Keepmoat plc Annual report and accounts 2011

ANNUALREPORT ANDFINANCIALSTATEMENTS

2011

Community regeneration is complex, creating numerouschallenges and opportunities. Government policy, throughstrategic drivers and demanding performance measures, creates an environment where Local Authorities and publicagencies, ie Registered Providers, need to innovate constantly, in order to meet these government targets and, at the sametime, satisfy the needs of their customers.

Regeneration means working with all stakeholders withincommunities to transform quality of life, across the builtenvironment, place shaping and delivering services for youngerpeople through to our older generation. Now more than ever,the UK’s public sector is facing greater pressure to achieve and deliver.

For over 80 years, Keepmoat has been assisting its partners to meet the demands of their markets and customers, byworking with them in innovative ways to deliver regenerationservices that provide long-term and sustainable benefits fortheir communities.

— Financial Summary 02

— Chief Executive’s Review 04

— Business Review 07

— The Keepmoat Board 14

— Directors’ report 16

— Statement of Directors’ responsibilities 18

— Independent auditors’ report 20

01

Contents Keepmoat Limited Annual Report and Financial Statements for the year ended 31 March 2011

— Consolidated profit and loss account 23

— Consolidated statement of total recognised gains and losses 24

— Balance sheets 25

— Consolidated cash flow statement 26

— Statement of accounting policies 27

— Notes to the financial statements 30

Annual Report and Financial Statements — 2011

Annual Report and Financial Statements

Financial Summary


Performance £m 2011 2010 Change

Revenue 677.1 604.4 12.0%

EBITDA† 70.0 70.7 (1.0%)

Adjusted operating profit* 67.3 68.9 (2.3%)

Financial indicators 2011 2010

Net cash flow from £44.7m £59.5moperating activities

Cash conversion to EBITDA 63.9% 84.2%

Dividends paid £29.4m £42.0m

02

(† Earnings before Interest, Taxation, Depreciation and Amortisation and before exceptional items. *Items have been adjusted to be shownbefore exceptional items).

Turnover (£m)

Profit before taxation (Before exceptional items)(£m)

Refurbished homes (all social housing)(1000’s)

New homes to the social housing sector

03Annual Report and Financial Statements — 2011

259ConsiderateConstructors Scheme awards to date

Over

100 zerocarbon homescompleted in 2011

Over

2,500new homes for sale, rent and shared ownershipevery year

The Comprehensive Spending Review of 2010 and the2011 Budget have signalled that social housing needs tobe more responsive, flexible, fair and effectively reflectindividual needs and changing circumstances of society.The Government is in the process of devolving significantfinancial control to local authorities and also reformingplanning policy to ensure that the planning system isresponsive to the needs of local communities forsustainable development and growth.

Sustainability and affordable energy solutions will be a focal point of regeneration for the future and a priority forregistered providers of social housing and local authorities.Although the challenge is mounting with the anticipatedbudget cuts for the forthcoming years, Keepmoat willcontinue to grow market share, offering a comprehensiverange of solutions to our public sector partners, throughquality, experience and innovation in new products and services.

The Board are pleased to report that the Group achieved aturnover of £677.1m and an EBITDA of £70.0m. This wasthe result of strong performances across both of ourdivisions. Keepmoat Homes has continued its return togrowth, delivering a record number of units at 1,220 duringthe year (654 in 2010). The Regeneration Divisionperformed strongly and enhanced our market positionamidst the very challenging market environment in thefinancial year.


04

Chief Executive’sReview

Keepmoat believes that significant developments will emergefrom the Regional Growth Fund in supporting investment in infrastructure that underpins economic growth. The newlyestablished Green Investment Bank will provideopportunities for our customers to invest in environmentallysustainable solutions.

Keepmoat is playing a major role in promoting thesustainability agenda in regeneration. We have invested inresearch and development of products and services thatsupport reduction in carbon emissions from homes and weare pioneering developments of high eco-code standards.We are proud of our benchmarking success with the Gold-leaf membership and accreditation from UK GBC and we arepromoting innovative retro-fit solutions to our customers.We offer both environmental and socio-economicsustainable solutions in affordable homes, mixed use andtenure regeneration initiatives, extra care and retirementsolutions, responsive and planned maintenance and outsourcing.

Keepmoat Homes is at the forefront of the housingregeneration agenda. Being the public sector partner to 11out of 14 Housing Market Renewal (HMR) Pathfinders, weoffer products and services of unparalleled quality andinnovation to government, local authorities and localcommunities. Through efficiencies, value engineering, anddesign innovations, Keepmoat provides a range of affordable,quality and environmentally friendly homes. KeepmoatHomes continues to greatly benefit from its landbank of

The financial performance for the year 2010-2011 reflectsan outstanding effort from the Keepmoat Group in a mostdifficult and uncertain economic environment. I takeimmense pride and pleasure to announce this set of resultswhich reflects the quality and dedication of our people andexpress an enormous gratitude to all our people for theirhard work and loyalty to Keepmoat.

David Blunt Chief Executive Officer, Keepmoat Limited

over 16,000 plots, of which 9,300 are within the HMR Pathfinder programme, which is a market leading performance.

Keepmoat’s priorities for the year ahead remain focussed on value for money and customer satisfaction. Our principles fully reflect and support the Government policy to createsustainable communities, affordable homes and socialinclusion. This demonstrates our position as the leadingservice provider in sustainable regeneration, social housingsolutions and as an investor in community infrastructure. We firmly believe in market making opportunities andthrough tested public private partnerships, will continue tooffer genuine solutions in community regeneration to central and local government. During the year ahead willcontinue to be on the sustainable growth of our productsand services in existing and new geographical markets.

Keepmoat’s corporate ethos is underpinned by well embedded principles such as prudent management,customer satisfaction, quality products and services,innovation and continuous development.

Delivering Community Regeneration“ The leading service provider to the public

sector offering comprehensive and sustainableregeneration solutions, innovative products and services in affordable housing and investing in community infrastructure.”


05


Employing over

3,000people across the business

‘UK’s most ConsiderateSite 2011’Considerate Constructors Scheme Awards 2011

A forwardorder book of

£3.2bn

Outstanding training record with

12,000days training provided to employees

Constructors of the country’s first BREEAM excellent rated Extra Care housing development

units) (2010: £70.7m (654 units), 2009: £84.2m (751units)) representing 19% (2010: 12% 2009: 15%) of totalgroup turnover. We continue to increase our activity in thissector and believe there is significant opportunity in thecoming years, building on the market leading exclusiveaccess to over 11,000 plots to be developed in partnershipwith Local Authorities.

During the financial year, the Keepmoat Group has achieved considerable success in landmark large scale socialhousing regeneration schemes in the UK. Building on itsalready enviable position in landmark schemes such asDurham Villages, Keepmoat Homes was selected as thepreferred partner in the Sheffield Local Housing Company,the Newcastle Scotswood Urban Regeneration Company andthe Scarborough Regeneration Partnership, which has addedfurther scale to our plots in hand and market position.

Keepmoat dedicates significant intellectual and capitalresources to Public-Private Partnerships (PPPs) and theGovernment’s agenda for social and affordable housing. As aresult, we have a sustainable development programme fornew lines of products and services, such as off-site modularconstruction of new build homes, responsive maintenancesolutions and retrofit.

Keepmoat is nominated as the partner to 11 out of 14 HMRpathfinders. Through our innovative and quality orientedPPP’s with local government and local communities,Keepmoat Homes offers a distinctive range of affordable,desirable and environmentally friendly homes. TheGovernment’s New Homes Bonus programme offers clearfinancial incentives, flexibility and autonomy to localauthorities, to ensure that local communities benefit fromnew housing and economic regeneration in their areas.

The strategic and timely acquisition of Milnerbuild Limitedduring 2010, a specialist provider of responsive maintenancesolutions to public sector customers in the North of Englandhas significantly improved our position as a service providerof integrated maintenance solutions and has strengthenedthe offering of the Keepmoat Group.

Keepmoat is the leading service provider to the publicsector offering comprehensive, sustainable regenerationsolutions, innovative products and services in affordablehousing and investing in community infrastructure.

Keepmoat has an extensive track record in holistic socialhousing solutions and affordable homes for sale with astrategy that is aligned with public regeneration policies.

Keepmoat works closely as an innovative service provider of integrated regeneration solutions with thepublic sector including Local Authorities, the Homes andCommunities Agency, Registered Providers, (formerlyRegistered Social Landlords) Arms Length ManagementOrganisations (ALMO’s), and Housing Market RenewalBoards across the North, the Midlands, East Of England,Wales and Scotland. We also work in partnership withLocal Authorities to deliver mixed tenure housingdevelopments through innovative regeneration projects.

OVERVIEW OF THE YEAR AND FUTURE OUTLOOKKeepmoat has continued to deliver substantial growth inturnover. During the year the Group achieved a 12%increase in turnover to £677.1m (2010: £604.4m, 2009:£570.5m), and an adjusted EBITDA of £70.0m (2010:£70.7m, 2009: £65.7m). This is an excellent performanceamidst a very difficult and challenging economicenvironment in the UK. This is attributed to our strategicfocus as a key social and affordable housing solutionsprovider in the UK. This is underpinned by a set of wellembedded principles in Keepmoat’s corporate ethos such asprudent management, risk assessment, customersatisfaction, quality of products and services, innovation and continuous improvement.

Keepmoat has a solid and impressive social housingregeneration order book of £1.5bn (2010: £1.3bn, 2009£1.3bn), and secured plots in hand totaling 16,101 (2010:11,557, 2009: 7,463). This positions Keepmoat as the majorprovider of social and affordable housing solutions in theUK. Keepmoat Homes achieved turnover of £126.0m (1,220

Business Review


07

The Comprehensive Spending Review of 2010 and the Budget of 2011 implied that social housing must beresponsive, flexible, fair and reflect individual needseffectively, together with the changing circumstances ofsociety. As a result, the UK Government has devolvedsignificant financial control to Local Authorities with specificdepartmental expenditure allocations for regeneration andhas also reformed the planning policy to ensure that theplanning system is responsive to the needs of localcommunities for sustainable development and growth.Sustainability and affordable energy solutions will be a focalpoint of regeneration for the future years and a priority forregistered providers and local authorities.

The UK Government is committed to the building of150,000 new homes between 2011 and 2015, with £4.5bncommitted to fund new affordable homes over that period.The Government will spend £2.1bn on tackling non-decentsocial homes over the next four years. The Government willinvest over £2bn of capital funding towards completing theDecent Homes programme.

Keepmoat regards the Regional Growth Fund as a significantfunding mechanism for infrastructure investment whichunderpins economic growth, in addition to the provision ofenvironmentally sustainable solutions through the GreenInvestment Bank. These and other Government initiatives areof strategic importance to Keepmoat in aligning our strategyperfectly with public policy in regeneration.


08

FINANCIAL POSITION AND RISKSKeepmoat measures its financial performance by reference to two principal indicators: EBITDA and cash flow. We alsomonitor our long term stability by reference to our orderbook and pipeline for regeneration projects and ourreservations, sales, and plots in hand for open market salesof private housing.

For the year ended 31st March 2011, EBITDA (Earningsbefore Interest, Tax, Depreciation and Amortisation and before exceptional items) was £70.0m (2010: £70.7m,2009: £65.7m) and free cash flow was £44.7m (2010:£59.6m, 2009: £61.7m).

Keepmoat monitors the amount of working capital requiredto service its operations and also appropriately controls itsmovements on a regular basis. The Group’s current assetscomprise mainly trade receivables, work in progress and landheld for the development of private housing and affordablehousing through partnering schemes. The Group hasinvested £19.0m of our free cash flow in growing workingcapital during the year, and cash balances decreased by£4.0m after paying £46.8m in tax and dividends.

In the course of its ordinary activities, Keepmoat is exposedto some financial risks which include liquidity and creditrisks. Liquidity risk relates to the Group generating sufficientcash flow to meet our operational requirements, whilstmeeting dividend payments to enable our parent companies’to service their debt interest requirements. A cross

‘09

CORPORATE GOVERNANCE AND REGULATORY INTERFACEKeepmoat has a detailed system of corporate governanceand adheres to industry regulatory regimes. We are fullycompliant with the appropriate legislation on health andsafety, employment, competition, environment, dataprotection, freedom of information, bribery and anti-corruption. We have adopted and implemented detailedpolicies and compliance practices in all the above areas.

Risk management is a core value of our business. We are at the forefront of the requirements imposed by the bestvalue regime. We assist our customers and partners tocomply with this regime by recording and monitoring keyperformance indicators and demonstrating best practice. We provide benchmarks for regulatory impact assessmentfor future best value inspections. We have a dedicated andwell established research and development team thatmonitors government and industry regulatory trends anddevelops our responses for compliance and best practice.

guarantee in relation to the debt held by Keepmoat’s parentcompany is disclosed in note 23 of our Annual Report andFinancial Statements 2011. Management projections indicate significant headroom on banking covenants for theforeseeable future.

Credit risk reflects risks in relation to trade receivables fromcustomers. As a result of the Group’s strategy to generatethe majority of our revenue from services to the publicsector and regulated organisations, the Group has no historyor exposure to potential bad debts.

SHAREHOLDERS AND DIRECTORSKeepmoat’s ultimate shareholders comprise CavendishSquare Partners LP (16.5% of the ordinary equity), a specialpurpose vehicle owned by Coller Capital and Lloyds BankingGroup, and the remaining Directors and Senior Managerswithin Keepmoat. Mr. David Cowie, a Non-Executive Directorof Lakeside 1 Ltd, is a Partner in Caird Capital LLP, which isthe advisor to Cavendish Square Partners LP.

WALKER GUIDELINES AND REPORTINGKeepmoat, led by its ultimate holding company Lakeside 1Ltd, has chosen to comply with the ‘Guidelines forDisclosure and Transparency in Private Equity’ (the WalkerGuidelines), which recommend that portfolio companies ofprivate equity firms, amongst other things, can make certain enhanced disclosures in their financialstatements. Full disclosure meeting the requirements of the Walker Guidelines is contained in this report and in theannual report of Lakeside 1 Ltd.


09

HEALTH AND SAFETYCompliance with health and safety regulations is ofparamount importance to Keepmoat. We strive to create asafe working environment for all. This year, we refurbishedover 38,000 homes (2010: 49,000, 2009: 43,500) andour work has been carried out around the daily lives of some160,000 residents. As a testament to the careful, safe andcaring approach of our people, we are pleased to report thatthe Group shows a 50% better than average site safetyperformance when compared to the industry. (NHBC H&Sfourth quarter March 2011).

We have also registered over 1,000 sites on the ConsiderateConstructors Scheme, leading the industry with 245 awards- 30 gold, 59 silver and 156 bronze.

CORPORATE CULTURE AND PEOPLEThe mission of Keepmoat is Delivering CommunityRegeneration Solutions. The Keepmoat Group has embraceda corporate philosophy based on honesty, business integrity,total commitment to our partners, respect of people anddelivery to the highest standards.

We are passionate about raising living standards, increasingthe capacity of affordable housing, providing socialenterprise and contributing towards sustainability.

We believe community regeneration is best delivered through the partnership between the public and privatesectors. Our role is as stakeholder, facilitator, innovator andpartner. We have embraced partnering as the best way todeliver social housing solutions and we have pioneeredsuccessful and award-winning regeneration public-privatepartnerships for social housing.


10

We are committed to equality of opportunities and a policy that encourages job creation from all sectors of thecommunity. This is demonstrated in the diversity of thepeople recruited across the Group. We continue to grow ourreputation as an employer of choice with the ability toattract, develop and retain high quality individuals. As such,we have an enviable track record for employee retention.This is supported by human resource initiatives such as theKeepmoat Academy, our senior management developmentprogramme, together with clear succession plans. We havealso brought new talent in to our industry by offering 350 traineeships and apprenticeships across the Group. Our human resource policies are continually reviewed andrefined in line with changing regulations and legislation.

Keepmoat directly employs around 3,000 people andprovides many more employment opportunities through oursubcontractors. Committed to lifelong learning andcontinuous professional development, during the past yearwe have invested more than 12,000 training days for ouremployees. The Keepmoat Academy is continuing to inspireand provide for educational and career developmentopportunities to help our people reach their potential.

Over

40,000social housing refurbishments this year - that’s 1 home every 3 minutes


SUSTAINABILITYThe Keepmoat Group places great emphasis onimplementing sustainability best practice into our products and services. Environmental protection andsustainable development is an increasingly significant part of our operations. Sustainable communities require the successful integration of environmental, social andeconomic considerations.

The Keepmoat Group consistently applies ISO 14001standards and has introduced innovative productionmethods that are beneficial to the environment, such asmodern construction methods, heating and insulation, waterharvesting and recycling features. Over 98% of ouraffordable homes are built on brownfield sites.

We are a significant provider of Code Level 6 Homes in thecountry with over 100 zero carbon homes programmed forcompletion in 2011. We were also the first contractor inEngland to receive BRE (Building Research Establishment)certification to Level 4 of the Code for Sustainable Homesand have secured the country’s first BREEAM (BuildingResearch Establishment Environmental Awareness Method)excellent rating for Extra Care housing development. Havingdelivered several pioneering eco refurbishment pilot projects,we are now an established large scale provider of warmer,healthier and more energy efficient homes through ourcarbon reduction retrofit programme.

Keepmoat demonstrates leadership in sustainability though a range of national and local working groups whichincludes informing government policy on the emergingGreen Deal and Zero Carbon Housing. We benchmark ourenvironmental and socio-economic performance on an

annual basis through the NextGeneration sustainabilitybenchmark and we are proud to have secured our place asthe most improved top 25 housebuilder in 2010.

DELIVERING COMMUNITY REGENERATION Keepmoat works closely with the public sector, communities,strategic allies and key stakeholders to deliver holistic andsustainable community regeneration. We deploy our ownresources as well as mobilise resources available throughstrategic alliances. Our aim is to achieve seamless, ‘one-stopshop’ successful and sustainable regeneration. Our residentsatisfaction score has increased to 97% (2010: 95%, 2009:93%). We invest considerably in local communities, utilisinglocal labour and sub-contractors, and providing muchneeded training and meaningful employment to local people.

PUBLIC PRIVATE PARTNERSHIPSOne of Keepmoat’s major strengths is our ability to establishand deliver successful public-private sector social housingand community regeneration partnerships. Our partnershipshave set national standards, receiving Government praiseand recognition. Keepmoat has been at the forefront of theHMR programme and partnerships. We have promoted legaland financial models which support our clients’requirements.

Our asset-management models offer local authorities andgovernment regeneration agencies the opportunity tomaximise public funding and achieve much more thantraditional procurement and contractual methods. A distinctive feature of our partnerships is the profit-sharingarrangements we provide for our public sector partners. We have established public-private partnerships that

reduce potential risks for the public sector, yet deliver theregeneration and financial results required by the publicsector with reduced need for public funding.

SUPPLY CHAIN MANAGEMENTOur effective supply chain management strategy is founded upon the principles of collaboration, trust andtransparency resulting in the operation of long termpartnering frameworks with many of our key suppliers andsub contractors. Such arrangements generate considerablesavings through leveraging our expenditure andbenchmarking deliverables, which ultimately provide moreefficient solutions to customers.

We continually innovate to deliver efficiency and value formoney benefits to our clients. Over the past 12 months wehave continued to develop the use of e-procurement havingsuccessfully launched Keepmoat E-Sourcing Solutions in2009. This cutting edge procurement tool has transformedour supply chain interface resulting in significant efficiencies,process improvements and cost savings.

SOCIAL ENTERPRISE AND CORPORATE SOCIAL RESPONSIBILITYKeepmoat has pioneered the delivery of social enterprise in regeneration areas. We have created a platform for thelaunch of socio-economic initiatives, such as training andemployment schemes. This provides opportunities for localpeople to train and obtain a vocational qualification inconstruction and construction-related activities, and to findmeaningful employment with long term prospects. We alsoestablish an enterprise culture, whereby small subcontractors and suppliers can flourish and benefit from theregeneration investment in the local community.

We continue to invest in the communities where we work.One such investment is our SOAR Build social enterprise, an excellent example of partnership working with the public sector which is regarded as the UK benchmark by theGovernment. Through SOAR Build we are helping to changecommunities for the long-term by improving skills andproviding training and employment opportunities for localpeople. This approach goes well beyond the traditionalprivate sector investment in corporate social responsibility.As a private sector Group, we are particularly proud that our work with, and investment in local communities, hasbeen praised by the Government.


12

The Keepmoat Foundation is an institution that supportsprojects which develop skills, strengthen communities andimprove the employment prospects of young people. Thisyear the Keepmoat Foundation has invested over £100,000(2010: £200,000 2009: £200,000) in community andyouth projects directly making a positive effect on manypeoples’ lives. The Keepmoat Foundation also supportsOutward Bound Trust, by offering an opportunity to over 60 young persons from the areas the Group regenerates toacquire transferable skills and employment aptitude. Ourassociation with Outward Bound Trust has been awarded theBig Tick Business in the Community accreditation for twoconsecutive years.


13

Over 25,000properties every year benefit from our offering of integratedbuilding solutions


14

David BluntChief Executive

David joined Bramall Construction in 1984 as GroupAccountant and Company Secretary. He was promoted toFinance Director of Keepmoat in 1987. He has played a keyrole in the development of the Group and was appointedChief Executive in September 2005.

Chris BovisDirector of Corporate Governance

Chris joined the Board in 1996. An internationally renownedspecialist in public procurement law and policy, he advisesthe Board in this area. He is responsible for setting up PPPsand for advising the Board on legal and regulatory matters.

Tom AllisonNon-Executive Chairman

Tom’s appointment as Non-Executive Chairman of theKeepmoat Group has brought invaluable experience from hisillustrious career as a business leader. Tom is currentlyChairman of Peel Ports, which consists of Clydeport Ltd,Mersey Docks & Harbour Company, The Manchester ShipCanal Company and Medway Ports, as well as main BoardDirector of Peel Holdings.

Allen HicklingDirector of Regeneration

Allen joined Frank Haslam Milan Yorkshire in 1999 asManaging Director. He was promoted to the position ofDirector of Regeneration in April 2008. Allen’s key role is todeliver growth in profits from the regeneration businesses.

The Keepmoat Board


15

Peter HindleyDirector of Homes

Peter joined the Keepmoat Group in 1986, as a ContractsManager for Frank Haslam Milan. Promoted to the positionof Group Managing Director of Keepmoat Homes, havingpreviously been Managing Director of Haslam Homes (now Keepmoat Homes) Yorkshire, a position he had heldsince 1998.

John ThirlwallFinance Director

John joined the Group in 1988 as Finance Director of Frank Haslam Milan. He was appointed as Group FinanceDirector in 2005. John’s key role is to deliver the plannedGroup profit, manage risk and drive the commercial focus of the Group.

David Cowie Non-Executive Director

David is a partner in Caird Capital LLP the advisor toCavendish Square Partners LP’s general partner. CavendishSquare Partners LP has a 16.48% investment in our ultimateholding company, Lakeside 1 Limited. David has workedwithin the Corporate Finance industry for over 20 years andhas extensive investment and portfolio managementexperience including responsibility for several companieswithin the current Cavendish fund.

Richard BrandonCompany Secretary (Non-Executive)

Richard joined the Group in 1993 as a subsidiary Companyaccountant, he was appointed Group Company Secretary in1996. Richard is responsible for legal matters, joint ventureaccounting and administration.

fully informed as is practicable about the performance andprospects of the Group. The methods of communication andconsultation include regular informal contact as well asperiodic formal meetings. It is the Group’s policy to provideequal opportunities to people regardless of their age, race,religion or sexual orientation. The Group actively encouragesthe employment of disabled people and they share the sameopportunities as all other employees. The Group placesspecial emphasis on occupational health and safety matters,with both policies and practices kept under constant review.

It is the Group’s policy to actively plan, encourage and assist in the training, retraining and career development ofall its employees. Annual training programmes areimplemented by each Company in the Group to develop thenecessary managerial, technical and craft skills needed toachieve success in the Group’s business.

BUSINESS RISKSThe Directors, in the execution of their duties, areresponsible for identifying the key business risks faced bythe Group and for determining the appropriate courses of action to manage these.

The Directors set out the principal risks facing the businessas follows:

a) Private sector and social housing marketThe Directors recognise that the medium term growth plansdepend on the market for new homes and refurbishment inthe private and social housing sectors. The Group monitorsthis risk through regular and thorough market analysis whichresult in robust forecasting.

(b) Financial Risk ManagementThe Group’s operations expose it to a variety of financialrisks that primarily include credit, liquidity, interest rate andfinancing. The Group has in place a risk managementprogramme that seeks to limit the adverse effects onfinancial performance of the Group.

Credit risk is in relation to trade receivables from customers.As a result of the Group’s strategy to generate the majorityof our revenue from services to public and regulated

The Directors present their annual report and the auditedconsolidated financial statements of the Group for the yearended 31 March 2011.

PRINCIPAL ACTIVITIESKeepmoat Limited (Keepmoat) is an intermediate holdingCompany of a Group which is principally engaged in therefurbishment and construction of residential dwellings. TheGroup’s operating subsidiaries are listed in note 12 to thefinancial statements.

BUSINESS REVIEW The Group's profit for the financial year is £43,097,000(2010: £48,925,000). The Company paid ordinarydividends of £29,350,000 (2010: £42,000,000). Asummary of the results and performance is presented in theFinancial Summary, Chief Executive’s Review and BusinessReview on pages 2 to 13.

DIRECTORS The Directors who held office during the year and up to thedate of signing the financial statement are given:

T AllisonD Blunt C Bovis D Cowie (appointed 15th March 2011)A HicklingP Hindley J Thirlwall

In accordance with the Articles of Association, none of theDirectors are required to retire by rotation.

CHARITABLE CONTRIBUTIONSThe charitable contributions made by the Group during theyear to community groups, local community projects andschools amounted to £84,000 (2010: £201,000).

EMPLOYEES The Group believes that its employees and theirdevelopment is integral to its success. Employees are kept as


16

Directors’ report

to Government policy and the use of key performanceindicators.

DIRECTORS' INDEMNITIESThe Company maintains liability insurance for its Directorsand officers. Following shareholder approval in July 2005,the Company has also provided an indemnity for itsDirectors and the Company Secretary, which is a qualifyingthird party indemnity provision for the purposes of theCompanies Act 2006.

KEY PERFORMANCE INDICATORSThe Group uses a number of Key Performance Indicators tomeasure the performance of its operations. Our financial andproduction KPI’s are shown on page 2. Our order book andsecured plots in hand are detailed in the Chief Executive’sReview and Business Review.

DISCLOSURE OF INFORMATION TO THE AUDITORSAll Directors, at the date this report is approved, confirmthat, as far as they are aware, there is no relevant auditinformation of which the Company’s auditors are unaware,and that they have taken all the steps that they ought tohave taken as Directors in order to make themselves aware ofany relevant audit information and to establish that theCompany’s auditors are aware of that information.

INDEPENDENT AUDITORSPricewaterhouseCoopers LLP have indicated their willingnessto continue in office and have been deemed to bereappointed for the next financial year.

By order of the Board

R H J BrandonCompany Secretary8th September 2011

organisations, the exposure to potential bad debts isextremely limited.

Liquidity risk relates to the Group generating sufficient cash flow to meet its operational requirements while avoidingdebt covenant breaches or excessive debt levels. Theborrowings of our ultimate parent company, Lakeside 1 Ltdare a combination of long term loans, which were put inplace to fund the MBO in August 2007, and revolvingworking capital credit facilities.

Interest rate risk is a key factor which the Board monitors. To mitigate this risk 88% of the Group’s cash paid interestbearing debt has been hedged by way of fixed interest rateswap arrangements. These arrangements enablemanagement to accurately forecast cash outflows in relationto interest payments into the medium term. Non financialrisks are referred to in the Directors’ Report.

(c) ProcurementThe Group’s supply chain strategy is an integral part of our overall business strategy. The Directors have developed long-term strategic partnering agreements with customersand major suppliers, and the associated risk is managedthrough effective risk management processes and theutilisation of key performance indicators.

(d) PeopleThe Directors recognise that achieving the Group’s growthstrategy is heavily dependent on the performance of itspeople. A continuing drive to become an employer of choiceis underpinned by an effective human resource strategy,which enables the recruitment and retention of people ofsufficient calibre at all levels in the organisation.

(d) Environmental, Social and Governance RiskThe Directors recognise the importance of Environmental,Social and Governance risks and have implemented astrategy which ensures that sustainability issues are fullyembedded into the Group’s organisational structure anddevelopment processes.

Risk is managed through regular stakeholder engagement, setting clear corporate objectives in response


17

Keepmoat Annual Report & Accounts — 2011

The Directors are responsible for preparing the Directors’Report and the financial statements in accordance withapplicable law and regulations.

Company law requires the Directors to prepare financialstatements for each financial year. Under that law theDirectors have prepared the Group and parent companyfinancial statements in accordance with United KingdomGenerally Accepted Accounting Practice (United KingdomAccounting Standards and applicable law). Under companylaw the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view ofthe state of affairs of the Group and the Company and ofthe profit of the Group for that period. In preparing thesefinancial statements, the Directors are required to:

— select suitable accounting policies and then applythem consistently;

— make judgements and accounting estimates that arereasonable and prudent;

— state whether applicable UK Accounting Standards havebeen followed, subject to any material departuresdisclosed and explained in the financial statements;

— prepare the financial statements on the going concernbasis unless it is inappropriate to presume that theCompany will continue in business.

18

Statement of Directors’ responsibilities

The Directors are responsible for keeping adequateaccounting records that are sufficient to show and explainthe Company’s transactions and disclose with reasonableaccuracy at any time the financial position of the Companyand the Group and enable them to ensure that the financialstatements comply with the Companies Act 2006. They arealso responsible for safeguarding the assets of the Companyand the Group and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

By order of the Board

R H J BrandonCompany Secretary8th September 2011


19

We have audited the Group and parent Company financialstatements (the ‘‘financial statements’’) of Keepmoat Limitedfor the year ended 31 March 2011 which comprise theGroup Profit and Loss Account, the Group and ParentCompany Balance Sheets, the Group Cash Flow Statement,the Group Statement of Total Recognised Gains and Losses,the Accounting Policies and the related notes. The financialreporting framework that has been applied in theirpreparation is applicable law and United KingdomAccounting Standards (United Kingdom Generally AcceptedAccounting Practice).

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSAs explained more fully in the Statement of Directors’responsibilities set out on page 18 the Directors areresponsible for the preparation of the financial statementsand for being satisfied that they give a true and fair view.Our responsibility is to audit and express an opinion on thefinancial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the AuditingPractices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body inaccordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in givingthese opinions, accept or assume responsibility for anyother purpose or to any other person to whom this report is shown or into whose hands it may come save whereexpressly agreed by our prior consent in writing.


Independent auditors’ report to themembers of Keepmoat Limited

SCOPE OF THE AUDIT OF THE FINANCIALSTATEMENTSAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud orerror. This includes an assessment of: whether theaccounting policies are appropriate to the Group’s andparent Company’s circumstances and have been consistentlyapplied and adequately disclosed; the reasonableness ofsignificant accounting estimates made by the Directors; and the overall presentation of the financial statements. Inaddition, we read all the financial and non-financialinformation in the annual report to identify materialinconsistencies with the audited financial statements. If webecome aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

OPINION ON FINANCIAL STATEMENTSIn our opinion the financial statements:— give a true and fair view of the state of the Group’s and

the parent Company’s affairs as at 31 March 2011 and ofthe Group’s profit and cash flows for the year thenended;

— have been properly prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice; and

— have been prepared in accordance with the requirementsof the Companies Act 2006.

OPINION ON OTHER MATTER PRESCRIBED BY THECOMPANIES ACT 2006 In our opinion the information given in the Directors’ Reportfor the financial year for which the financial statements areprepared is consistent with the financial statements.

20

MATTERS ON WHICH WE ARE REQUIRED TO REPORTBY EXCEPTION We have nothing to report in respect of the followingmatters where the Companies Act 2006 requires us toreport to you if, in our opinion: — adequate accounting records have not been kept by the

parent Company, or returns adequate for our audit havenot been received from branches not visited by us; or

— the parent Company financial statements are not inagreement with the accounting records and returns; or

— certain disclosures of Directors’ remuneration specifiedby law are not made; or

— we have not received all the information and explanationswe require for our audit.

Ian Marsden (Senior Statutory Auditor)For and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsSheffield8th September 2011


21


22

Significant provider of zerocarbon, Code Level 6 homes in the country with over 100 zero carbon homescompleted in 2011

Consolidated

profitand

lossaccount

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Resultsbefore Exceptional

Exceptional itemsitems (Note 6)2011 2011 2011 2010

£'000 £'000 £'000 £'000

Note

1 Turnover 677,103 - 677,103 604,417 Cost of sales (570,845) (1,371) (572,216) (499,760)Gross profit 106,258 (1,371) 104,887 104,657Administration expenses (38,984) (3,804) (42,788) (35,747)Operating profit 67,274 (5,175) 62,099 68,910

5 Net interest receivable / (payable) 593 - 593 (61) Profit on ordinary activities before taxation 67,867 (5,175) 62,692 68,849

7 Tax on profit on ordinary activities (20,771) 565 (20,206) (19,924)Profit on ordinary activities after taxation 47,096 (4,610) 42,486 48,925

25 Equity minority interests - 611 611 -19 Profit for the financial year 47,096 (3,999) 43,097 48,925

All items dealt with in arriving at operating profit above related to continuing operations.

There is no difference between the profit on ordinary activities and the retained profit for the year stated above and theirhistorical cost equivalents.

Consolidated

statement

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andlosses

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24


2011 2010£'000 £'000

Profit for the financial year 43,097 48,925Actuarial gains on pension scheme (Note 24) 52 366 Movement on deferred tax relating to pension scheme (Note 7) (14) (102) Total recognised gains for the year 43,135 49,189

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Group Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

Note Fixed assets 10 Intangible assets 4,659 4,904 - -11 Tangible assets 15,105 14,895 - -12 Investments - - 10,490 10,490

19,764 19,799 10,490 10,490Current assets

13 Land held for and under development 31,607 36,815 - -14 Work in progress 43,865 27,081 - -15 Debtors - amount falling due after one year 23,055 19,552 7,170 7,05315 Debtors - amount falling due within one year 109,921 94,170 3,085 7,517

Cash at bank and in hand 98,431 102,584 - -306,879 280,202 10,255 14,570

16 Creditors: amounts falling due within one year (190,973) (179,273) (18,028) (20,897)Net current assets / (liabilities) 115,906 100,929 (7,773) (6,327)Total assets less current liabilities 135,670 120,728 2,717 4,163

17 Provisions for liabilities and charges (1,860) - (85) -

Net assets excluding pension asset 133,810 120,728 2,632 4,16324 Pension asset 985 893 - -

Net assets including pension asset 134,795 121,621 2,632 4,163

Capital and reserves 18 Called up share capital 313 313 313 31319 Share premium account 690 690 690 69019 Profit and loss reserve 132,336 118,551 1,226 2,75719 Merger reserve 186 186 186 18619 Other reserve 51 51 - -19 Capital redemption reserve 217 217 217 21719 Investment revaluation reserve 1,613 1,613 - -

Total shareholders' funds 135,406 121,621 2,632 4,16325 Minority interests (611) - - -

Capital employed 134,795 121,621 2,632 4,163

The financial statements on pages 23 to 50 were approved by the Board of Directors on 8th September 2011 and weresigned on its behalf by:

D Blunt J Thirlwall Registered numberChief Executive Financial Director 01998780

Consolidated

cashflow

statement

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26


2011 2010£'000 £'000

Note

20 Net cash inflow from operating activities 45,344 59,517Returns on investment and servicing of financeInterest paid (127) (91)Net cash outflow from returns on investment and servicing of finance (127) (91)

TaxationUK corporation tax paid (17,482) (90)Capital expenditure and financial investmentPurchase of tangible fixed assets (2,603) (2,899)Sale of tangible fixed assets 65 197Net cash outflow from capital expenditure and financial investment (2,538) (2,702)

AcquisitionsPurchase of subsidiary undertakings - (5,436)Cash acquired with subsidiary undertakings - 674Net cash outflow from acquisitions - (4,762)

Financing Equity dividends paid (29,350) (42,000)Decrease in inter company debtor funding - 64,071Net cash (outflow) / inflow from financing (29,350) 22,071

21 (Decrease) / increase in cash (4,153) 73,943

Statement

ofaccountingpolicies

27


Basis of accountingThese financial statements are prepared on the going concern basis under the historical cost convention and in accordancewith the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal accountingpolicies, which have been applied consistently throughout the year, are set out below.

Basis of consolidation The Group profit and loss account and balance sheet include the audited financial statements of the Company and all of its subsidiaries made up to the end of the financial year. The results of subsidiaries acquired are included in the consolidatedprofit and loss account from the date control passes. Intra-group sales and profits are fully eliminated on consolidation.

On acquisition of a subsidiary, all of the subsidiary's assets and liabilities are recorded at their fair values, reflecting theirvalue at that date.

Joint venturesJoint ventures comprise investments in undertakings where the Group holds an interest on a long-term basis and jointlycontrols the commercial and financial policy of the venture with one or more other entities who are party to the jointventure contractual arrangement. The Group share of the result of its investment in joint ventures is included in theconsolidated profit and loss account if material to the Group. In the consolidated balance sheet the investment in jointventures is included as the Group share of net assets of the year end.

Joint ventures are shown in the parent Company balance sheet at cost less any amounts written off for permanent diminution in value.

Turnover and profit recognition: Private house building, property development and land salesTurnover and profits on these activities are included in the financial statements on legal completion. Where house salesinclude an interest free loan provided by the Company to the customer in respect of an element of the sale value (sharedequity house sales), this is recognised in turnover net of discounting using an estimated financing cost.

Contracts Turnover and profit on short term contracts are recognised when the contracts have been completed. Turnover on long-termcontracts represents the value of work done, and excludes value added tax and trade discounts. For long-term contracts,attributable profits are calculated based on the Directors' estimate of total forecast value less total forecast costs and arerecognised based on the proportion of cost incurred to date compared to total costs expected to be incurred.

Attributable profits are not recognised until the point at which the outcome of the contract can be assessed with reasonablecertainty. Provision is made for losses on all long-term contracts as soon as such losses become apparent.

Claims on customers or third parties for variations to the original contract are recognised in the profit and loss accountonce entitlement to the claim has been established. Claims by customers or third parties in respect of work carried out arerecognised in the profit and loss account once the obligation to transfer economic benefit has become probable.

Intangible assets - goodwillGoodwill arising on consolidation is recorded at cost, which includes associated costs of acquisition, less the fair value ofassets acquired and any amounts written off for permanent diminution in value. Goodwill is being amortised over its usefuleconomic life, which is estimated to be 20 years. Impairment reviews are performed by the Directors when there has been anindication of potential impairment.

The Company applies FRS11, where relevant impairment triggers are identified an impairment review is performed and any resulting impairment charge is accounted for in the year it arises. The carrying value is the higher of value in use andrecoverable value. Value in use is derived from cash flow projections discounted to net present value at an appropriatediscount rate.

Statement


28


Exceptional items Exceptional items are material items which fall within the ordinary activities of the Group and which need to be disclosed by virtue of their size or incidence. Such items are included within operating profit unless they represent profits or losses onthe sale or termination of an operation; costs of a fundamental reorganisation or restructuring having a material effect onthe nature and focus of the Group's operations; profits or losses on the disposal of fixed assets; or provisions in respect ofsuch items. In these cases separate disclosure is provided on the face of the profit and loss account after operating profit.

Tangible fixed assets and depreciationTangible fixed assets are stated at their historic purchase cost less accumulated depreciation.

The cost of fixed assets is their historic purchase cost, together with any incidental costs of acquisition. Depreciation iscalculated so as to write off the cost of tangible fixed assets, less their estimated residual value, on a straight line basis over their estimated useful expected economic lives. The principal annual rates used for this purpose are:

%Freehold properties 2 Long leasehold properties Over the term of the lease Equipment, plant and vehicles 10 - 25 Fixtures, fittings and office equipment 10 - 33

No depreciation is provided on freehold land.

Operating leasesCosts in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term.

Stocks, work in progress and land held for development House developments in progress are valued at the lower of cost and net realisable value. Cost comprises direct expenditure,together with an appropriate proportion of production overheads. Net realisable value represents the estimated amount atwhich stock could be realised after allowing for costs of completion and realisation.

Land held for and under development includes land purchase costs and costs directly attributable to enhancing land value.

Long-term contract balances are included in the balance sheet at the value of turnover less the value of progress paymentscertified and receivable. The value of progress payments not yet certified is treated as receivable in respect of workcompleted, or measurable parts thereof, and is stated after making allowance for irrecoverable amounts. Where turnoverexceeds progress payments the net balance is included in debtors as amounts recoverable on contracts; where progresspayments exceed turnover the net balance is included in current liabilities as payments on account.

Shared equity debtors Loans and receivables due from customers on 'Shared Equity' scheme sales, whereby the Group has provided a portion ofthe finance of a house sale, are included as debtors due after one year. These receivables are held at discounted presentvalue less any impairment. The amount is then increased to settlement value over the settlement period via finance income.

Statement


29


Deferred taxation Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates andlaw. Deferred tax is not provided on timing differences arising from revaluation of fixed assets where there is no commitmentto sell the asset. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will berecovered. Deferred tax assets and liabilities are not discounted.

Government grantsThe cost of private house developments in progress is stated after deduction of certain government grants which relate tothe funding of such costs. SSAP 4 recommends that grant income is shown separately. The Directors believe that thetreatment adopted is necessary for the financial statements to show a true and fair view. The effect of this treatment is toreduce the carrying value of work in progress in the balance sheet by £4,284,000 (2010: £3,209,000) and to reduce cost of sales in the profit and loss account by £2,662,000 (2010: £1,871,000).

InvestmentsInvestments in subsidiaries and associated undertakings are shown at cost less any amounts written off for permanent diminution in value. Impairment reviews are performed by the directors when there has been an indication of potential impairment.

Pension scheme arrangements The Group contributes to a hybrid Group pension scheme, the Keepmoat Limited Group Pension Plan, the assets of whichare held in independently administered funds. Contributions and pension costs are based on pension costs across theGroup as a whole.

Pension scheme assets are measured using market values. Pension scheme liabilities are measured using the projected unitactuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term andcurrency to the liability.

The increase in the present value of the liabilities of the Group's defined benefit pension scheme expected to arise fromemployee service in the period is charged to operating profit. The expected return on the scheme's assets and the increaseduring the period in the present value of the scheme's liabilities, arising from the passage of time, are included in netinterest. Actuarial gains and losses are recognised in the consolidated statement of total recognised gains and losses.

Pension scheme surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and presentedon the face of the balance sheet net of related deferred tax.

The Company is unable to identify its share of the underlying assets and liabilities of the defined benefit element of the Group scheme. As such, the Company has applied the multi-employer exemption provisions of FRS17. The scheme isaccounted for by the Company as a defined contribution scheme, charging contributions to the scheme when they become payable.

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1 Turnover

Turnover, as defined in the statement of accounting policies, excludes value added tax and relates wholly to operations in theUnited Kingdom.

The Directors regard the Group as operating in one segment, the refurbishment and construction of residential dwellings.

2 Employee informationGroup Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

Wages and salaries 94,462 95,373 3,868 5,104Social security costs 9,142 9,541 508 620Other pension costs 1,780 1,501 164 173Staff costs 105,384 106,415 4,540 5,897

The average monthly number of persons employed by the Group (including executive Directors) during the year, all of whomare engaged in the Group’s principal activities, was as follows:

Group Company2011 2010 2011 2010

By activity Number Number Number Number

Production 1,997 2,231 - -Selling and distribution 47 27 - -Administration 873 705 40 38

2,917 2,963 40 38

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3 Directors' emoluments

2011 2010£'000 £'000

Aggregate emoluments 2,153 2,373Company pension contributions to money purchase scheme 73 71

2,226 2,444

Retirement benefits are accruing to five Directors (2010: five) under a money purchase pension scheme.

Highest paid Director2011 2010

£'000 £'000

Aggregate emoluments 584 688Company pension contributions to money purchase scheme 25 25

4 Operating profit2011 2010

£'000 £'000

Operating profit is stated after charging / (crediting): Depreciation of tangible fixed assets - owned assets 2,384 1,809Profit on disposal of fixed assets (56) (177)Amortisation of goodwill 245 -Operating lease rentals:- plant and machinery 7,938 7,283- other 1,590 1,561Exceptional items (Note 6) 5,175 -Auditors' remuneration for:- audit of the Company and consolidated accounts 28 33- audit of subsidiaries of the Company 162 159- services relating to taxation 224 159- other services to the Company and its subsidiaries 56 62

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5 Net interest receivable / (payable)

2011 2010£'000 £'000

Net return on pension scheme assets (Note 24) 122 30Bank interest payable (127) (70)Other finance charges - (21)Shared equity discounting provision 598 -

593 (61)

6 Exceptional items

Cost of Administration 2011sales Expenses £'000

Restructuring costs - 2,018 2,018Evolve Built for Life Limited 1,371 1,786 3,157

1,371 3,804 5,175

Restructuring costs These related to redundancy and restructuring costs incurred during the year.

Evolve Built for Life LimitedDuring the year the Group entered into an agreement with a third party to manufacture off site modular units. Following the significant losses that have been experienced during the year the Directors of the venture have taken the decision toclose the factory, which will cease operations once all work servicing the current contract is completed. A provision has beenmade in the accounts for the write-off of assets (£0.3m), and the foreseeable loss expected to be incurred servicing thecontract to completion (£1.5m), in addition to the losses incurred during the year (£1.4m). These results have been shownin exceptional items due to their one-off nature and that they relate to a manufacturing venture outside the normal Group activities.

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7 Tax on profit on ordinary activities

2011 2010£'000 £'000

Current taxUK corporation tax on profit of the year at 28% (2010: 28%) 15,635 18,787 Adjustments in respect of previous years 1,411 627Total current tax charge 17,046 19,414

Deferred taxOrigination and reversal of timing differences 2,614 766Adjustment to tax charge in respect of previous period 176 (304)Change in tax rate - impact on deferred tax asset 384 -Pension cost (credit) / charge in excess of pension cost relief (14) 48Total deferred tax charge 3,160 510Tax on profit on ordinary activities 20,206 19,924

The tax assessed for the year is lower (2010: higher) than the standard rate of corporation tax in the UK of 28% (2010: 28%). The differences are explained below.

2011 2010£'000 £'000

Profit on ordinary activities before taxation 62,692 68,849Profit on ordinary activities multiplied by the standard rate in the UK 28% (2010: 28%) 17,554 19,278Effects of:Expenses not deductible for tax purposes 353 313Adjustment to tax charge in respect of previous periods 1,411 627Accelerated capital allowances and other timing differences (2,586) (804)Other permanent differences (2,664) -Deferred tax not recognised 2,978 -Current tax charge for the year 17,046 19,414

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Factors affecting current and future tax chargesAs a result of the Finance Act (No 2) 2010 enacted on 20 July 2010 the main rate of a UK corporation tax was amendedfrom 28% to 27%. Subsequent to this, a number of further changes to the UK Corporation tax system were announced in the March 2011 UK Budget Statement. A resolution passed by Parliament on 29 March 2011 reduced the main rate ofcorporation tax to 26% from 1 April 2011. As such, the relevant deferred tax balances have been re-measured.

Subsequent to the year end the main rate of corporation tax was reduced from 26% to 25% as of 1 April 2012, beingsubstantively enacted on 5 July 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annumto 23% by 1 April 2014. None of these rate reductions had been substantively enacted at the balance sheet date and,therefore, are not included in these financial statements. The impact of proposed changes is not expected to be material.

Deferred taxationGroup Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

At 1 April (4,855) (5,467) (2) -Deferred tax credit / (charge) to profit and loss account 3,160 510 (22) (2)Deferred tax charge to statement of total recognised gains and losses 14 102 - -At 31 March - asset (1,681) (4,855) (24) (2)

Deferred taxation comprises:Accelerated capital allowances (1,299) (1,031) (2) (2)Other timing differences (728) (4,170) (22) -Deferred tax asset (Note 15) (2,027) (5,201) (24) (2)Pension deferred tax liability (see below) 346 346 - -Deferred tax asset including pension (1,681) (4,855) (24) (2)

No provision has been made for deferred tax on gains recognised on revaluing property to its market value. Such tax wouldbecome payable only if the property was sold without it being possible to claim rollover relief. The total amount unprovidedfor is £339,000 (2010: £452,000).

A deferred tax asset amounting to £5,656,000 (2010: £nil) in relation to certain tax losses within the group have not beenrecognised as the directors are of the opinion that there is doubt over its recoverability.

Deferred tax liability relating to pension deficitGroup Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

At 1 April 2010 346 196 - -Deferred tax (credit) / charge to profit and loss account (14) 48 - -Deferred tax charge to the statement of totalof recognised gains and losses 14 102 - -At 31 March 2011 346 346 - -

The deferred tax liability of £346,000 (2010: £346,000) has been deducted in arriving at the net pension asset on thebalance sheet.

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8 Profit for the financial year

As permitted by Section 408 of the Companies Act 2006, the parent Company's profit and loss account has not been included in these financial statements. The parent Company's profit for the financial year was £27,819,000.(2010: £40,916,000).

9 Dividends2011 2010

£'000 £'000

Dividends on ordinary shares:Ordinary paid of £93.79 per share (2010: £134.19) 29,350 42,000

10 Intangible assetsGoodwill

Group £'000

At 1 April 2010 4,904Charge for the year (245)Net book amount at 31 March 2011 4,659

Goodwill arising on acquisitions is being amortised over the Directors' estimate of its useful economic life of 20 years.

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11 Tangible assets

Plant and

equipment,

Long Freehold fixtures

leasehold land and and motor

properties properties vehicles Total

Group £'000 £'000 £'000 £'000

CostAt 1 April 2010 798 11,352 13,305 25,455Additions - - 2,603 2,603Disposals - - (278) (278)At 31 March 2011 798 11,352 15,630 27,780

Accumulated depreciationAt 1 April 2010 212 1,071 9,277 10,560Charge for the year 10 362 2,012 2,384Disposals - - (269) (269) At 31 March 2011 222 1,433 11,020 12,675

Net book valueAt 31 March 2011 576 9,919 4,610 15,105At 31 March 2010 586 10,281 4,028 14,895

The Company has no tangible assets.

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12 Investments

Company £'000

Interests in subsidiary and associated undertakingsCost and net book value at 31 March 2010 and 31 March 2011 10,490

The Directors believe that the carrying value of investments is supported by their underlying net assets. The following information relates to those subsidiary undertakings of which Keepmoat Limited owns 100% of the ordinaryshare capital (except where noted) and registered in Great Britain whose results or financial position, in the opinion of theDirectors, principally affect the figures of the Group:

Name of Company Principal activities Shareholding

Bramall Construction Limited Housing regeneration 100%Frank Haslam, Milan & Company Limited Housing regeneration 100%Keepmoat Homes Limited Private house building development 100%Keepmoat Site Services Limited Hire of site accommodation and motor vehicles for

other Group companies 100%Keepmoat Property Limited Property development and the holding of property

on behalf of other Group companies 100%Keepmoat Regeneration Limited Intermediate holding company of a Group whose

principal activity is housing Regeneration 100%Force Solutions Limited Investment holding company 100%Milnerbuild Limited Maintenance, improvement, refurbishment and

management of homes 93%Evolve Built for Life Limited Manufacture of modular units 55%

Notes

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Details of operating joint venture undertakings, all of which are incorporated in Great Britain, are as follows:

Description of shares and proportion of Proportionnominal value of value of voting Accounting

Name of undertaking that class held rights held year end

TradingSOAR Build Limited Ordinary shares 50% 31 March

of £1 each (50% held)

Durham Villages A class ordinary shares 50% 31 MarchRegeneration Limited of £1 each (51% held)

DormantHull & Gipsyville Housing B class ordinary shares 50% 31 MarchVenture Limited of £1 each (81% held)

Doncaster 2000 Limited B class ordinary shares 50% 31 March of £1 each (81% held)

Durham Villages Regeneration Limited is a joint venture between Keepmoat and Durham County Council. Its principal activityis private housebuilding, land sales and property development. The Company’s registered office is: The Waterfront, LakesideBoulevard, Doncaster DN4 5PL.

SOAR Build Limited is a joint venture with SOAR Enterprises Limited. Its principal activity is training local people inconstruction skills whilst working for major contracts as a subcontractor. The Company’s registered office is: 11 Southey Hill,Sheffield, S5 8BB.

Hull & Gipsyville Housing Venture Limited is a venture with Hull City Council. Its principal activities are house building andproperty development. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL.

Doncaster 2000 Limited is a venture with Doncaster Metropolitan Borough Council. Its principal activity is house buildingand property development. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL.

Details of transactions with these companies are set out in Note 26.

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13 Land held for and under development

2011 2010Group £'000 £'000

Land held for and under development 31,607 36,815

The Group has undertaken a detailed review of the net realisable value of land held for and under development both relatingto plots currently in development, and land and phases of sites not yet in development. This review recognises the impact oflower selling prices and reduced activity levels being experienced across the business in recent years.

Net realisable value for land where construction of homes had commenced at the year end or is anticipated to commencewithin the next 12 months was assessed by estimating selling prices and costs (including sales and marketing expenses)taking into account current market conditions.

Land where house build had not commenced at the year end and was more likely to be sold undeveloped is assessed by re-appraising the land using current selling prices and costs for the proposed development and assuming an appropriatefinancial return to reflect the current housing market conditions and the prevailing financing environment.

At the year end the net realisable value provision amounts to £7.9m (2010: £15.8m) with the movement of £7.9m in theyear reflecting utilisation of provision.

This provision will be closely monitored for adequacy and appropriateness as regards under and over provision to reflectcircumstances at future balance sheet dates. Any material change to the underlying provision will be reflected through costof sales as an exceptional item.

The Company had no land held for and under development at 31 March 2011 (2010: £nil).

14 Stocks and work in progress

2011 2010Group £'000 £'000

House building developments in progress 43,865 27,081

The Company had no stocks or work in progress at 31 March 2011 (2010: £nil).

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15 DebtorsGroup Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

Amounts falling due after more than one year:

Amounts owed by associated undertakings (Note 26) 7,146 7,051 7,146 7,051Shared equity debtors 13,882 7,300 - -Deferred tax (Note 7) 2,027 5,201 24 2

23,055 19,552 7,170 7,053

Amounts falling due within one year:Trade debtors 87,266 76,776 30 14Amounts recoverable on contracts 12,978 10,033 - -Amounts owed by group undertakings - - 1,004 4,504Amounts owed by parent undertakings - 811 558 811Amounts owed by associated undertakings (Note 26) 52 20 20 20Corporation tax recoverable 475 39 27 27Other debtors 5,323 3,994 1,349 2,009Prepayments and accrued income 3,827 2,497 97 132

109,921 94,170 3,085 7,517

Amounts owed by associated undertakings falling due after more than one year are unsecured and carry a rate of interest1% above the Bank of England base rate.

Amounts owed by Group, parent and associated undertakings falling due within one year are unsecured, interest free andrepayable on demand.

Long term debtors due under the 'Shared Equity' scheme are due for repayment at the earlier of 10 years, or the date onwhich there is a future sale of the related property. Interest is charged at a rate of 3% on certain debtor balances after 5years, increasing each year thereafter in line with the Retail Prices Index plus 1%. Long term debtors are discounted topresent value at a discount rate which reflects the estimated cost of finance for the loan.

16 Creditors - amounts falling due within one yearGroup Company

2011 2010 2011 2010£'000 £'000 £'000 £'000

Bank overdraft (secured) - - 13,902 17,595Trade creditors 112,550 95,987 332 622Payments on account 29,741 31,518 - -Amounts owed to parent undertakings 16,498 18,785 1,399 171Amounts owed to associated undertakings (Note 26) 209 73 - -Taxation and social security 7,804 13,382 133 1,249Other creditors 840 1,361 - 358Accruals and deferred income 23,331 18,167 2,262 902

190,973 179,273 18,028 20,897

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Amounts owed to parent and associated undertakings falling due within one year are unsecured, interest free and repayableon demand.

The overdraft in the Company has been offset against cash balances held in the Company and on consolidation againstother Group Companies. The Company and its subsidiaries have given floating charges over all their assets and undertakings,and fixed charges over book debts, in favour of the Group's bankers as security for Group debt and overdraft facilities.

17 ProvisionsOther

Group £'000

At 1 April 2010 -Charged to the profit and loss account 1,860At 31 March 2011 1,860

Company £'000

At 1 April 2010 -Charged to the profit and loss account 85At 31 March 2011 85

18 Called up share capital2011 2010

£'000 £'000

Authorised 686,000 ordinary shares of £1 each 686 686Issued and fully paid 313,000 ordinary shares of £1 each 313 313

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19 Reserves

Share Profit Capital Investmentpremium and loss Merger Other redemption revaluationaccount reserve reserve reserves reserve reserve

Group £'000 £'000 £'000 £'000 £'000 £'000

At 1 April 2010 690 118,551 186 51 217 1,613Retained profit for the year - 43,097 - - - -Dividends - (29,350) - - - -Actuarial gain on pension asset - 52 - - - -Movement on deferred tax relating to pension asset - (14) - - - -At 31 March 2011 690 132,336 186 51 217 1,613Pension asset (985)Profit and loss reserve excluding pension asset 131,351

Company At 1 April 2010 690 2,757 186 - 217 -Profit for the year - 27,819 - - - -Dividends - (29,350) - - - -At 31 March 2011 690 1,226 186 - 217 -

20 Reconciliation of operating profit to net cash inflow from operating activities

2011 2010£'000 £'000

Operating profit 62,099 68,910Depreciation on tangible fixed assets (net of profit on disposals) 2,328 1,633Goodwill amortisation 245 -Decrease in land held for development 5,208 4,966(Increase) / decrease in work in progress (16,784) 4,571Increase in debtors (21,394) (23,776) Increase in creditors 11,700 3,355Increase in provision for long-term performance plan 1,860 -Difference between pension charge and cash contributions 82 (142) Net cash inflow from operating activities 45,344 59,517

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21 Reconciliation of net cash flow to movement of net funds

2011 2010£'000 £'000

(Decrease) / increase in cash in year (4,153) 73,943Net funds at 1 April 102,584 28,641Net funds at 31 March 98,431 102,584

22 Other financial commitments

At 31 March 2011 the Group had annual commitments under non-cancellable operating leases expiring as follows:

2011 2011 2010 2010

Land and Other Land and Other

buildings buildings

£'000 £'000 £'000 £'000

Within one year 295 374 287 427Within two to five years 1,060 1,154 935 1,748 Expiring over five years 352 - 318 -

1,707 1,528 1,540 2,175

The Company has no annual commitments under non-cancellable operating leases.

23 Contingent liabilities

The Group has entered into performance guarantees in the normal course of business which, at 31 March 2011, amounted to£14,948,000 (2010: £9,616,000). In the opinion of the Directors, no loss will arise in respect of these guarantees.

The Company has given guarantees in respect of its own bank borrowings and the bank borrowings of Castle 1 Limited andLakeside 1 Limited, its parent Companies. At 31 March 2011 borrowings covered by these guarantees amounted to£705,994,000 (2010: £863,126,000). The guarantees are in the form of a fixed charge over freehold land and building andfloating charges over the assets of the certain group companies.

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24 Pension commitments

The Group operates a hybrid Group pension scheme, the Keepmoat Limited Group Pension Plan, with assets held inindependently administered funds.

A full actuarial valuation of the defined benefit scheme was carried out at 5 April 2010 and this has been updated to 31 March 2011 by a qualified independent actuary. The scheme assets are stated at their market value at 31 March 2011.The major assumptions used by the actuary to calculate the liabilities of the Keepmoat Group Pension Plan are:

2011 2010 % %

Discount rate 5.5 5.6Rate of inflation 3.5 3.7Rate of increase in salaries 2.0 2.0Rate of increases in pension in payment 0.0 0.0

The mortality assumptions used were as follows:31 March 31 March

2011 2010Years Years

Pensioner age 65: - Men 22.2 22.1- Women 25.1 25.0Current member age 45: - Men 23.2 23.2- Women 26.0 26.0

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The assets in the Keepmoat Group Pension Plan and the expected rates of return were:

Long-term Value Long-term Valueexpected expected

rate of rate of return return

31 March 31 March 31 March 31 March 2011 2011 2010 2010

% £'000 % £'000

Equities 7.0 5,174 7.0 4,993Bonds 4.5 723 4.5 760Cash 3.5 113 4.5 327Total market value of assets 6,010 6,080Present value of scheme liabilities (4,679) (4,841)Pension scheme surplus 1,331 1,239Related deferred tax liability (346) (346)Net pension asset 985 893

Reconciliation of present value of scheme liabilities

31 March 31 March2011 2010

£'000 £'000

1 April 4,841 3,815Current service cost 104 81Interest cost 259 259Actuarial losses recognised in the year 20 1,030Benefits paid (545) (344)31 March 4,679 4,841

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Reconciliation of fair value of scheme assets

31 March 31 March2011 2010

£'000 £'000

1 April 6,080 4,516Expected return on scheme assets 381 289Actuarial gains recognised in the year 72 1,396Employers contributions 126 170Employee contributions 49 53Benefits paid (545) (344)Expenses paid (153) -31 March 6,010 6,080

Scheme assets do not include any of Keepmoat Limited own financial instruments, or any property occupied by Keepmoat Limited.

The expected return on scheme assets is determined by considering the expected returns available on the assets underlyingthe current investment policy. Expected yields on fixed asset interest investments are based on gross redemption yields as atthe balance sheet date. Expected returns on equity investments reflect long-term real rate experienced in respective markets.

Analysis of amounts charged to the profit and loss account: Operating profit

2011 2010£'000 £'000

Expenses paid 153 -Current service cost 104 81

257 81

Other finance income2011 2010

£'000 £'000Expected return on pension scheme assets 381 289Interest on pension scheme liabilities (259) (259)Net return 122 30

History of experience gains and losses 2011 2010 2009 2008 2007£'000 £'000 £'000 £'000 £'000

Defined benefit obligation (4,679) (4,841) (3,815) (5,516) (17,922)Plan assets 6,010 6,080 4,516 6,422 18,323Surplus 1,331 1,239 701 906 401Experience adjustments on plan assets 72 1,396 (1,449) (442) 150Experience adjustment on plan liabilities (233) (380) 615 418 331Total actuarial gains and losses recognisedin the statement of recognised gains and losses 52 366 (382) 341 388

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The pension cost charged to the profit and loss account in respect of the defined contribution scheme was £1,698,000(2010: £1,562,000) representing contributions payable in the period. Contributions due to the Keepmoat Group PensionPlan at year end were £224,537 (2010: £208,923).

25 Minority interests

2011 2010£'000 £'000

At 1 April - -Loss on ordinary activities after taxation 611 -At 31 March 611 -

Minority interests relate to Evolve Built for Life Limited, which is the maximum amount of funding that will be provided by theminority partner under the joint agreement and therefore is not a share of liabilities based on percentage ownership.

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26 Related party disclosures

The Company has 50% of the voting rights in the following companies, except where indicated. Details of its significanttransactions with these companies are summarised as follows:

(a) Durham Villages Regeneration LimitedUnder agreements between Keepmoat Homes Limited, Durham Villages Regeneration Limited and Durham City Council (on 1April 2010 Durham City Council merged into the Unitary Authority of Durham County Council), Keepmoat Homes Limitedhas a license to build on land owned by Durham Villages Regeneration Limited. Keepmoat Homes is a wholly ownedsubsidiary of Keepmoat Limited. Durham Villages Regeneration Limited is a company in which Keepmoat Limited holds a 50%interest. During year the value of services provided under this arrangement to Durham Villages Regeneration Limitedamounted to £747,276 (2010: £502,219). At 31 March 2011, the amounts owed to Durham Villages Regeneration Limitedamounted to £209,178 (2010: £72,514) and are included in amounts owed to related parties in note 16.

Keepmoat Limited provided a medium term loan to Durham Villages Regeneration Limited for a principal sum of £7,887,088.At 31 March 2011 the amount due from Durham Villages Regeneration Limited, which includes accrued interest, was£7,146,251 (2010: £7,050,748) and is included in amounts owed by associated undertakings falling due after more than oneyear in Note 15. Interest is accruing at 1% above the Bank of England base rate. Interest charged for the year was £95,508(2010: £118,008). Keepmoat Limited also provided certain other services in the year totalling £10,000 (2010: £10,000).

(b) SOAR Build LimitedSOAR Build Limited is a company which Keepmoat Limited holds a 50% interest in. During the year, SOAR Build Limitedprovided services to Frank Haslam Milan & Company Limited and Bramall Construction Limited. Amounts charged by SOARBuild Limited to the Group during the year were £1,496,502 (2010: £2,083,335). Frank Haslam Milan & Company andBramall Construction Limited also charged SOAR Build Limited for services during the year amounting to £420,989 (2010:£527,653). At the balance sheet date SOAR Build Limited owed the Group £31,657 (2010: £44,383).

(c) Other related party transactionsShow home salesDuring the year the Company sold 19 properties (2010: 9 show homes) to James and Philip Blunt (the sons of David Blunt,who is a Director of Lakeside 1 Limited, the ultimate parent company) for £1,046,000 (2010: £900,000 relating to 9 showhomes sold).

Under the terms of the show home sales in previous years, the show homes are leased back to the Company for anunspecified period of time at a cost of £122,000 (2010: £127,000) per annum. On the sale of each show home, the salesprice achieved over and above the original purchase price will be shared equally between the Company and either James orPhilip Blunt, provided that the Company sell the property within 4 weeks of the termination of the lease agreement. Anylosses are borne in full by the purchaser. In the current year 2 show homes (2010: 1 show home) were sold under the abovearrangement which resulted in the Company receiving additional consideration of £31,000 (2010: £22,000), representingits share of profit.

Director house saleDuring the prior year the company also sold a property to J Thirlwall, a Director of the Company, for £65,000. Thepurchase was made under the Company’s shared equity scheme with 15% of the purchase price being financed by theCompany. The gross balance owing to the Company at the year end amounts to £9,750 (2010: £9,750), which is includedwithin shared equity debtors at its discounted net present value of £7,940 (2010: £7,550).

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36 Westbourne Gardens LimitedDuring the year Keepmoat Limited provided £40,548 of building services (2010: £nil) to 36 Westbourne Gardens Limited,with the full amount remaining unpaid at year end (2010: nil). D Blunt (a Director of Keepmoat Limited) is the sole Directorof Westbourne Gardens Limited, owning 33% of the share capital.

27 Ultimate parent undertaking and controlling party

The immediate parent undertaking is Castle 1 Limited.

The ultimate parent undertaking is Lakeside 1 Limited, a Company incorporated in the United Kingdom.

Lakeside 1 Limited is the parent undertaking of the smallest and the largest group of undertakings to consolidate thesefinancial statements at 31 March 2011. The consolidated financial statements of Lakeside 1 Limited are available from:

The Company Secretary Keepmoat Limited The Waterfront Lakeside Boulevard Doncaster South YorkshireDN4 5PL

The Directors do not believe there to be one overall controlling party of the Lakeside 1 Limited Group.


Directors

andadvisers

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50DirectorsT AllisonD Blunt C BovisD Cowie (appointed 15th March 2011)A HicklingP HindleyJ Thirlwall

SecretaryR Brandon

Registered OfficeThe WaterfrontLakeside BoulevardDoncasterSouth YorkshireDN4 5PL

Registered number 01998780

Independent auditorsPricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors1 East ParadeSheffieldS1 2ET

SolicitorsDLA Piper UK LLP1 St Paul’s PlaceSheffieldSouth YorkshireS1 2JX

BankersBank of ScotlandLevel ThreeNew Uberior House 11 Grey StreetEdinburghEH3 9BN

DESIGNED BY The Ideas Facility www.theideasfacility.com

The WaterfrontLakeside BoulevardDoncasterSouth Yorkshire DN4 5PL

Telephone01302 346620

Facsimile01302 346621

[email protected]

Webwww.keepmoat.com

Documents

Keepmoat plc Annual report and accounts 2011