adopted is: • relevant to the users of the financial information; • more representative of the financial position, performance and cash flows of the Group; • reflects the economic substance of the transaction, not merely the legal form; and • free from bias, prudent and complete in all material aspects. The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the consolidated financial statements of the legal parent (Trafalgar New Homes plc) as a continuation of the accounting acquirer’s financial statements (Combe Bank Homes Limited). This policy reflects the commercial substance of this transaction as follows: • the original shareholders of the subsidiary undertakings are the most significant shareholders post initial public offering, owning 90 per cent. of the issued share capital; and • the cash consideration paid as part of the initial public offering returned equity to the original shareholders of the legal subsidiary undertaking and as a consequence diluted their shareholding to 10 per cent. Accordingly, the following accounting treatment and terminology has been applied in respect of the reverse acquisition: • the asset and liabilities of the legal subsidiary Combe Bank Homes Limited are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without reinstatement to fair value; • the retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Combe Bank Homes Limited immediately before the business combination, and the results of the year from 1 December 2010 to the date of the business combination are those of Combe Bank Homes Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination; • the cost of the combination has been determined from the perspective of Combe Bank Homes Limited. The fair value of the shares in Combe Bank Homes Limited has been determined from the admission price of the Trafalgar New Homes plc shares on re-admission to trading on ISDX (formerly PLUS) for 1 pence per share. The value of the consideration shares was £1,868,177. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is 10 per cent of the market value of the shares after issues, being £207,575. The difference between the notional consideration paid by Trafalgar New Homes plc for Combe Bank Homes Limited and the Trafalgar New Homes plc net liabilities acquired of £54,000 has been charged to the Consolidated Statement of Comprehensive Income as a deemed cost of listing amounting to £261,575 with a corresponding entry to the reverse acquisition reserve. Trafalgar New Homes plc had no significant assets nor significant other liabilities or contingent liabilities of its own at P a g e | 17 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 the time that the share for share exchange took effect. Transaction costs of equity transactions relating to the issue and re-admission of the Company’s shares are accounted for as a deduction from equity where they relate to the issue of new shares and listing costs are charged to the Group Income Statement as an exceptional item within administrative expenses. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying the shareholding of more than half of the voting rights. Where necessary, adjustments have been made to the financial statements of subsidiaries, associates and joint ventures to bring the accounting policies used and accounting years into line with those of the Group. Intragroup balances and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the Consolidated financial statements. The results of subsidiaries acquired during the year are included from the effective date of acquisition, being the date on which the Group obtains control. They are deconsolidated on the date that control ceases. Business combinations, other than noted above, are accounted for under the acquisition method. Any excess of the purchase price of the business combination over the fair value of the identifiable assets and liabilities acquired is recognised as goodwill. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. This fair value includes any contingent consideration. Acquisition-related costs are expensed as incurred. Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The excess of consideration over the fair value of the assets and liabilities acquired is recorded as goodwill. If the consideration is less than the fair value of the assets and liabilities acquired, the difference is recognised directly in the Statement of Comprehensive Income. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean the amounts previously recognised in other comprehensive income are reclassified to profit or loss. FUNCTIONAL CURRENCY Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Pounds Sterling (£), which is the company’s functional and the Group’s presentation currency. OPERATING (LOSS)/PROFIT Operating (loss)/profit is stated before interest and tax. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group has become a party to the contractual priorities of the instrument. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances and deposits held at call with banks. P a g e | 18 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 INVENTORIES Inventories consist of properties under construction and are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bring the inventories to their present location and condition. Interest of sums borrowed that finance specific projects is added to cost. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. TANGIBLE FIXED ASSETS AND DEPRECIATION Tangible fixed assets are stated at cost, net of depreciation and any provision for improvement. Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets by equal annual instalments over their expected useful economic lives. The rates generally applicable are: Fixtures, fittings and equipment - 25% on reducing balance TRADE AND OTHER RECEIVABLES Trade and other receivables are initially measured at fair value and are subsequently reassessed at the end of each accounting year. FINANCIAL LIABILITIES AND EQUITY Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. TRADE PAYABLES Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method. BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial year of time to get ready for their intended use of sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the statement of comprehensive income in the year in which they relate. EQUITY INSTRUMENTS Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Shares issued are held at their fair value. CURRENT TAXATION Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted, by the balance sheet date. DEFERRED TAXATION The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. P a g e | 19 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. SHARE CAPITAL Ordinary share capital is classified as equity. Interim ordinary dividends are recognised when paid and final ordinary dividends are recognised as a liability in the year in which they are approved. PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre- tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. COMMITMENTS AND CONTINGENCIES Commitments and contingent liabilities are disclosed in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is virtually certain. SUBSEQUENT EVENTS Events subsequent to the year end that provide additional information about the Group’s position at the balance sheet date and are adjusting events are reflected in the financial statements. Events subsequent to the year end that are not adjusting events are disclosed in the notes when material. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY The preparation of financial statements in conformity with IFRS as adopted by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed below. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the present circumstances. VALUATION OF INVENTORY The Group assesses the net realisable value of inventories under development and completed properties held for sale P a g e | 20 Trafalgar New Homes Plc ACCOUNTING POLICIES For the year ended 31 March 2015 according to their recoverable amounts based on the realisability of these properties, taking into account estimated costs to completion based on past experience and committed contracts and estimated net sales based on prevailing market conditions. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be realised. The assessment requires the use of judgment and estimates. The carrying amount of inventory is disclosed in note 11 to the financial statements. P a g e | 21 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 1 SEGMENTAL REPORTING For the purpose of IFRS 8, the chief operating decision maker (“CODM”) takes the form of the Board of Directors. The Directors opinion of the business of the Group is as follows. The principal activity of the Group was property development. All the Group’s non-current assets are located in the UK. Based on the above considerations, there is considered to be one reportable segment. The internal and external reporting is on a consolidated basis with transactions between Group companies eliminated on consolidation. Therefore the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position and cashflows. Geographical segments The following tables present revenue regarding the Group’s geographical segments for the year ended 31 March 2015. Year ended 31 March 2015 Property development – sales Year ended 31 March 2014 Property development – sales 2 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME Bank interest received Rental income & ground rent United Kingdom £ Total £ 3,898,250 3,898,250 3,898,250 3,898,250 United Kingdom £ Total £ 3,368,500 3,368,500 3,368,500 3,368,500 2015 £ 174 1,361 1,535 2014 £ 189 605 794 P a g e | 22 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 3 LOSS FOR THE YEAR The Group’s loss for the year is stated after charging the following: AIM Transaction costs Depreciation of tangible fixed assets Loan interest to Director Auditor’s remuneration: Audit of these financial statements Amounts receivable by the auditor in respect of the audit of the financial statements of subsidiary undertakings pursuant to legislation Non-audit services associated with AIM Listing 2015 £ - 215 - 2014 £ 250,653 287 100,000 10,000 10,000 5,124 - 4,250 40,000 Amounts payable to Crowe Clark Whitehill LLP and its related entities in respect of audit and non-audit services are disclosed in the table above. 4 EMPLOYEES AND DIRECTORS’ REMUNERATION Staff costs during the year were as follows: Directors remuneration Wages and salaries Social security costs Other pension costs The average number of employees of the company during the year was: Directors and management 2015 £ 36,250 66,000 8,454 18,000 128,704 2014 £ 30,000 71,000 11,489 18,000 130,489 2015 Number 2014 Number 4 3 Key management are the Group’s Directors. Remuneration in respect of key management was as follows: Short-term employee benefits: - Emoluments for qualifying services C C Johnson - Emoluments for qualifying services A Johnson - Emoluments for qualifying services J Dubois 2015 £ - 10,000 26,250 2014 £ - - 30,000 36,250 30,000 There are retirement benefits accruing to Mr C C Johnson for whom a company contribution was paid during the year of £18,000 (2014: £18,000). Consultancy fees of £8,748 (2014: £10,000) were paid to Mr N Lott during the year. P a g e | 23 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 5 INTEREST PAYABLE AND SIMILAR CHARGES During the year all interest paid on borrowings is normally capitalised with the exception of:- Director’s loan interest paid 6 TAXATION Current tax Tax charge 2015 £ 2014 £ - - 100,000 100,000 2015 £ 2014 £ - - - - 2015 £ 2014 £ (Loss)/profit on ordinary activities before tax (619,106) (305,049) Based on (loss)/profit for the year: Tax at 21% (2014: 23%) Effect of: Losses utilised Disallowable items Capital allowances claimed Losses c/f Tax charge for the year - - - - - - (70,161) - 43,784 - 26,377 - No deferred tax asset has been recognised in respect of historical losses due to the uncertainty in future profits against which to offset these losses. As at the 31 March 2015 the group had cumulative tax losses of £2,056,907 that are available to offset against future taxable profits. 7 (LOSS)/PROFIT PER ORDINARY SHARE The calculation of (loss)/profit per ordinary share is based on the following profits/(losses) and number of shares: (Loss)/profit for the year 2015 £ 2014 £ (619,106) (320,999) Weighted average number of shares for basic (loss)/profit per share Weighted average number of shares for diluted (loss)/profit per share 236,708,533 224,347,803 236,708,533 224,347,803 (LOSS)/PROFIT PER ORDINARY SHARE: Basic Diluted (0.26p) (0.26p) (0.14p) (0.14p) P a g e | 24 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 8 PROPERTY, PLANT AND EQUIPMENT Fixtures and fittings Cost At 1 April At 31 March Depreciation At 1 April Charge for the year At 31 March 2015 £ 2,936 2,936 11- 2014 £ 2,936 2,936 11- 2,073 215 1,786 287 2,288 2,073 Net book value at 31 March Net book value at 31 March 648 863 863 1,150 9 TRADE AND OTHER RECEIVABLES Other receivables Other taxes Prepayment 2015 £ 59,268 18,532 3,444 81,244 2014 £ 2,395,257 25,451 4,548 2,425,257 There are no receivables that are past due but not impaired at the year end, and receivables relate only to customers with no recent history of default. There are no provisions for irrecoverable debt included in the balances above. 10 CASH AND CASH EQUIVALENTS All of the Group's cash and cash equivalents at 31 March 2015 are in sterling and held at floating interest rates. Cash and cash equivalents 2015 £ 2014 £ 490,770 1,216,471 The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. 11 INVENTORY Work in progress 2015 £ 2014 £ 1,884,250 5,070,454 P a g e | 25 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 12 TRADE AND OTHER PAYABLES Trade payables Accruals Tax Other payables 13 BORROWINGS Director’s loans Other loans Bank and other loans 2015 £ 24,579 20,848 2,015 23,335 70,777 2014 £ 60,766 54,848 5,478 619,998 741,090 2015 £ 2014 £ 2,566,961 765,000 381,450 3,713,411 3,631,410 755,000 4,483,665 8,870,075 Included in other loans, all bearing interest at 10% & 12% per annum, is the sum of £300,000 (2014: £300,000) advanced by the DFM Pension Scheme of which Mr J Dubois is the principal beneficiary. C C Johnson is a named guarantor on the loan included within bank loans. The bank borrowings are repayable as follows: On demand or within one year In the second year In the third to fifth years inclusive After five years Less amount due for settlement within 12 months (included in current liabilities) Amount due for settlement after 12 months 2015 £ 381,450 - - 381,450 2014 £ 574,503 3,909,162 - 4,483,665 381,450 - (574,503) 3,909,162 The weighted average interest rates paid on the bank loans were as follows: Bank Loans – 4.73% (2014: 8.41%) All of the Directors’ loans are repayable after more than 1 year. All loans are interest bearing and charged accordingly. However Mr C C Johnson has waived his right to interest in the year and as a result interest of nil (2014: £ 100,000) was paid to Mr C C Johnson. The rate of interest on the loan is 5 % pa (2014: 5% pa). Interest of £ 36,000 (2014: £ 36,000) was paid to Mr J Dubois at the rate of 12% pa (2014: 12% pa) P a g e | 26 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 14 SHARE CAPITAL Authorised Share Capital Ordinary shares of 1p each – as at 1April 2014 Additional shares issued for cash in year Issued, allotted and fully paid Ordinary shares of 1p each 2015 Number 2014 Number 228,375,200 214,375,200 14,000,000 238,375,200 228,375,200 10,000,000 2015 £ 2014 £ 2,383,752 2,283,752 On 10th June 2014 Trafalgar New Homes plc issued 10,000,000 ordinary shares for cash at £0.02 per share. 15 SHARE PREMIUM ACCOUNT Balance brought forward Premium on issue of new shares Share issue costs Balance carried forward 16 RELATED PARTY TRANSACTIONS 2015 £ 2014 £ 1,075,513 100,000 (10,050) 1,165,463 961,128 140,000 (25,615) 1,075,513 Mr C C Johnson holds 78.4% (2014: 81.8%) of the total issued share capital of the Group. Mr C C Johnson is the ultimate controlling party. The following working capital loans have been provided by the Directors: C C Johnson Opening balance Loan repayments Personal drawings Interest payable Balance carried forward 2015 £ 2014 £ 3,631,410 (1,000,000) (64,449) - 2,566,961 4,035,391 (404,000) (99,981) 100,000 3,631,410 J Dubois – no transactions in the year £300,000 £300,000 Mr Johnson’s Loan bore interest during the year at 5% (2014: 5% pa), however he has chosen to forego the interest in the year.. Mr Dubois’s Loan, which is from his Pension Fund of which he is the sole beneficiary, was at 12% pa interest (2014: 12% pa). Mrs L C Howard (daughter of Mr C C Johnson) has provided a loan to the company at a rate of 10% per annum of £100,000 (2014: £ 90,000). P a g e | 27 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 17 CATEGORIES OF FINANCIAL INSTRUMENTS The Group’s financial assets are divided as cash and cash equivalents. The Group’s financial liabilities are divided as Directors loans, bank loans and other loans. Financial assets Cash and cash equivalents Trade receivables Financial liabilities Trade payables Borrowings – Directors’ loans Borrowings – Bank loan Borrowings – Other loans Total Loans and receivables Financial liabilities measured at amortised cost 2015 £ 2014 £ 2015 £ 2014 £ 490,770 81,244 1,216,471 2,425,257 - - - - - 490,770 - - - 1,216,471 70,777 2,566,961 381,450 765,000 3,713,411 741,090 3,631,410 4,483,665 755,000 8,870,075 The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and it sets policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below: Capital risk management The Group considers its capital to comprise its share capital and share premium. The Group’s capital management objectives are to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to sharehold ers by pricing products and services commensurately with the level of risk. Significant Accounting Policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed on pages 16 to 21 to these financial statements. Foreign currency risk The Group has minimal exposure to the differing types of foreign currency risk. It has no foreign currency denominated monetary assets or liabilities and does not make sales or purchases from overseas countries. Interest rate risk The Group is sensitive to changes in interest rates principally on the loans from banks. £ 2,000,000 of the loans from Mr Johnson bears interest at 5% pa (2014: 5% pa), although Mr Johnson has waived his right to receive interest in the year. Mr Dubois’ loan of £ 300,000 within other loans, from his Pension Fund attracts interest at 12% pa (2014: 12% pa). Additional loans of £ 365,000 included in other loans attract interest at 10% pa (2014: 10% pa). The impact of a 100 basis point increase in interest rates would result in additional interest cost for the year of £ 24,325 (2014: £41,283). P a g e | 28 Trafalgar New Homes Plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2015 Credit risk management Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group. Liquidity risk management This is the risk of the Company not being able to continue to operate as a going concern. The Directors have, after careful consideration of the factors set out above, concluded that it is appropriate to adopt the going concern basis for the preparation of the financial statements and the financial statements do not include any adjustments that would result if the going concern basis was not appropriate. Mr Johnson confirms that he will continue to support the Group for its anticipated needs for the next two years. As with all business forecasts, the Directors’ statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about the future events. Derivative financial instruments The Group does not currently use derivative financial instruments as hedging is not considered necessary. Should the Group identify a requirement for the future use of such financial instruments, a comprehensive set of policies and systems as approved by the Directors will be implemented. In accordance with IAS 39, "Financial instruments: recognition and measurement", the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet specific requirements set out in the standard. No material embedded derivatives have been identified. P a g e | 29 Trafalgar New Homes Plc COMPANY BALANCE SHEET Company Registration Number: 05332938 31 March 2015 FIXED ASSETS Investments Current assets Debtors Stocks Cash at bank and in hand Creditors: amounts falling due within one year Note 2015 £ 2014 £ 3 4 5 6 2,323,524 2,323,524 2,323,524 2,323,524 372,353 - 39,655 412,008 119,507 132,599 14,773 266,879 1,467 120,835 Net current assets / (liabilities) 410,541 146,044 Creditors: amounts falling due after more than one year 7 445,835 314,670 Net assets Capital and reserves Called up share capital Share premium account Profit and loss account Equity – attributable to the owners of the Parent 2,288,230 2,154,898 8 9 10 11 2,383,752 1,165,463 (1,260,985) 2,288,230 2,283,752 1,075,513 (1,204,367) 2,154,898 The financial statements were approved by the Board of Directors on 16th July 2015 and authorised for issue and are signed on its behalf by: C C Johnson J Dubois P a g e | 30 Trafalgar New Homes Plc NOTES TO COMPANY STATEMENT OF CASH FLOWS Year ended 31 March 2015 Notes £ 2015 £ £ 2014 £ 1 2 2 3 Net cash outflow from operating activities Capital expenditure and financial investment Return on Investment and Servicing of finance Financing (Decrease) / increase in cash in the year Reconciliation of net cash flow to movement in net funds (Decrease) / increase in cash in the year Cash outflow / (inflow) from decrease / (increase) in debt Change in net funds resulting from cash flows Movement in net funds in the year Net funds at 1 April Net funds at 31 March (296,233) (361,533) - (296,233) - 321,115 24,882 24,882 - 10,976 14,643 24,882 24,882 14,773 39,655 - (361,533) (117) 372,626 10,976 25,619 25,619 (10,846) 14,773 P a g e | 31 Trafalgar New Homes Plc NOTES TO COMPANY STATEMENT OF CASH FLOWS Year ended 31 March 2015 1. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Operating loss Decrease/(Increase) in stocks Increase in debtors (Decrease)/Increase in creditors Net cash outflow from operating activities 31.3.15 £ (56,617) 132,599 (252,847) (119,368) 31.3.14 £ (231,606) (132,599) (109,592) 112,264 (296,233) (361,533) 2. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT Capital expenditure and financial investment Purchase of fixed asset investments Sale of tangible fixed assets Net cash outflow for capital expenditure and financial investment Financing Loan repayments in year Loans from Group undertakings in year Share issues Net cash inflow from financing 31.3.15 £ 31.3.14 £ - - - - - - - 131,165 189,950 (14,643) 132,899 254,370 321,115 372,626 P a g e | 32 Trafalgar New Homes Plc NOTES TO COMPANY STATEMENT OF CASH FLOWS Year ended 31 March 2015 3. ANALYSIS OF CHANGES IN NET FUNDS Net cash: Cash at bank Debts: Falling due within one year Falling due after one year At 1.4.14 £ Cash flow £ At 31.3.15 £ 14,773 24,882 39,655 14,773 24,882 39,655 - - - - - - - - - Total 14,773 24,882 39,655 P a g e | 33 Trafalgar New Homes Plc ACCOUNTING POLICIES FOR THE COMPANY FINANCIAL STATEMENTS for the year ended 31 March 2015 BASIS OF ACCOUNTING The financial statements have been prepared in accordance with the historical cost convention and in accordance with applicable United Kingdom law and accounting standards. The principal accounting policies are described below. They have all been applied consistently throughout the year and proceeding year. GOING CONCERN The Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with appropriate regard for the current economic environment and the particular circumstances in which the Company operates. These were prepared with reference to historical and current industry knowledge, taking into account future strategy of the Company and wider Group. The existing operations have been generating funds to meet short-term operating cash requirements. As a result of these considerations, at the time of approving the financial statements, the Directors consider that the Company and the Group have sufficient resources to continue in operational existence for the foreseeable future. It is appropriate to adopt the going concern basis in the preparation of the financial statements. Mr Johnson confirms that he will continue to support the Company and Group for its anticipated needs for the next two years. As with all business forecasts, the Directors’ statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about the future events. INVESTMENTS Investments held as fixed assets are stated at cost less provision for impairment. TAXATION Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in years different from those in which they are recognised in the financial statements. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on sale has been recognised in the financial statements. Neither is deferred tax recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being charged to tax only if and when the replacement assets are sold. Taxation arising on disposal of a revalued asset is split between the profit and loss account and the statement of total recognised gains and losses on the basis of the tax attributable to the gain or loss recognised in each statement. STOCK Stock consists of land purchased for development and is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stock to its present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. P a g e | 34 Trafalgar New Homes Plc NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 31 March 2015 1 LOSS FOR THE FINANCIAL YEAR The company has taken advantage of section 408 of the Companies Act 2006 and consequently a profit and loss account for the company alone has not been presented. The company's loss for the financial year was £ 56,618 (2014: Loss £ 231,738). The company's loss for the financial year has been arrived at after charging auditor's remuneration payable to Crowe Clark Whitehill LLP for audit services to the company of £ 10,000 (2014: £10,000). 2 EMPLOYEES AND DIRECTORS' REMUNERATION Directors fees Wages and salaries Social security costs Management fees The average number of employees of the company during the year was: Directors and management There are no retirement benefits accruing to any of the Directors. 2015 £ 36,250 - 2,524 8,748 47,522 2014 £ 30,000 - 3,078 10,000 43,078 2015 Number 2014 Number 4 4 £8,748 (2014: £10,000) was paid to Mr Norman Lott for his professional services. Additional directors remuneration of £ 10,000 (2014: nil) was paid to a director through subsidiary entities. P a g e | 35 Trafalgar New Homes Plc NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 31 March 2015 3 INVESTMENTS At 1 April 2014 At 31 March 2015 Subsidiary undertakings £ 2,323,524 2,323,524 The company owns the following undertakings, all of which are incorporated in the United Kingdom: Class of share held % shareholding Principal activity Held directly Combe Bank Homes Ltd Held indirectly through Combe Bank Homes Limited Combe Bank (Oakhurst) Ltd Trafalgar Distributions Ltd Combe Homes (Borough Green) Ltd Ordinary shares Ordinary shares Ordinary shares Ordinary shares 100% 100% 100% 100% 4 DEBTORS Amounts owed by group undertakings Other debtors Other taxes and social security 5 STOCKS Land Disposal Residential property developers Residential property developers Dormant Company dissolved 5/8/14 Residential property developers 2015 £ 3,166 3,166 368,504 1,136 2,713 372,353 2014 £ 6,781 6,781 115,200 1,141 3,166 119,507 2015 £ 138,104 (138,104) - 2014 £ 132,599 - 132,599 P a g e | 36 Trafalgar New Homes Plc NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 31 March 2015 6 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Taxation and social security Other creditors 7 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Amounts owed to group undertakings 8 SHARE CAPITAL Authorised share capital Ordinary shares of 1p each Issued, allotted and fully paid Brought forward – 1 April 2014 Issued for cash in year Ordinary shares of 1p each 2015 £ 1,467 - 1,467 2014 £ 1,470 119,365 120,835 2015 £ 445,835 2014 £ 314,670 445,835 314,670 2015 £ 2014 £ 2,383,752 2,283,752 2015 £ 2014 £ 2,283,752 100,000 2,143,752 140,000 2,383,752 2,283,752 On 10th June 2014, Trafalgar New Homes plc issued 10,000,000 ordinary shares for cash at £ 0.02 per share. P a g e | 37 9 SHARE PREMIUM ACCOUNT Balance brought forward Premium on issue of new shares Share issue costs Balance carried forward 10 PROFIT AND LOSS ACCOUNT Balance brought forward Loss for financial year Balance carried forward 11 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS- Loss for the financial year Net decrease in shareholders' funds Issue of new shares Share premium – shares issued in year Share premium – issue costs Opening Shareholders' funds Closing Shareholders' funds 2015 £ 2014 £ 1,075,513 100,000 (10,050) 1,165,463 961,128 140,000 (25,615) 1,075,513 2015 £ 2014 £ (1,204,367) (56,618) (1,260,985) (972,629) (231,738) (1,204,367) 2015 £ 2014 £ (56,618) (56,618) 100,000 100,000 (10,050) 2,154,898 2,288,230 (231,738) (231,738) 140,000 140,000 (25,615) 2,132,251 2,154,898 12 INTERCOMPANY The company has taken advantage of the exemption conferred by Financial Reporting standard 8 “Related Party disclosures” not to disclose transactions undertaken with other members of the group. P a g e | 38 Explanation of resolutions at the Annual General Meeting Information relating to resolutions to be proposed at the Annual General Meeting is set out below. The notice of AGM is set out on page 40. Ordinary business at the AGM In addition to the re-election of a Director retiring by rotation (resolution 4) and renewal of authorities to allot shares (resolutions 5 and 6), the following ordinary business resolutions will be proposed at the AGM: (a) Resolution 1: to approve the annual report and accounts. The Directors are required to lay before the Company at the AGM the accounts of the Company for the financial year ended 31 March 2015, the report of the Directors and the report of the Company's auditors on those accounts. (b) Resolution 2: to approve the re-appointment of Crowe Clark Whitehill LLP as auditors of the Company. The Company is required to appoint auditors at each general meeting at which accounts are laid, to hold office until the next such meeting. (c) Resolution 3: to approve the remuneration of the auditors for the next year. Re-election of Director Under the Articles of Association, Directors must retire and submit themselves for re-election at the annual general meeting if they have not done so at either of the two previous annual general meetings. By resolution 4, Alex Johnson is retiring by rotation, and is submitting himself for re-election. Grant of authorities to allot shares The Company currently has an issued share capital of £2,383,751.90 divided into 238,375,190 Ordinary Shares. The Company has outstanding warrants to subscribe for 4,567,504 Ordinary Shares at 2p per share. The Board proposes to renew the current authorities to allot shares, which expire at the next AGM. Accordingly, resolutions 5 and 6 are being proposed at the AGM for the purpose of (i) granting the Directors general authority to allot up to 119,190,000 ordinary shares, representing approximately 50% of the current issued ordinary share capital; and (ii) disapplying pre-emption rights in connection with the allotment of up to 37,000,000 ordinary shares, representing approximately 15.5% of the current issued ordinary share capital. Disposal of property at 11 Oakhurst Park Gardens On 27 June 2013, Christopher Johnson, the Company’s Chief Executive, entered into an agreement with the Company’s subsidiary, Combe Bank Homes (Oakhurst) Limited (“CBHO”), whereby he agreed to loan the amount of £1,421,255 to CBHO for the acquisition and development of properties at Oakhurst Lodge and Oakhurst Manor in Kent, now known as Oakhurst Park Gardens (and as disclosed in the Company’s AIM Admission Document dated 27 June 2013) (“CBHO Loan”). The CBHO Loan is repayable out of the net proceeds of sale of those properties, but only after the repayment of bank loans made in relation to those properties, and the bank loans have now been repaid. Of the 12 properties at Oakhurst Park Gardens, 11 were sold in the market, reducing the outstanding balance on the CBHO Loan accordingly. The properties at Oakhurst Park Gardens have been sold over a prolonged period since February 2014. In October 2014, the Company accepted an offer to purchase the final property (11 Oakhurst Park Gardens (“Oakhurst Property”)) for £500,000, but the sale fell through. Since then a tenant has come forward to rent the house but the property still hasn’t been sold at the proposed price of £525,000. Having considered these factors and accepting that £525,000 was the best price that could be achieved for the Oakhurst Property in the foreseeable future, the independent directors of the Company therefore decided that it was in the best interests of the Company to transfer the Oakhurst Property to Christopher Johnson for £525,000 in satisfaction of the outstanding balance on the CBHO Loan and part repayment of his Loan to Combe Bank Homes Limited, which took place on 7 July 2015. The CBHO Loan has therefore now been repaid in full. The CBHO Loan carried interest at a rate of 5 per cent. per annum from 1 April 2013, payment of which has been waived by Mr. Johnson. The transfer of the Oakhurst Property to Christopher Johnson is subject to section 190 of the Companies Act 2006 regarding substantial property transactions with directors. Resolution 7 will be proposed at the AGM to affirm the transfer of the Oakhurst Property to Christopher Johnson. P a g e | 39 TRAFALGAR NEW HOMES PLC (Registered in England No. 04340125) NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 2015 Annual General Meeting of the Company will be held at the Company’s offices at Chequers Barn, Bough Beech, Edenbridge, Kent TN8 7PD at 12.00 noon on 27 August 2015, for the following purposes: To consider and, if thought fit, to pass resolutions 1 to 4 (inclusive) as ordinary resolutions: RESOLUTIONS 1 2 3 4 To receive and adopt the directors’ report, the auditor’s report and the Company’s accounts for the year ended 31 March 2015. To re-appoint Crowe Clark Whitehill LLP as auditor in accordance with section 489 of the Companies Act 2006, to hold office until the conclusion of the Annual General Meeting of the Company in 2016. To authorise the Directors to determine the remuneration of the auditor. To re-appoint Alexander Johnson as a Director of the Company. As special business, to consider and, if thought fit, to pass resolutions 5 and 7 as ordinary resolutions and resolution 6 as a special resolution: 5 6 THAT the directors be authorised generally and unconditionally pursuant to Section 551 of the Companies Act 2006 as amended ("2006 Act") (in substitution for all other existing authorities to allot securities generally to the extent not utilised at the date this resolution is passed) to exercise all the powers of the Company to allot shares and/or rights to subscribe for or to convert any security into shares, provided that the authority conferred by this resolution shall be limited to the allotment of shares and/or rights to subscribe or convert any security into shares of the Company up to an aggregate nominal amount of £1,191,900 such authority (unless previously revoked, varied or renewed) to expire on the conclusion of the Annual General Meeting of the Company to be held in 2016 or, if earlier, 15 months after the date on which this resolution has been passed, provided that the Company may, before such expiry, make an offer, agreement or other arrangement which would or might require shares and/or rights to subscribe for or to convert any security into shares to be allotted after such expiry and the directors may allot such shares and/or rights to subscribe for or to convert any security into shares in pursuance of such offer, agreement or other arrangement as if the authority conferred hereby had not expired. THAT, subject to resolution 5 above being duly passed, in substitution for any existing and unexercised authorities, the directors be and are hereby generally empowered pursuant to Section 570 of the 2006 Act to allot equity securities (within the meaning of Section 560 of the 2006 Act) for cash pursuant to the authority conferred by resolution 5 above or by way of sale of treasury shares as if Section 561 of the 2006 Act or any pre-emption provisions contained in the Company’s articles of association did not apply to any such allotment, provided that the power conferred by this resolution shall be limited to (i) any allotment of equity securities where such securities have been offered (whether by way of rights issue, open offer or otherwise) to holders of equity securities in proportion (as nearly as may be practicable) to their then holdings of such securities, but subject to the directors having the right to make such exclusions or other arrangements in connection with such offer as they deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising in, or pursuant to, the laws of any territory or the requirements of any regulatory body or stock exchange in any territory or otherwise howsoever; (ii) the allotment (otherwise than pursuant to sub-paragraphs (i) and (ii) above) of equity securities up to an aggregate nominal value of £370,000, such authority and power (unless previously revoked, varied or renewed) to expire on the earlier to occur of 15 months after the passing of this resolution or the conclusion of the Annual General Meeting of the Company to be held in 2016, provided that the Company may prior to such expiry make any offer, agreement or other arrangement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities pursuant to any such offer, agreement or other arrangement as if the power hereby conferred had not expired. 7 THAT the disposal of the property at 11 Oakhurst Park Gardens, BNK Lane, Hildenborough, Kent to Christopher Johnson be affirmed for the purposes of section 190 of the Companies Act 2006, and that the directors of the Company be authorised to do all such things as they may consider necessary or desirable to P a g e | 40 complete and/or implement the disposal in accordance with its terms, subject to any non-material modifications as they may consider necessary or desirable. Dated: 31 July 2015 Registered Office: Chequers Barn Chequers Hill Bough Beech Edenbridge Kent TN8 7PD By order of the Board Nicholas Narraway Secretary Notes: 1. 2. 3. 4. 5. 6. 7. As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may photocopy the enclosed proxy form. If you do not give your proxy an indication of how to vote on any resolution, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be: (a) (b) (b) completed and signed; sent or delivered to the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA; and received by no later than 12.00 noon on 25 August 2015. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. To change your proxy appointment, simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, you may photocopy the enclosed proxy form. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. In order to revoke a proxy appointment you will need to inform the Company by sending a signed hard copy notice clearly stating that you revoke your proxy appointment to Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The revocation notice must be received by no later than 12 noon on 25 August 2015. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the Meeting and voting in person. 8. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, only those members registered in the register of members of the Company as at 6.00 p.m. on 25 August 2015 shall be entitled to attend and P a g e | 41 vote at this Meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of securities after such time shall be disregarded in determining the rights of any person to attend or vote at this Meeting. P a g e | 42 

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