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ANNUAL REPORT AND ACCOUNTS 2014

CONTENTS

Financial highlights 4

Operational highlights 6

STRATEGIC REPORT

Reporting comparatives 8

Business overview 8

Business model 8

Strategy 10

Acquisition 11

Market review 12

Chairman’s statement 14

Chief Executive’s review 16

Financial performance review 22

Key performance indicators 26

Risk management 28

Corporate responsibility 31

DIRECTORS’ REPORT

Meetings 36

Internal control 36

Corporate governance 36

Going concern 39

Pension scheme 39

Dividends 40

Political and charitable contributions 40

Directors 40

Independent auditors and disclosure

of information to auditors 40

Statement of directors’ responsibilities 40

Directors and advisers 42

FINANCIAL STATEMENTS

Consolidated statement of comprehensive income 44

Consolidated balance sheet 45

Consolidated statement of changes in

shareholders’ equity 46

Consolidated statement of cash flows 47

Statement of accounting policies 50

Notes to the financial statements 57

MILL GREEN CHASE, ALDRIDGE, WEST MIDLANDS

FINANCIAL HIGHLIGHTS

All figures for 2012 and 2013 are from the CALA Group Limited annual accounts to provide comparability.

HOME SALES

2014743^

2013850^

2012875^

Âffordable, Private

Home sales split: 2012; 209 Affordable 666 Private. 2013; 156 Affordable 694 Private. 2014; 66 Affordable 677 Private.

HOUSE SALES GROSS MARGIN†

201422.7%

201318.8%

201216.4%

† UK GAAP, before exceptional items

PROFIT BEFORE TAX†

2014£27.3m^

2013£12.6m*

2012£12.4m*

† Before exceptional items * UK GAAP ÎFRS

TURNOVER†

2014£294.2m^

2013£240.8m*

2012£253.7m*

† Including share of joint ventures * UK GAAP ÎFRS

BENTLEY PRIORY, STANMORE, MIDDLESEX4

OPERATIONAL HIGHLIGHTS

PRIVATE AVERAGE SALES PRICE (‘ASP’)

ANNUAL INJURY INCIDENT RATE (‘AIIR’)

OVERALL CUSTOMER SATISFACTION SCORE

CONTRACTED LANDBANK†

† Gross Development Value (‘GDV’)

2014£423k

2013£335k

2012£340k

2014228

2013203

2012138

201490

201392

201290

2014£4.7bn

2013£3.2bn

2012£3.0bn

All figures for 2012 and 2013 are from the CALA Group Limited annual accounts to provide comparability.

MILL GREEN CHASE, ALDRIDGE, WEST MIDLANDS6

STRATEGIC REPORT

REPORTING COMPARATIVES

The statutory financial statements

for the year to 30 June 2014 have

been prepared under International

Financial Reporting Standards (‘IFRS’)

as adopted by the European Union

and include the results for Banner

Homes Group Plc (‘Banner’) from 21

March 2014.

Prior year comparatives include the

results for the group from 4 March

2013 (date of incorporation) to 30

June 2013. However, for the purpose

of providing a meaningful comparison

certain key performance indicators

and other selective information

contained in this report for the prior

year cover the 12 months to 30 June

2013, and where indicated, are

prepared under UK GAAP.

BUSINESS OVERVIEW

CALA Group (Holdings) Limited and

its subsidiaries, together CALA Group,

CALA, or the group, is the UK’s

most upmarket major homebuilder;

a leading provider of high quality

homes in the more affluent areas of

southern England and Scotland.

At £423,000, we have the highest

private average selling price (‘ASP’)

of the top 20 major UK homebuilders

outside central London.

Our brand is highly regarded within

the industry and aspirational for many

homebuyers. We are differentiated by

our clear focus on delivering excellent

customer service and building high

quality, well designed, sustainable

homes in prime locations with a

strong track record of delivery.

We operate through eight regional

businesses in the UK. Four of these

cover the Home Counties excluding

central London, with a fifth operating

in the southern Midlands. In addition,

we are the leading premium

homebuilder in Scotland where

we have three regional businesses

covering the principal cities of

Glasgow, Edinburgh and Aberdeen.

BUSINESS MODEL

Land is the most critical ingredient

in delivering our business strategy.

Our business model is founded

on contracting or acquiring at an

optimal price, sufficient land in

premium locations within our areas

of operation. All land acquisition

proposals must meet our profit margin

and internal rate of return targets.

The Strategic Report contains information which has been provided for the purpose

of assisting shareholders, as a body, in assessing the strategies adopted by the group

and the potential for those strategies to succeed. Any forward-looking statements have

been made in good faith based on the information available at the time of approval of

this report but actual outcomes may be different from those anticipated because of the

inherent risks in the markets in which the group operates, and no assurances can be

given about any such statements.

8TRINITY PARK, TRINITY, EDINBURGH

3

BUSINESS MODEL (CONTINUED)

Thereafter, we rely on the skills of our

project teams to secure appropriate

planning permission through extensive

consultation with key stakeholders

to deliver an attractive development

proposition for our customers and

the local community. Integral to this

is our focus on outstanding design,

in keeping with the areas in which we

build, which reinforces the aspirational

positioning of our product.

We partner with selected subcontractors

to deliver high quality homes and

offer industry-leading customer

service. CALA remains the only

mainstream homebuilder to have

achieved unqualified 5 star ratings

for both of the measured categories

in the Home Builders Federation

(‘HBF’) National New Home Customer

Satisfaction Survey in each of the last

five years.

We sell a variety of homes, from

apartments to detached houses,

predominantly to owner occupiers, but

our customers also include investors

and affordable housing providers.

We optimise sales prices and sales

rates through our professional sales

approach, supported by a strong and

distinctive marketing presence. This,

along with the quality of our homes

and our excellent customer service is

what defines the CALA brand and our

premium market positioning.

STRATEGY

CALA’s core strategy is to

accelerate the growth of the group

and optimise the operational

efficiency of our eight regional

businesses without compromising

our premium market positioning.

This will result in a trebling of annual

turnover between 2014 (excluding

Banner) and 2016, driven by

increasing the level of development

activity in the east of Scotland and

Aberdeen where CALA’s existing

landbank is already very strong, and

through our new operating regions,

extending our presence in the south

east of England where there is

significant unmet demand for high

quality homes.

This growth strategy will be delivered

and sustained through the strength

of our existing landbank and the

platform provided by the acquisition

of Banner.

We will ensure our strategy

generates value for shareholders in a

responsible and controlled manner by

adopting the following key principles:

• A strong and resilient balance sheet

• A clear focus on margin delivery

enhanced by strategic land

• Cash flow efficiency and increased

return on capital

• Strict land acquisition discipline

• Landbank flexibility through

the cycle

In the absence of a material adverse

change in market conditions, the

group is exceptionally well placed to

deliver its strategy.

ACQUISITION

On 21 March 2014, CALA Group

acquired the entire issued share

capital of Banner Homes Group

Plc, a leading independent luxury

homebuilder operating in the south

east of England.

This acquisition places the

combined group in the top 10 of

UK homebuilders by revenue with

significant further growth potential.

The acquisition is an excellent fit

with CALA’s own premium market

positioning and will accelerate

existing organic expansion plans in

the group’s target growth area of the

south east of England. In addition,

we have secured a talented and

committed team that will help drive

full value from the acquisition and

provide the necessary platform to

deliver our growth strategy.

The transaction was funded through

£107.8 million of equity provided

by the group’s existing shareholders,

funds managed by Patron Capital

(‘Patron’) and Legal & General

Capital Investments Limited (‘Legal

& General’). Four key members of

the Banner senior management team

have also invested in the enlarged

business which brings the total

management investment in CALA to

£13.8 million.

In conjunction with the acquisition

of Banner, the group conducted

a full refinancing of its banking

arrangements, taking advantage of

the more favourable terms in the

market place. The provision of a new

£300 million five year committed

senior banking facility was led by

Bank of Scotland with Santander and

subsequently HSBC.

The acquisition is immediately

earnings enhancing to the group, with

Banner delivering a house sales gross

margin of 23.7% for the period from

21 March to 30 June 2014.

STRATEGIC REPORT STRATEGIC REPORT

CURRENT DEVELOPMENTS

NORTH

EAST

WEST

MIDLANDS

NORTH HOMES COUNTIES

CHILTERN

THAMES

SOUTH HOMES COUNTIES

ORCHARD GREEN, BEACONSFIELD, BUCKINGHAMSHIRE

10 11

1

12

2

3

3

4

4

5

5

6

6

7

7

8

8

ACQUISITION (CONTINUED)

The acquisition has added 103 sites

to the group’s contracted landbank,

representing 1,589 plots with a

potential Gross Development Value

(‘GDV’) of £788 million of which 53%

already has a consent. This land has

attractive gross margins, consistent

with the average embedded in CALA’s

existing contracted landbank and

in line with CALA’s land buying

hurdle rate.

In addition, the Banner acquisition

brings with it a strong pipeline of

further land opportunities and a

strategic landbank of 1,200 plots.

The majority of a comprehensively

planned integration strategy has

been executed with the remaining key

elements expected to be completed

on schedule by 31 October 2014.

As the integration work streams have

progressed it has become clear that

significant further potential value

exists than was assumed in our

original investment case at the time

of acquisition.

The following areas of additional

value are already being realised, not

only directly from the Banner business

but also due to the increase in scale

of the enlarged group:

• Overhead efficiency savings of circa

£2 million per annum

• Site return on capital improvements

• Material and subcontractor

procurement gains

• Site margin increases through

rationalisation of product

and specification

Further details of the acquisition,

including the new capital structure of

the group, can be found in the notes

to the financial statements.

MARKET REVIEW

The economic environment in the UK

during the financial year has improved

steadily. Much brighter employment

prospects and a strong sense that the

recession is now behind us have created

an optimism that has also translated

through to the housing market.

The extension of Help to Buy (England)

to 2020, whilst having a more limited

direct impact on CALA due to our

market positioning, remains a welcome

and supportive measure for the

housing market as a whole. However,

it is disappointing that there is not yet

a longer term replacement for Help to

Buy (Scotland) or a continuation of the

existing scheme beyond 2015/6.

We have experienced little adverse

impact following the introduction of

the Mortgage Market Review (‘MMR’).

This is because our customers generally

have a lower LTV requirement for

their mortgage and have tended to

use independent mortgage brokers

to source their mortgage products.

Although the wider market has seen

a greater negative effect from the

introduction of the MMR, prospective

homeowners continue to benefit from

a more accessible and affordable

mortgage market.

Visitor levels have generally been

strong and confidence amongst

home buyers has been high during

the year. Combined with tight supply,

this has served to drive house prices

higher in our operating areas, with

greater increases seen in the south

east of England and east of Scotland

including Aberdeen. However, all of

our regional businesses have now

seen good improvements in sales

prices, broadly reflecting the trend

seen in the national house price

indices (with London excluded).

The improving housing market and

increasing levels of development

activity have brought about the first

marked rise in the cost of labour and

materials we have seen since the

downturn in 2008 although, to date,

this has been more than offset by

sales price inflation or accommodated

within our overall budget allowances.

The well documented disruption to

the supply of certain key building

materials during the past year

has eased gradually, alleviated by

additional manufacturing capacity

and alternative sources of supply. This

has been mitigated as far as possible

to minimise the adverse impact on

product delivery to our customers.

Nonetheless, we expect cost pressures

to remain a challenge to the

business in the year ahead and for

the availability of supply of skilled

tradesmen to feature as a growing

issue for CALA and the industry as

development activity continues

to increase.

STRATEGIC REPORTALBERT DOCK, LEITH, EDINBURGH

12

“BY ANY MEASURE, CALA’S PERFORMANCE DURING THE YEAR HAS BEEN EXCEPTIONAL AND ONLY

ACHIEVED THROUGH THE EFFORT OF OUR TEAMS.”

A. MARK COLLINS Non-Executive Director (Acting Chairman)

CHAIRMAN’S STATEMENT


It gives me great pleasure to report

on the strong results achieved and

overall high levels of activity during

this milestone year for CALA Group,

its first full financial year under the

new ownership of Patron Capital,

Legal & General and the senior

management team. Taking a step

back and reflecting on the events of

the last 12 months, the position of

CALA has changed fundamentally in

a very positive way.

With the additional investment and

support from its new shareholders,

the group has embarked on a

journey which will transform its size

and influence, extending CALA’s

presence in the south east of England

where our product is well suited. Our

expansion plans for the group will see

a trebling of annual turnover between

2014 (excluding Banner) and 2016

and are already underpinned by the

strength of the landbank which now

comprises over 12,500 plots with a

projected GDV of £4.7 billion, 59% of

which has planning consent.

Over recent months, there have

been two major changes which have

a direct impact on CALA. The first

is that, on 18th September 2014,

Scotland voted to remain part of

the United Kingdom. Scotland is

a key market for CALA and the

group is a leading and respected

player in the housing market north

of the border. The ‘No’ vote in the

Scottish Independence Referendum

is a welcome outcome for CALA’s

business, removing the uncertainty

in the Scottish housing market that

in our view would undoubtedly

have been prolonged with adverse

consequences for our business.

Whilst I am pleased that the Scottish

decision was definitive, it is unlikely to

be the end of a process, instead the

beginning of a new era of challenges

as we move towards the General

Election in May 2015.

The second change, but just as

important, is the corporate acquisition

of Banner, a specialist, high end

homebuilder with a concentration

in the Home Counties, perfectly

complementing CALA’s geographic

footprint across affluent markets in

the south east of England. I would

like to extend a warm welcome to all

Banner staff and am delighted that

we will be joined by a talented and

committed team at such an exciting

time for the combined group.

The Banner acquisition and the

group’s organic growth plans have

been financed by additional equity

from existing shareholders, with

the group’s net asset position at 30

June 2014 increasing significantly to

£207.3 million. At the same time, the

group’s committed banking facilities

were increased to £300 million,

extended to March 2019 and are now

provided by a syndicate of six banks

led by Bank of Scotland.

The housing market has seen a

considerable improvement during

the financial year, brought

about by the wider UK economic

recovery, increasing consumer

confidence and the Help To

Buy schemes.

This positive market environment has

enabled CALA to deliver a record set of

financial results driven by the sale of 743

homes with a private ASP of £423,000.

Profit before tax and exceptional items

was £27.3 million (including three and

a half months with Banner) on turnover,

including share of joint ventures of

£294.2 million. This compares with a

profit before tax and exceptional items

of £12.5 million as reported by CALA

Group Limited on a UK GAAP basis for

the year to 30 June 2013.

House sales gross margin (excluding

the impact of exceptional items)

reached a record for the group of

22.7% in the 12 months to 30 June

2014 (2013: 18.8%). This has come

from the strong inherent margin in the

landbank, and the prime location of

our developments during the year.

I am particularly pleased that the

performance this year has been

achieved at the same time as the

group being able to stay core to its

values of excellent customer service,

a strong health and safety culture and

creating well designed homes for a

sustainable future.

It is with sadness that I am delivering

this year’s statement on behalf of

our Chairman, Anthony Fry, who is

currently away from the business for

health reasons. Anthony has been

a huge support during the past few

years at a critical time for CALA and

our thoughts are with him and his

family. We wish him a full recovery

and hope that he is able to return to

the business.

It is my pleasure to welcome John

Pollock as Non-Executive Director

who joined the board on 24 June

2014. John joined the Legal &

General board more than 11 years

ago and currently holds the position

of Chief Executive Officer of the Legal

& General Assurance Society. John

replaces Paul Stanworth who stepped

down from the board and I would like

to place on record our thanks to Paul

for his contribution and input since

the acquisition of CALA in 2013.

By any measure, CALA’s performance

during the year has been exceptional

and only achieved through the effort

of our teams. I would like to thank all

our staff for their commitment and

hard work in what has been a year of

great achievement. I would also like

to thank our subcontractors, suppliers

and advisers who have been essential

in supporting our delivery.

NET ASSETS

Figures for 2012 are CALA Group Limited.

THE CRESCENT, LENZIE, EAST DUNBARTONSHIRE

2014£207.3m

2013£94.6m

2012£75.3m

2012 & 2013 UK GAAP

14 15

CHIEF EXECUTIVE’S REVIEW


This financial year has been a

transformational period for CALA

and I am delighted with how the

group is placed as we enter a year of

significant volume growth.

I am particularly pleased with our

acquisition of Banner, a company

operating at the premium end of the

market and very much aligned with

our approach to homebuilding. The

transaction accelerates our stated

organic expansion plans in the south

east of England with the Banner

team and landbank providing much

of the momentum for our three

new operating regions in the Home

Counties. I am convinced we have

made an excellent purchase and this

is reinforced by the value enhancing

opportunities we are seeing as we

complete the integration process and

continue to get to know the business

and its people.

Our financial performance during the

year has been excellent, delivering

record profits once again. We

continue to have one of the best

health and safety records in the

industry and our overall customer

satisfaction score as measured

by external consultants In-house

Research was 90, reinforcing

our market-leading position and

demonstrating the energy and passion

we apply to these two very important

areas of the business.

The excellence of our business has

been externally recognised with a

number of prestigious awards during

the year and we were named the UK’s

‘Best Medium Housebuilder’ at last

year’s What House? ceremony for the

second year running and received the

UK’s ‘Best Development’ accolade for

Trinity Park, Edinburgh.

FINANCIAL PERFORMANCE

The group’s financial results for

the 12 month period have been

excellent, with the hard work of

our teams driving CALA to another

record performance. Profit before

tax and exceptional items was £27.3

million on an IFRS basis, including

a contribution from Banner for the

three and a half month period since

acquisition. This equates to a 117%

increase on the profit before tax and

exceptional items of £12.6 million as

reported by CALA Group Limited on

a UK GAAP basis for the year to 30

June 2013.

House sales gross margin for the 12

months to 30 June 2014 increased

sharply to a record for the group

of 22.7% (2013: 18.8%) and along

with a strong profit contribution from

Banner, was a key driver in our record

financial performance. Our excellent

site performance has translated into

an increase in operating margin to

13.6% (2013 UK GAAP equivalent:

10.2%) albeit constrained by the

additional overhead costs incurred in

setting up our new operating regions

ahead of their volume delivery.

We expect to approach optimum

operational efficiency as a group

from 2016.

DEVELOPMENT ACTIVITY

During the financial year to 30

June 2014 the group increased its

average number of active selling

sites per week to 29 (2013: 25), and

secured legal completions from a

total of 56 sites (2013: 39), these

increases being entirely due to the

inclusion of the Banner portfolio. We

completed 22 sites during the 12

month period and delivered the first

legal completion of homes on 24 new

developments across our regions.

Our net private reservation rate

equates to 0.48 average weekly sales

“WE HAVE ENJOYED A VERY SUCCESSFUL 2014, A SUPERB YEAR OF DELIVERY AND A STEP CHANGE

IN THE SHAPE OF THE BUSINESS.”

ALAN D. BROWN Chief Executive

HOME SALES

THE MARINA, RATHO, EDINBURGH

WEST

MIDLANDS

SOUTH

BANNER

GROUP

EAST210

190

139

142

62

743

16 17


per development (2013: 0.56) and is

slightly lower than the previous year

due to a change in site and product

mix, accentuated by the predictable

influence of Banner. Help To Buy

has been a very important support

mechanism for the housing market

as a whole but as our customers

have made only moderate use of

this incentive during the financial

year given the level of our ASP, we

have seen just 17% of net private

reservations using Help To Buy. As

such, our average weekly sales per

development compares favourably to

the industry average of 0.62, given

our much higher ASP and that our

peers have used Help To Buy to a far

greater extent than CALA.

Cancellation rates were at normal

market levels and averaged 15%,

the same as 2013. Whilst total net

private reservations were down 1%

on 2013, the group commenced

the new financial year with a strong

forward sales position. At 1 July 2014

we had accumulated 367 advance

private home sales with a turnover

value of £166.2 million (2013: 192

units and £69.9 million) for delivery

by 30 June 2015. This includes 37%

(2013: 28%) of a significantly greater

number of private homes planned

for the year ahead and at 1 October

this had risen to 50% including legal

completions since the year end.

HEALTH AND SAFETY

The health and safety of our staff and

those who work with us, particularly

on-site where the risks to accident

and injury are highest, is our

primary concern. Moreover, a safe

site is generally a well-run site

and a strong indicator of a good

operational performance.

We maintained our excellent health and

safety record in the year to 31 March

2014 reported on by the HBF. Our

average Annual Injury Incidence Rate

over the last five years of 195 places us

as the best performer in the benchmark

group of companies participating fully

for that period. In the 12 months to

31 March 2014 we recorded a similar

number of injuries reportable under

RIDDOR at 6 (31 March 2013: 6).

Regrettably, this included one major

injury during the year, the first in a five

year period, though fortunately not

serious in nature.

CUSTOMER SERVICE

The delivery of excellent customer

service and a high quality product

is a key element of our business

model and we are passionate about

succeeding in this hugely important

area that really defines the nature of

our company.

We are clear industry leaders in

this area and undertake external

benchmarking to measure objectively

our performance and provide

feedback to help us drive our

standards ever higher. For the 12

months to 30 June 2014 we achieved

an overall satisfaction score of 90

(2013: 92) as measured by customer

surveys undertaken by external

consultants In-house Research and

once again, 98% of our customers said

they would recommend CALA. Whilst

these are very good scores there is

always room for improvement and we

are planning a number of initiatives

in the year ahead that will add to the

overall experience for our customers.

We have been awarded the top

rating of 5 stars for both categories

measured in the HBF National New

Home Customer Satisfaction Survey.

We remain the only mainstream home

builder to have achieved unqualified

5 star ratings for both of the

measured categories for each of

the last five years.

The skill, care and attention shown by

our site teams are vital to delivering for

our customers. Once again, I am very

pleased that a number of them have

been recognised for their outstanding

performance. NHBC Pride in the Job

quality award winners this year were:

Mark Foley, Billy Hamilton and

Mike Harding (East)

Michael Carrigan (West)

Willie McCallum, Merrick Clarke,

Mick Eyre, Connor Stewart and

Will Petrie (Chiltern)

Dave Knight (Midlands)

Matt Eason and Dave Tolmie

(South Home Counties)

Dennis Howard and Jon Channon

(Thames)

LAND

The residential land market has

continued to be very competitive

during the financial year, particularly

for more attractive development

opportunities and those in the south

east of England where demand is

high. Our land buying approach

has been disciplined despite the

increased competition and we have

been very active in the market to

secure excellent opportunities that will

underpin our growth plans.

This year we have seen a greater

number of sites being brought to

the market which, combined with

our increased financial strength,

has enabled us to exceed our land

buying targets without compromising

our financial hurdle criteria or

quality of location.

During the year to 30 June 2014

our land teams contracted 37 new

sites in premium locations which are

projected to deliver 1,948 homes with

an estimated gross development value

(‘GDV’) of £795 million and average

selling price of £408,000 (2013:

1,290 homes with a GDV of £455

million). This represents 2.8 times

2014 group turnover with nearly 50%

located in our principal growth area

of the south east of England.

The National Planning Policy

Framework (‘NPPF’) has continued

to drive a more favourable planning

environment in England and we

have benefited directly as a result.

However, despite this positive

OWNED/CONTRACTED PLOTS GDV ASP LAND COST YEARS

Consented 7,288 £2,773m £380k 23.4% 3.3

Allocated 2,763 £923m £334k 15.9% 1.1

Other 2,639 £998m £378k 23.7% 1.2

Total at 30 June 2014 12,690 £4,694m £370k 22.0% 5.6

Total at 30 June 2013 10,016 £3,163m £316k 19.8% 7.2

FORWARD PRIVATE SALES*

201437%

201328%

201225%

* Home sales including joint ventures

HAYFIELD GRANGE, CULTS, ABERDEEN

18 19

CHIEF EXECUTIVE’S REVIEW (CONTINUED)


backdrop, the current planning process

is unlikely to deliver the increase in

supply of new homes that are needed

with so few adopted and up-to-date

Local Plans in place. In addition, too

many Local Authorities remain in

denial about their ability to deliver a

five year land supply and the number

of homes that constitute this, such that

there continues to be unnecessary use

of the appeals process.

We have little option but to build the

inefficiencies of the planning system

into our own delivery processes and

with the proactive engagement with

all stakeholders by our talented

planning teams we have had another

very successful year of delivery.

During the 12 months to 30 June

2014 we acquired land or secured

planning permission on 42 sites for

3,256 homes with an estimated GDV

of over £1 billion at an average

selling price of £318,000 including

affordable housing. This compares

to 3,378 homes with an estimated

GDV of £1 billion consented during

the previous year, although last year’s

figures included 2,000 homes at our

Barton Farm strategic landholding

in Winchester. 48% of homes which

secured planning permission during

the financial year were pulled through

from our strategic landbank.

The group’s owned and contracted

landbank at 30 June 2014 consists of

12,690 plots (private and affordable

homes), the scope and planning

status of which is shown on page

19. This also includes strategic land

with a planning status. CALA has no

sites within in its landbank that are

not already under construction where

consents are in place that would

permit development to commence.

In addition, the group controls a

longer term strategic landbank

comprising over 12,000 plots which

will be promoted through the planning

system at the appropriate time.

The plots in the landbank at 30

June 2014 have a projected GDV

of approximately £4.7 billion

measured at today’s selling prices

with an ASP of £370,000. This

is significantly higher than at the

same time last year, reflecting our

success in the land market and the

inclusion of Banner. The land factor

% i.e. ratio of land cost to GDV at

22.0% (2013: 19.8%) is more than

a year ago due to our significantly

higher ASP and a greater weighting

of GDV in the south east of England

where land is more expensive.

Overall the landbank represents

5.6 years’ development potential

based on the latest projections of

future development activity. Although

this is a reduction on the 7.2 years

reported last year, it relates to a

future development programme

which is more than double the size

contemplated previously.

Plots acquired and committed before

the housing market downturn in 2008

with an adversely impacted gross

margin represent under 2% of the total

landbank by GDV at 30 June 2014.

This includes less than 1% which has

been subject to impairment.

GROWTH PLANS

Our growth plans are underpinned

by the strength of our landbank, its

contractual and planning status and the

quality of our development locations.

At 30 June 2014, 81% of the projected

profit to be delivered through our

business plans in the next four

years is already owned, contracted

or deal terms are agreed and in

solicitors’ hands. Furthermore, 74%

has a planning consent or has been

identified for residential development

in local plans.

Whilst we have an excellent platform

from which to embark on our first year

of significant volume growth, it is vital

that a change in scale of the business

of this magnitude is achieved in an

efficient and controlled manner. We

don’t wish to build a larger business

which dilutes in any way all the good

things we do and achieve. To that

end, we are currently investing a lot

of time and energy reviewing and

renewing our policies, procedures and

controls to improve how we conduct

our business and ensure best practice

is always applied. Additional oversight

is being provided by our newly formed

internal audit function.

OUTLOOK

In line with the other major

homebuilders, we have experienced

a moderating of housing activity

levels during the summer period to

more sustainable levels than has

been seen at times during the past

year. Nonetheless, the market is in

good health and pricing remains

strong, particularly for quality new

developments in prime locations

where supply has been constrained.

The group is well forward sold and

with the market backdrop as it

currently stands I am very excited

about CALA’s prospects for the year

ahead. 2015 will be our first year of

significant volume growth since our

new business plans were formed and

delivery is underpinned by a strong

development portfolio, well spread

across our eight operating regions.

Finally, I would like to thank all our

hard working teams and business

partners for their vital contribution

during the year. We have enjoyed a

very successful 2014, a superb year

of delivery and a step change in the

shape of the business which reinforces

our position as the UK’s most

upmarket major homebuilder.

20 21

CHIEF EXECUTIVE’S REVIEW (CONTINUED)

MORETON PARK, MORETON-IN-MARSH, GLOUCESTERSHIRE

“HOUSE SALES GROSS MARGIN CLIMBED TO A RECORD FOR THE GROUP OF 22.7% IN THE

12 MONTHS TO 30 JUNE 2014.”

J. GRAHAM G. REID Group Finance Director

FINANCIAL PERFORMANCE REVIEW


TRADING

The group delivered a record profit

before tax and exceptional items of

£27.3 million for the year to 30 June

2014 on revenue, including share of

joint ventures of £294.2 million (2013

full year equivalent: £240.8 million).

The year-on-year revenue increase of

22% was almost entirely due to the

inclusion of Banner for the period

since the acquisition date.

CALA Group legally completed

743 homes during the 12 months

to 30 June 2014, including 62 by

Banner (2013: 850). The fall in the

number of home completions was

mainly due to the delivery of fewer

affordable homes, reducing to 66 in

the year (2013: 156). The delivery of

affordable homes from large sites in

recent years has not been repeated

on any of our developments in 2014

although this trend will reverse in

future years as our growth plans

are realised.

The number of private homes

completed dipped slightly to 677

(2013: 694) but were delivered at

a much higher ASP which increased

sharply to £423,000 (2013:

£335,000) due to a change in site

mix, sales inflation and the influence

of Banner.

House sales gross margin (excluding

the impact of exceptional items)

climbed to a record for the group of

22.7% in the 12 months to 30 June

2014 from 18.8% in 2013. These

figures exclude the impact of the fair

value exercise carried out following

the CALA acquisition in 2013 and

the acquisition of Banner this year. If

included, the impact of the fair value

would increase the house sales gross

margin in 2014 to 24.6%.

This excellent site margin performance

has been driven by strong underlying

land buying assisted by sales price

gains during the year. In addition,

there was a reduced impact of

lower margin legacy sites as they

are worked out of our development

portfolio, with only 15% of revenue in

the year to 30 June 2014 generated

from land acquired before the market

downturn in 2008 and where gross

margins have been adversely affected

as a result (2013: 39%).

Our strong site performance results

in an increase in operating margin to

13.6% (2013 UK GAAP equivalent:

10.2%) although this still reflects

CALA running at below operating

efficiency and accentuated by the

level of current investment to extend

our regional coverage running ahead

of volume delivery. We expect to

approach operational efficiency from

2016 and as a result aim to deliver

an operating margin in line with our

listed peer group.

BANNER ACQUISITION

The Banner acquisition has resulted

in goodwill of £40.1 million which

is shown as an intangible asset

on the group balance sheet at 30

June 2014. This is after fair valuing

Banner’s inventory which resulted

in an increase to the value of stock

and work in progress held at the

acquisition date of £4.9 million.

No value has been ascribed to the

Banner brand which will cease to be

used by the business once existing

developments are complete. Our two

companies have been united under

a single, strong, brand proposition –

CALA – in which we can have a sole

focus in supporting and building and

which is recognised throughout the

industry for quality of design, product

and customer service.

The goodwill therefore essentially

represents a platform value, providing

CALA with a highly capable,

functioning team and extended

business network to help drive and

deliver our growth plans, shortening

the timescale towards operational

efficiency for the group.

FINANCING

As an integral part of the Banner

acquisition and to facilitate the

growth plans that had already been

put in place, the group’s banking

facilities were replaced with a new

£300 million committed five year

senior debt package comprising an

amortising term loan of £100 million

and a revolving credit facility of £200

million. The debt funding has been

secured on more favourable terms

and is provided by a syndicate of six

banks led by the group’s existing debt

provider, Bank of Scotland and also

including Santander and HSBC, both

of whom previously financed Banner.

BALANCE SHEET

The carrying value of the group’s

intangible assets, excluding goodwill,

at 30 June 2014 was £8.6 million

(2013: £8.6 million) and represents

the value of the CALA brand in

Scotland at the time of the acquisition

of CALA. The CALA brand is

considered to have an indefinite life

and is tested for impairment on an

annual basis.

At 30 June 2014, the group held

available for sale financial assets,

being shared equity debtors relating

to 155 homes with an estimated net

recoverable value of £3.0 million

(2013: 121 homes and £2.0 million

respectively). The increase since last

year was mainly due to the inclusion

of Banner for the first time with very

little new shared equity undertaken

during the financial year.

At 30 June 2014 the group had net

debt of £244.6 million (2013: £68.8

million) which comprises net bank

debt of £141.6 million (2013: £40.5

million) and unsecured redeemable

loan notes provided by the group’s

PRIVATE ASP

WEST

MIDLANDS

SOUTH

BANNER

GROUP

EAST£439k

£333k

£330k

£402k

£854K

£423k

22 23

TRINITY PARK, TRINITY, EDINBURGH


shareholders amounting to £110.0

million (2013: £36.0 million). These are

offset by loans due from joint ventures

of £7.0 million (2013: £6.7 million).

The increase in both net bank debt and

loan notes is due to a combination of

the Banner acquisition with £115.0

million of bank debt drawn to repay

Banner’s existing borrowings and

greater investment in land and work in

progress relating to CALA’s expansion

plans. In addition, £4.9 million of

accumulated interest has been added

to the value of the loan notes during

the financial year (2013: £0.9 million).

Inventories include part exchange

properties with a combined net

expected resale value of £6.9 million

(2013: £11.4 million) which has

reduced significantly since last year

and reflective of the changed market

conditions. Land and work in progress,

net of land creditors, has increased

substantially from £143.8 million in

2013 to £426.5 million, again due

to the inclusion of Banner and the

investment in new developments for

CALA’s expansion plans. Land creditors

at 30 June 2014 were £114.7 million

(2013: £70.0 million), of which £52.1

million relates to commitments for sites

not yet acquired or in development at

the year end and therefore capital not

yet employed in the business.

TAXATION

The group’s deferred tax asset relating

to past trading losses stands at £28.8

million (2013: £35.9 million) and

has been partially absorbed through

a combination of the taxable trading

profits earned during the year and a

reduction in the corporation tax rate

applied to 20%.

FINANCIAL RISK AND TREASURY MANAGEMENT

The treasury function is centrally

managed to support the operating

activities of the group, its primary

objective being to manage liquidity

and interest rate risk. Any trading in

financial instruments is prohibited and

hedging is undertaken using simple

risk management products, almost

exclusively interest rate swaps.

The management of liquidity is a

significant risk for the group. It is

essential that cash flow is tightly

managed and borrowing remains

within agreed bank facility limits.

The major variable in maintaining

adequate liquidity is the impact of a

deterioration in the housing market

on cash flow. This is managed by the

collection and monitoring of extensive

market intelligence at a local and

national level, combined with a clear

and effective sales strategy aligned

with the delivery of our financial

plan. This is further supported by a

close working relationship with our

shareholders and debt providers.

Following the acquisition of Banner,

the group increased its interest rate

hedging and extended the duration

to align with the expiry of its new

banking facilities on 21 March

2019. The interest rate hedging has

been effected through six interest

rate swaps with an average value of

£108.4 million over this period at a

blended fixed rate of interest of 1.64%

excluding margin.

The interest rate has been fixed on

an average of 52% of the most recent

projected borrowings profile for the

group from 1 July 2014 to 30 June

2018. However, this is deliberately

skewed to 38% for the first 24 months

and 77% for the remaining two year

period, reflecting our assessment of

where the interest rate risk lies.

At 30 June 2014 net bank debt

of £50.0 million was hedged at a

blended fixed rate of interest of

1.03% excluding margin. The

aggregate fair value of all of the

group’s interest rate swaps at 30

June 2014 was an asset of £834,000

(2013: asset of £322,000).

Direct foreign exchange exposure

is negligible given the nature of

the group’s business activities which

are conducted exclusively in the

United Kingdom.

NET BANK DEBT

2014£141.6m

2013£40.5m

2012£111.7m

Figures for 2012 are CALA Group Limited.

THE COLLECTION, ST QUIVOX, AYRSHIRE

24 25

FINANCIAL PERFORMANCE REVIEW (CONTINUED)

STRATEGIC REPORT

The board monitors the group’s progress by reference to selected KPIs. These KPIs are unaudited.

Comparator KPIs for the prior year are those used in, or derived from, the accounts of CALA Group Limited for the year to

30 June 2013.

KEY PERFORMANCE INDICATORS (KPIs)

STRATEGIC REPORT

Unit completions

(12 months ended 30 June)

743

2014KPI KPI 2014

850

2013 2013Definition, method of calculation and analysis Definition, method of calculation and analysis

The number of homes (private and affordable) legally completed including joint ventures.The total number of homes legally completed by the group during the year was down 13% compared with 2013. The number of affordable homes delivered reduced significantly to 66 (2013: 156) due to the mix and nature of sites developed during the year and the timing of affordable housing delivery on our larger sites. The number of private completions was broadly in line with the previous year at 677 (2013: 694) although this included a contribution of 62 homes from Banner since the acquisition date.

House sales gross margin - %


22.7 18.8 The ratio of gross profit (before exceptional items and excluding IFRS adjustments) to net turnover on total units sold, including joint ventures expressed as a percentage.House sales gross margin for the year reached 22.7%, a record for the group. This was 3.9 percentage points higher than 2013 and driven by a number of factors. The housing market has performed strongly and resultant sales price inflation has contributed to the increase in house sales gross margin. There has been a further reduction in the proportion of lower margin legacy sites acquired before the downturn where margins have been adversely affected as a result. These represented only 15% of housing turnover in the year (2013: 39%). In addition, the housing margin contribution from Banner since the acquisition date has been strong at 23.7%.

Consented landbank - £ million of turnover

2,772

(7,288plots)

1,613

(4,999 plots)

The estimated turnover value generated from land owned or controlled with an outline or detailed planning consent.

The consented landbank has increased substantially during the year, both in terms of number of plots and potential GDV. The ASP has also increased from £323,000 to £380,000. The increase in size of the consented landbank has been driven by the inclusion of Banner and the strategic acquisition of certain key consented sites to underpin our growth plans in the south east of England. In addition, during the year we secured planning permission on 1,573 plots from our strategic landbank, representing GDV of £334 million.

Contracted landbank - £ million of turnover

4,694

(12,690 plots)

3,163

(10,016 plots)

The estimated turnover value generated from land owned or controlled. This includes strategic sites that that have earned a planning status, and where the prospects for achieving a planning consent within a reasonable timescale are strong.

The contracted landbank has increased substantially in the year to 30 June 2014. The number of plots increased by 27% compared with the previous year and this has translated to a 48% rise in total GDV due to an increase in the average selling price to £370,000 (2013: £316,000). The planning status of the contracted landbank is strong with 79% of GDV comprising sites with either a planning consent or an allocation for residential development within an adopted local plan.

Forward sales - % 37 28 The ratio of private homes reserved or better at 30 June for the following year to total budgeted homes for the following year expressed as a percentage. Figures include joint ventures.

Forward sales at 37% equate to 367 private homes and are significantly ahead of the 192 achieved in 2013. The increase has been driven by a contribution of 100 private homes from Banner and an improving housing market resulting in a forward sales position that is well balanced between good visibility over future cash flow and the ability to capture sales price inflation.

Average weekly unit reservations


13.8 14.1 The average number of private homes reserved for sale (net of cancellations) including joint ventures for each week of the financial year.Despite an increase in the number of active selling sites from 25 in 2013 to 29 in 2014, the reservation rate edged down during the financial year. This is reflective of a different site and product mix with fewer homes available for sale during the year but at a significantly higher average selling price.

Average weekly unit reservations per active site


0.48 0.56 The average number of private homes reserved for sale (net of cancellations) including joint ventures for each week of the financial year divided by the average number of active selling sites for each week.The average weekly unit reservation rate per active site edged down to 0.48 in 2014 compared with 0.56 achieved in 2013. The rate of sale during the year was inevitably influenced by the higher number of smaller sites with large homes following the acquisition of Banner. The weekly unit reservation rate is currently lower than the industry average of 0.62 during the year. Nonetheless our sales performance was strong given that the group’s average selling price is considerably higher than the industry average.

Customer satisfaction - score(12 months ended 30 June)

90 92 Overall customer satisfaction with the quality of the homes delivered and the service provided by CALA, both before and after sales, as measured through quarterly customer surveys undertaken by external consultants, In-house Research.

Overall satisfaction score figures do not include Banner for the period since the acquisition date. This measure represents a mean overall satisfaction rating and to achieve in excess of 75 means that a majority of our customers have to be either ‘satisfied’ or ‘very satisfied’. Delivering premium quality homes supported by an excellent customer experience remains a key focus of the group and the directors are pleased that the group has once again achieved a very high overall satisfaction score albeit slightly down on the record score in 2013. Despite being a market leader in this area we strive continually to improve our approach by reviewing our own performance in detail, adapting our processes as a consequence and by sharing new ideas across our regional businesses.

Operating margin on an IFRS basis - % (prior year is UK GAAP equivalent)


13.6 10.2 The ratio of operating profit (before exceptional items) to net turnover, including joint ventures expressed as a percentage.Operating margin in 2014 increased by 3.4 percentage points to 13.6% compared with 10.2% achieved in 2013. The year-on-year increase was due to higher site gross margins as described above, partially offset by higher overhead costs, being the investment in new staff to deliver CALA’s growth plans.

26 27

The operation of the business and the

execution of the group’s strategy are

subject to a number of risks.

The board has in place a risk

management system for the group,

each of its operating divisions and the

IT function. The aim being to highlight,

manage and reduce the principal risks

to which the group is exposed.

Risks are assessed and formally

reviewed on a regular basis to ensure

that the group is fully aware of their

potential impact on the business. The

controls in place to manage identified

risks are also reviewed to ensure that

they remain relevant and effective.

In addition, the subsidiary boards

identify and evaluate the significant

risks applicable to their particular

areas of business together with the

operation of their internal controls.

The risks are assessed and cover all

aspects of the business.

The board considers that the principal

business risks currently affecting the

group are:

HEALTH AND SAFETY

The health and safety at work

of our employees, customers

and subcontractors is a major

consideration of the board and a

high priority on our agenda. We have

a positive and active safety culture

throughout the group and proactively

adapt our work practices to eliminate

safety risks as they are identified. On-

site safety compliance is monitored

and reinforced through an in-house

inspection regime and regular direct

communication with subcontractors.

In addition, a comprehensive training

programme is in place. All Banner

activity has already been fully

integrated into the group’s health

and safety management system, the

first area of the combined business

to complete this post-acquisition

integration task.

LAND SUPPLY

Maintaining a timely and adequate

supply of suitable land that will meet

our development and financial criteria

is essential to deliver the growth

ambitions planned for the group.

The group mitigates its land supply

risk in an increasingly competitive

environment through the adoption of

regional land strategies and annual

targets which are closely monitored

and regularly updated to reflect local

land market conditions. We have in

place high calibre land teams with

the appropriate skills, experience

and motivation and are able to

demonstrate a strong track record of

delivery for land owners. In addition,

our strong financial position provides

us with greater flexibility to secure

more readily land opportunities as they

become available in the land market.

SKILLED TRADESMEN

As CALA and the industry increases

significantly the level of development

activity, a shortage of experienced

skilled tradesmen is an emerging

risk for the business in the on-time

delivery of a high quality product to

our customers. The group mitigates

this risk by managing a portfolio

of approved subcontractors, many

with whom we have long standing

relationships – they understand

our quality requirements and work

positively with us to achieve these.

Our construction and commercial

teams review regularly our

subcontractor base, seeking to add

new partners to supplement our

available resources where necessary.

We provide a safe and organised

working environment that allows our

subcontractors to work efficiently and

we offer competitive rates of pay with

prompt payment.

PLANNING PERMISSION

Securing appropriate planning

permission on development sites in

our contracted landbank and from

our strategic land portfolio is a key

driver in maintaining the continuity

of our development activities and

meeting our growth targets. The

principal risks in this regard relate

to the timing and uncertainty of

securing planning permission. The

group manages its planning risk

by working collaboratively with

all key stakeholders and decision

makers, engaging in extensive local

consultation so that our developments

are sympathetic to the areas in which

we build and to ensure maximum

planning success. The NPPF in

England has started to simplify the

planning process and provides

a much more positive planning

environment for the homebuilding

industry to meet a growing housing

demand. In addition, we incorporate

planning uncertainties into our

business planning as well as running

a surplus of developments in our

planning pipeline to protect against

the risk of refusal or delays arising

from the appeals process.

KEY PERSONNEL

The group’s performance is

significantly impacted by the quality

and expertise of its employees. The

loss of key senior personnel and the

inability to replace their skills and

experience would adversely impact the

group’s results. This risk also extends

to our ability to recruit excellent

people into key positions to lead the

growth and development of our eight

operating regions. In mitigation, the

group offers a positive working culture

and has in place a succession strategy

which includes capability assessments

and development plans for key

individuals. The group also operates

a comprehensive benefits structure

and a performance and personal

development review system which are

updated on a regular basis to ensure

they remain effective.

PREMIUM BRAND AND REPUTATION

Excellent customer service and quality

of product are two of the main

ingredients that underpin CALA’s

premium brand and reputation. These

core qualities are externally measured

by the HBF through the National New

Home Customer Satisfaction Survey

and separately by consultants,

In-house Research. The loss of our

HBF 5 star rating for ‘recommend to a

friend’ would represent a significant


RISK MANAGEMENT

28 29

EMM SQUARE, WOKINGHAM, BERKSHIRE

reputational risk for the group and

may negatively impact our sales

performance. This would also apply to

any material reduction in our In-house

Research quality and service scores.

In mitigation the group has recently

appointed a director responsible

for product and customer service

to review targets, performance and

trends and ensure implementation

of best practice across our operating

regions in these important areas for

the group. Customer service delivery

also forms a material element of

performance related pay for most

employees in the group, in our offices

and on-site.

GROWTH MANAGEMENT

CALA Group has commenced its

journey on a significant growth strategy

which, including the acquisition of

Banner, has seen an increase in the

number of operating regions from

four to eight that is planned to deliver

a three-fold increase in revenue by

2016. Having not previously operated

to this scale, the board recognises

there is a risk that the growth strategy

may not be met and financial returns

are compromised in comparison with

plan. In addition, CALA’s existing

high standards of customer service

and product quality could be diluted

and the value anticipated from the

Banner acquisition not delivered.

This risk is mitigated by having an

appropriate organisational structure

with the requisite skills and resources

to deliver our plans, combined

with the necessary oversight of

operational activity. The group is

currently reviewing all key processes

and controls to ensure they are

sufficiently clear and robust to enable

the business to operate in an effective

and controlled manner.

EMPLOYEES

The acquisition of Banner has

resulted in a 50% increase to our staff

numbers and as envisaged we have

retained within the group almost all of

the roles inherited with that business –

acquiring a talented team to support

our growth plans being amongst the

key rationale for the acquisition.

Delivering our growth plans

requires a significant recruitment,

induction and training effort but at

the same time provides a wealth of

opportunities for our employees.

We have expanded our HR team to

support the volume of recruitment

being undertaken by the business

and to enhance our staff training and

development initiatives. Our induction

process has been further developed

by the launch of a new online

portal to provide easy access to key

information for new employees and to

help them understand CALA’s values

and aspirations.

Our culture is a key ingredient in our

ability to attract and retain excellent

people and for the business to

deliver to its potential. We encourage

people to make a difference, pushing

responsibility and decision-making

further down the organisation in an

open and supportive environment.

We are very mindful of the challenge

we face in a fast growing business to

retain the culture we value so highly

and this will be a key focus of our

senior management team in the year

ahead as we introduce many new

people into the group.

The strength in depth of our senior

teams is a key component of

achieving and sustaining success for

the group. In recognition, our current

talent management programme,

the ‘Future Presence Experience’,

was launched during the year and is

due to complete its first phase in the

next few months. The purpose of the

initiative is to develop the leadership

skills, self-awareness and business

knowledge of our current high

potential managers and directors.

We encourage all staff to take

responsibility for their own

development and this is supported

by line managers through the annual

performance appraisal process. We

invest in training for all staff which

is identified through this process in

addition to group-wide core training

initiatives for our key teams. This

training is delivered from a variety

of sources including on-the-job

coaching, external courses and

e-learning packages. The training

is focused and ensures that our

employees have a breadth and depth

of skill, knowledge and experience

to carry out their role effectively. We

remain committed to supporting

our staff through further education

qualifications and this helps us in

our plan to retain and develop

our workforce.

We promote from within where

possible and ensure that

remuneration packages are

competitive and understood through

benchmarking and individual total

reward statements. We operate an

online HR portal which empowers

employees to take control of their

personal data at any time and

from any place that is able to access

our systems.


CORPORATE RESPONSIBILITY

KINSBROOK, BROOKS GREEN, WEST SUSSEX

30 31

RISK MANAGEMENT (CONTINUED)

EMPLOYEES (CONTINUED)

We believe it is essential to engage

and communicate effectively with

our staff and to that end we provide

regular updates on operational

developments and the financial

performance of the group using

e-mail and our intranet. We also have

a dedicated email address that any

member of staff can use at any time

to submit questions to the board.

Regular staff briefings are hosted

at our regional and head offices. In

addition, we bring all our employees

together for an annual briefing. This

is an extremely important event for

our staff and provides an opportunity

for them to hear about the group’s

plans and vision for the future. It is

also an opportunity for staff to ask

questions about the business and the

directors encourage this open and

direct communication.

Individually and collectively, the directors

visit our operating regions and sites

frequently and engage with employees

on a one-to-one basis in order to assess

directly operational performance.

Being acutely aware of the many

skills lost to the industry over the past

few years and our growing need for

new talent in the business we accept

university student placements and

have continued to work with local

schools to help young people gain

work experience which also includes

our partnership with the charity

Career Academies UK. This year

we are increasing the number of

apprentices and graduates in the

business, in our offices and on-site,

and will be developing a more

structured approach to nurture their

development and maximise their

potential for the benefit of the group

and the industry.

Applications for employment by

disabled persons are always fully

considered, bearing in mind the

respective aptitudes and abilities

of the applicant concerned. In the

event of members of staff becoming

disabled, every effort is made

to ensure that their employment

with the group continues and the

appropriate training is arranged. It

is the policy of the group that the

training, career development and

promotion of a disabled person

should, as far as possible, be

identical to that of a person who

does not suffer from a disability.

HEALTH AND SAFETY

The health and safety of our

employees, subcontractors and

customers is always the first concern

of the board and we are committed to

ensuring that everyone who visits our

sites and offices is able to carry out

their duties safely.

The group operates a comprehensive

health and safety management

system, which includes monitoring,

staff training and management

reporting. Regular on-site inspections

are carried out by our own qualified

staff who also provide forward

planning and coaching support to

our site teams. We have recently

expanded our internal health and

safety team to allow for the increase

in development activity following the

Banner acquisition.

All health and safety issues, including

matters arising from on-site

inspections, are reported to the board

for consideration on a regular basis.

We remain vigilant at all times and

continue to be both proactive and

reactive in taking appropriate action

to address new health and safety risks

as they are identified.

Although the board has a zero-

accident target it is satisfied with the

overall health and safety performance

during the year. CALA’s Annual Injury

Incidence Rate (‘AIIR’) for the year to

31 March 2014 was 228 incidents

per 100,000 employees (2013: 203)

which reflects a similar number of

injuries reportable under RIDDOR at

6, but from lower site activity.

Whilst the injury reporting criteria

under RIDDOR was extended to ‘over

7 days’ with effect from 6 April 2012,

CALA continues to record, investigate

and report internally, all ‘over 3 day’

injuries. In addition and reflecting

our proactive approach to health and

safety, all near misses and first aid

incidents are recorded and analysed

to identify any trends and ensure

these do not become future accidents.

Our commitment to maintaining the

highest standards of health and safety

is reinforced by the investment we

make in ensuring our own staff and

subcontractors are fully aware of their

responsibilities and that they have the

resources, knowledge and capability

to carry out their roles safely. To that

end in the 12 months to 30 June

2014, we maintained the number

of health and safety training days

delivered at 477 (2013: 477).

Continual improvement is the essence

of how we manage health and safety

in the group. Key initiatives introduced

this year included further work with

subcontractors on avoiding existing

services on-site, behavioural safety

training and enhanced training

for our own directly employed

operatives to better support our site

management teams.

There were no HSE Enforcement

Notices issued to any of our sites

for non-compliance with health and

safety legislation.

Disappointingly, one major injury was

reported during the year to 30 June

2014 (2013: nil) although fortunately

not serious in nature. There were no

fatalities (2013: nil).

The day-to-day management of all

health and safety activities is


CORPORATE RESPONSIBILITY (CONTINUED)

ALBERT DOCK, LEITH, EDINBURGH

32 33

HEALTH AND SAFETY (CONTINUED)

conducted by our director of health

and safety. Graham Reid is the main

board director responsible for health

and safety throughout the group.

SUSTAINABLE DEVELOPMENT AND THE ENVIRONMENT

CALA is committed to the principle of

delivering sustainable developments,

maximising the use of land and

natural resources, minimising our

impact on the environment while we

work and creating attractive, well

designed places in the local areas in

which we operate.

CALA’s renowned design is

encapsulated in our award winning

Signature Collection housetypes

in Scotland and the flexible living

options offered by our range of

homes in England. These are

supplemented by bespoke, one-

off designs to ensure that all our

developments are sympathetic to

local architectural heritage, reflective

of the vernacular of surrounding

properties and where a strong sense

of community spirit can thrive.

However, rather than design

our developments in isolation,

we recognise the importance of

engaging and working closely with

local communities, interest groups

and Local Authorities at the earliest

possible stage of the planning

process. We believe strongly in the

benefit this brings to facilitating a

better understanding and greater

support for our development plans

and for us to appreciate fully the

things that matter most to local

people. Our ability to be flexible and

to promote the right development

solutions for each site is a key

factor in obtaining community and

Local Authority approval for our

proposals and our approach is often

commended as a result.

We adopt a ‘fabric first’ approach

to design and construction and aim

to deliver energy efficient living with

a focus on the thermal performance

of our homes. We also incorporate

renewable technologies in our drive

towards zero carbon homes. 75

homes legally completed during

the year to 30 June 2014 were

constructed with renewable energy

components (2013: 159) that

included solar PV, solar thermal and

air source heating.

During the year, the group

introduced a new environmental

management system in order to

ensure our development teams and

subcontractors apply best practice

and that we are always in compliance

with environmental laws. This is

particularly important where the

risks from our site operations to

wildlife, water courses, neighbouring

land and property and from ground

contamination are at their highest.

During the 12 months to 30

June 2014 we legally completed

501 homes on brownfield land

representing 67% of all legal

completions in the year (2013: 664

homes and 78%). 66 (2013: 156)

new affordable homes were delivered

to housing associations in the last 12

months, although this is planned to

increase markedly from 2016 as the

group undertakes a greater number

of developments with more larger

sites in line with its expansion plans.

76% of all legal completions in

the year were houses compared

with 62% a year ago. This change

was driven by the lower number of

affordable homes delivered, the

majority of which are apartments. In

addition, fewer private apartments

were delivered from larger sites like

Grovewood Hill, Edinburgh and

Nascot Grange, Watford which either

completed in 2013 or during 2014

with residual levels of output.

Waste recycling of building materials

from sites is an important part of our

sustainability programme. During

the 12 months to 30 June 2014 the

proportion of construction waste

recycled from our sites was similar

to last year at 88% (2013: 90%).

The total waste sent to landfill in the

year was down slightly at 652 tonnes

compared with 684 tonnes in 2013.

The Strategic Report was approved by

the board on 10 October 2014.

MOIRA R. SIBBALDGroup Company Secretary

KINSBROOK, BROOKS GREEN, WEST SUSSEX

STRATEGIC REPORT

CORPORATE RESPONSIBILITY (CONTINUED)

34

DIRECTORS’ REPORT

MEETINGS

The board of CALA Group (Holdings)

Limited met 11 times during the

financial year to 30 June 2014.

INTERNAL CONTROL

The board is responsible for the

group’s system of internal control and

also for reviewing its effectiveness.

The board has monitored the

effectiveness of the system of internal

control throughout the year and has

initiated a group-wide review of

processes, procedures and controls

to ensure they are ‘fit for purpose’ in

anticipation of the change in scale of

the business.

The board acknowledges that it

has a responsibility to establish,

maintain and monitor a system of

internal control relating to operations,

financial and compliance matters

and risk management. The Audit

Committee maintains an overview

of the effectiveness of the system of

internal control and risk management

and reports to the board accordingly.

In order to increase the level of

assurance around the group’s system

of internal control, an internal audit

function has been established that

will evaluate the adequacy and

effectiveness of CALA’s governance,

risk management, and internal control

processes. An internal audit charter

has been adopted that covers the

operating framework for the delivery

of the internal audit service. The

Director of Internal Audit will report

functionally to the Audit Committee

and administratively to the General

Counsel & Group Company Secretary.

During the year, the Audit Committee

approved the group’s first strategic

annual and 3-year internal audit

plans which set out a programme

of reviews that focus on the key

risks and priorities across the group.

A full internal audit programme

will be delivered in the new financial

year and the first reviews have

been completed.

The Director of Internal Audit

will report on key findings,

recommendations and management

actions to the Audit Committee for

review and discussion. Follow-up and

escalation processes will be put in

place to ensure that agreed actions

are implemented and improvements

embedded fully in a timely manner.

CORPORATE GOVERNANCE

The group is committed to achieving

and maintaining a high standard of

corporate governance and although

The directors of CALA Group (Holdings) Limited present their report and the audited

consolidated financial statements for the period ended 30 June 2014.

THE MEADOWS, KING’S SUTTON, OXFORDSHIRE36

CORPORATE GOVERNANCE (CONTINUED)

not a listed company, the board had

regard to the provisions of the UK

Corporate Governance Code in the

way in which it operated throughout

the year.

ORGANISATION STRUCTURE

An Executive board dealing with

matters of policy and an Operations

board responsible for delivery of the

group’s business strategy are in place.

The group is organised into eight

regional divisions which are separate

business units. These divisions are

run by local boards of directors and

include the Group Chief Executive

and Group Finance Director. Clear

reporting lines have been put in

place as well as appropriate levels

of delegation with major decisions

being escalated to the Operations or

Executive boards.

A Contract Authority Group is in

place which includes the Group

Chief Executive, Group Finance

Director, Group Land Director and

the two Regional Chairmen. This

body provides an important control

by reviewing and sanctioning all

land acquisition and development

commencement proposals following a

rigorous due diligence process by the

regional teams.

WHISTLEBLOWING POLICY

This policy has put in place a

confidential method of communication

for employees to raise matters of

concern and for such matters to

be properly and independently

investigated. It is the role of the

Chairman of the Audit Committee to

oversee this policy and to act as one

of the channels of communication in

the event of a matter being raised.

ANTI-CORRUPTION POLICIES

The group has an anti-money

laundering policy and an anti-bribery

policy with relevant ancillary policies

and processes including those dealing

with gifts, hospitality and expenses.

These have been reviewed during

the year. In addition to bringing

the policies to the attention of all

staff and suppliers of services to the

group, from August 2013 all staff

have been required to undertake an

online training module covering the

Bribery Act and further appropriate

training using a risk based approach

continues to ensure that all staff,

including the non-executive directors,

are aware of the legislation and the

zero tolerance approach taken by the

group. In addition, regular training on

the anti-money laundering processes

is undertaken by all sales staff.

COMPETITION POLICY

The group’s competition manual

containing the policy and procedures

to ensure compliance with competition

legislation was reviewed and reissued

during the year.

BOARD COMMITTEES

The board has delegated certain

responsibilities to board committees

with agreed terms of reference.

These committees report regularly

to the board.

1. The Audit Committee is chaired by

Jonatas Szkurnik and Phil Bayliss is

a member of the Committee. The

Audit Committee meets at least three

times per year. The Audit Committee

assists the board in fulfilling its

overview responsibilities relating

primarily to consideration of the

financial information being reported,

the systems of internal control, risk

management and the audit process.

The Group Finance Director, the

General Counsel & Group Company

Secretary and the Director of Internal

Audit attend all meetings. The external

auditors attend at least two meetings

per year. The committee met five times

during the financial year.

2. The Remuneration Committee

is chaired by Anthony Fry. In

his absence this role has been

undertaken by Mark Collins. Paul

Stanworth sat on the committee

until his resignation in June

2014 and has been replaced by

John Pollock. The Group Chief

Executive is also a member of

the Committee. The Human

Resources Director, the Group

Finance Director and the General

Counsel & Group Company

Secretary attend, as appropriate,

at the request of the Committee

Chairman. The Committee

meets at least twice per year

and ensures that the executive

directors and senior management

are appropriately rewarded

having regard to the financial

performance of the group. During

the financial year the Committee

met on nine occasions.

GOING CONCERN

The consolidated balance sheet at 30

June 2014 shows the group had net

assets of £207.3 million.

The group’s most recent financial

projections show that for the

foreseeable future net assets remain

in a positive position at each financial

year end. In addition, forecast debt

requirements are comfortably within

existing committed banking facilities

which expire on 21 March 2019 and

the group is forecasting to be able to

comply with its banking covenants at

each appropriate test date.

As a result, the projected trading

position for the group enables the

directors to form a judgment that the

company and group have adequate

resources to continue to trade for the

foreseeable future and that the group

will be able to realise its assets and

discharge its liabilities in the normal

course of business.

For these reasons the directors believe

it is appropriate to continue to adopt

the going concern basis in preparing

the financial statements.

PENSION SCHEME

The group operates a defined benefit

pension scheme which is contracted

in to the State Second Pension (‘S2P’).

The CALA Retirement and Death

Benefits Scheme (‘the Scheme’) is

closed to new entrants but remains

open to future accrual for existing

members. The Scheme uses a career

average revalued earnings basis for

future accrual of members’ benefits at

a rate of 1/80th of pensionable salary.

The most recent Triennial Valuation

was carried out as at 6 April 2012

and agreement reached with the

Trustees of the Scheme on a new

recovery plan to eliminate the deficit

by December 2018. The cost of future

accrual for the Scheme is 18.8%

of pensionable salary, of which

employees contribute 5.0%.

The group has continued to comply

fully with the Scheme recovery plan and

has made special deficit contributions

into the Scheme during the 12 months

to 30 June 2014 of £1.0 million and a

further payment of £0.5 million since

the balance sheet date.

During the year, the Trustees,

in consultation with the group,

implemented a change in the

investment strategy of the Scheme

DIRECTORS’ REPORT DIRECTORS’ REPORT

NASCOT GRANGE, WATFORD, HERTFORDSHIRE

38 39

PENSION SCHEME (CONTINUED)

to reduce risk and funding volatility.

The growth asset allocation has

been reduced, the corporate bond

funds switched to a more diversified

credit portfolio and a Liability Driven

Investment (‘LDI’) allocation introduced.

The group provides a defined

contribution pension scheme for new

employees operated by Standard

Life. The contribution rate is 3.0% of

pensionable salary from employees

and 7.0% from the company. The

performance of the CALA Flexible

Retirement Plan is monitored by a DC

Governance Committee comprising

senior staff and directors and is

advised by external consultants.

DIVIDENDS

No dividends have been proposed or

paid in the period.

POLITICAL AND CHARITABLE CONTRIBUTIONS

Contributions to charities during the

period amounted to £22,688. These

donations were made to various

local charities covering a range of

charitable purposes. The group made

no political contributions during

the period.

DIRECTORS

The names of the current directors

and changes in directorships during

the year are listed on page 42.

At the date of this report the board

comprises two executive and five

non-executive directors. Anthony

Fry is Non-Executive Chairman.

Mark Collins is Acting Chairman

while Anthony Fry is absent from the

business through illness.

All directors have access to the advice

of the General Counsel & Group

Company Secretary who ensures that

the board, which meets at least six

times per year, receives appropriate

information for its decision-making,

that the board procedures are

followed and that the statutory

requirements are met.

There is a procedure whereby any

director who wishes to do so in the

furtherance of his duties may take

independent professional advice.

As permitted by the Articles of

Association, the directors have the

benefit of an indemnity which is

a qualifying third party indemnity

provision as defined by Section 234

of the Companies Act 2006. The

indemnity was in force throughout the

last financial year and is currently in

force. The company also purchased

and maintained throughout the

financial year Directors’ and Officers’

liability insurance in respect of itself

and its directors.

INDEPENDENT AUDITORS AND DISCLOSURE OF INFORMATION TO AUDITORS

Each director, as at the date of this

report, has confirmed that insofar as

they are aware there is no relevant

audit information (that is, information

needed by the company’s auditors

in connection with preparing their

report) of which the company’s

auditors are unaware, and they have

taken all the steps that they ought

to have taken as a director in order

to make themselves aware of any

relevant audit information and to

establish that the company’s auditors

are aware of that information.

The auditors, PricewaterhouseCoopers

LLP, have indicated their willingness

to continue in office, and their

appointment will continue.

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 prepared the

group and parent company financial

statements in accordance with

International Financial Reporting

Standards (IFRSs) as adopted by the

European Union. 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 the company and of the

profit or loss of the group for that

period. In preparing these financial

statements, the directors are

required to:

• select suitable accounting policies

and then apply them consistently;

• make judgements and accounting

estimates that are reasonable

and prudent;

• state whether applicable IFRSs as

adopted by the European Union

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

company will continue in business.

The directors are responsible for

keeping adequate accounting records

that are sufficient to show and explain

the company’s transactions and

disclose with reasonable accuracy

at any time the financial position

of the company and 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 the group

and hence for taking reasonable steps

for the prevention and detection of

fraud and other irregularities.

The Directors’ Report was approved

by the board on 10 October 2014.

MOIRA R. SIBBALDGroup Company Secretary

DIRECTORS’ REPORT DIRECTORS’ REPORT

THE BLUEBELLS, PEBWORTH, WORCESTERSHIRE

40 41

1. JONATAS SZKURNIK Non-Executive Director

Jonatas joined Patron in August

2007 and works on Patron’s direct

investments in real estate, asset

backed operating companies and

corporate investments. During his time

with Patron, he has been involved

in investments in the residential,

commercial and healthcare sectors.

Jonatas was appointed to the CALA

board in 2013.

2. A. MARK COLLINS Acting Chairman & Non-Executive Director

Mark is a partner of Patron Capital

Advisers LLP and Chairman of its UK

investment activity. Mark is a chartered

surveyor and has held a number of

senior positions in the UK real estate

market with GE Capital Real Estate,

Land Securities Group Plc and Lloyds

Banking Group. Mark joined the CALA

board in 2013.

3. ALAN D. BROWN Chief Executive

Alan joined CALA in 1986 as a

development manager and held a

range of positions including Divisional

Managing Director before being

appointed to the Group Board in

2007 as Regional Chairman of CALA

Homes in England. In 2008, Alan

was appointed Managing Director

for CALA Homes across the UK and

promoted to Chief Executive in 2009.

4. PHIL BAYLISS Non-Executive Director

Phil joined the Legal & General Real

Estate division in 2007 and was

promoted to Investment Manager

of Direct Investments in 2013. He

previously held roles within AMP

Capital Investors and has specialised

in real estate investments since the

start of his career. Phil was appointed

to the CALA board in 2013.

5. ANTHONY M. FRY Chairman

Anthony has more than 30 years’

experience in advising companies

and governments in both the UK

and internationally. He has held senior

roles for leading financial institutions

including Lehman Brothers, Credit Suisse

and the Rothschild Group. Anthony

joined the CALA board in 2010.

6. J. GRAHAM G. REID Group Finance Director

Following various financial roles with

TDG Plc and Thomson Travel Group,

Graham joined CALA in 1995 as

Divisional Finance Manager. He was

promoted to Finance Director of

CALA Group in 2001. Graham is

a former Chairman of the Scottish

Finance Directors Group and ACCA

Scotland President.

7. MOIRA R. SIBBALD General Counsel & Group Company Secretary

Moira joined CALA as Group

Company Secretary in 2001.

Previously she worked in a senior

capacity for a Scottish financial

services institution and in private

practice for leading firms in

Edinburgh and Glasgow specialising

in commercial property. Moira was

formerly a Non-Executive Director of

the Scottish Building Society and of the

Link Group.

8. JOHN B. POLLOCK Non-Executive Director

John joined Legal and & General in

1980 and worked his way up through

a variety of roles to be appointed CEO

of Legal & General Assurance Society

in 2013. He joined the CALA board

in 2014. John is also Chairman of

Cofunds Ltd and Deputy Chair of the

FCA Practitioner Panel.

REGISTERED OFFICE

CALA House

54 The Causeway

Staines-Upon-Thames,

Surrey, TW18 3AX

ADVISERS

PRINCIPAL BANKERS Bank of Scotland

The Mound,

Edinburgh, EH1 1YZ

INDEPENDENT AUDITORS PricewaterhouseCoopers LLP

Atria One

144 Morrison Street,

Edinburgh, EH3 8EX

PRINCIPAL SOLICITORS Pinsent Masons LLP

Princes Exchange

1 Earl Grey Street,

Edinburgh, EH3 9AQ

43

DIRECTORS AND ADVISERS

7 8

2

5 6

43

1

42

Year ended 30 June 2014 Period ended 30 June 2013 Before Exceptional Before Exceptional exceptional items Year ended exceptional items Period ended items (note 2) 30 June 2014 items (note 2) 30 June 2013 Note £000 £000 £000 £000 £000 £000

Continuing operations Revenue 1 285,438 - 285,438 93,978 - 93,978Cost of sales (218,696) 1,974 (216,722) (69,931) - (69,931)

Gross profit 66,742 1,974 68,716 24,047 - 24,047

Net operating expenses 3 (28,988) (4,651) (33,639) (12,453) (9,008) (21,461)Other operating income - - - 191 - 191 Operating profit/(loss) 37,754 (2,677) 35,077 11,785 (9,008) 2,777 Finance income 210 - 210 377 - 377Finance costs (11,914) (1,676) (13,590) (2,132) - (2,132) Finance costs - net 5 (11,704) (1,676) (13,380) (1,755) - (1,755)

Share of post tax profit of joint ventures 12 1,281 - 1,281 547 - 547 Profit/(loss) before income tax 27,331 (4,353) 22,978 10,577 (9,008) 1,569

Income tax expense 6 (9,572) - (9,572) (2,426) - (2,426) Profit/(loss) for the period 17,759 (4,353) 13,406 8,151 (9,008) (857)

Profit/(loss) attributable to: Owners of the parent 17,771 (4,353) 13,418 8,151 (9,008) (857)Non-controlling interests (12) - (12) - - - 17,759 (4,353) 13,406 8,151 (9,008) (857)

Other comprehensive income Profit/(loss) for the period 17,759 (4,353) 13,406 8,151 (9,008) (857) Other comprehensive income Items that will not be reclassified to profit or loss Remeasurements of post employment benefit obligations 21 (4,338) - (4,338) (1,447) - (1,447) Other comprehensive income for theperiod, net of tax (4,338) - (4,338) (1,447) - (1,447) Total comprehensive income for the period 13,421 (4,353) 9,068 6,704 (9,008) (2,304)

Attributable to: Owners of the parent 13,433 (4,353) 9,080 6,704 (9,008) (2,304)Non-controlling interests (12) - (12) - - - Total comprehensive income for the period 13,421 (4,353) 9,068 6,704 (9,008) (2,304)

The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company profit and loss account. The profit for the parent company for the period was £2.2 million. The notes on pages 57 to 81 are an integral part of these consolidated financial statements. The figures and financial information contained in this report do not constitute the statutory financial statements for the year ended 30 June 2014 or period ended 30 June 2013. Those financial statements have been reported on by the group’s auditors, PricewaterhouseCoopers LLP, and have been delivered to the Registrar of Companies. The reports of the auditors on the year ended 30 June 2014 and the period ended 30 June 2013 were unqualified; did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their reports; and did not contain a statement under section 498(2) of the Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with records and returns) or section 498 (3) of the Companies Act 2006 (failure to obtain necessary information and explanations).

Group Group Company Company 2014 2013 2014 2013 Note £000 £000 £000 £000Assets Non-current assets Intangible assets 7 48,730 8,586 - -Property, plant and equipment 8 2,579 1,800 - -Investments in subsidiaries 11 - - 90,643 90,643Investments in joint ventures 12 623 5,079 - -Deferred income tax assets 18 29,093 36,808 - -Available for sale financial assets 9 2,981 2,019 - -Derivative financial instruments 14 834 322 - -Trade and other receivables 13 415 350 - - 85,255 54,964 90,643 90,643

Current assets Inventories 10 548,065 225,275 - -Trade and other receivables 13 20,299 17,415 110,911 5,070Cash and cash equivalents 29,188 24,442 - - 597,552 267,132 110,911 5,070

Total assets 682,807 322,096 201,554 95,713 Current liabilities Loans and borrowings 15 - (102) - -Current income tax liabilities (355) (54) - -Trade and other payables 16 (130,988) (83,139) - -

(131,343) (83,295) - - Non-current liabilities Loans and borrowings 15 (280,783) (99,870) - -Trade and other payables 16 (56,858) (41,488) - -Retirement benefit obligations 21 (6,532) (2,860) - - (344,173) (144,218) - -

Total liabilities (475,516) (227,513) - - Net assets 207,291 94,583 201,554 95,713

Equity Ordinary share capital 19 4,349 4,246 4,349 4,246Share premium 195,004 91,467 195,004 91,467Retained earnings 6,776 (2,304) 2,201 - Equity attributable to parent 206,129 93,409 201,554 95,713Non-controlling interest 1,162 1,174 - - Total equity 207,291 94,583 201,554 95,713

The notes on pages 57 to 81 are an integral part of these consolidated financial statements. The financial statements on pages 44 to 81 were approved by the Board of Directors on 10 October 2014 and signed on its behalf by Alan D. Brown, Director and J. Graham G. Reid, Director.

CALA GROUP (HOLDINGS) LIMITED

CONSOLIDATED BALANCE SHEETat 30 June 2014


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 30 June 2014

44 45

Non Share Share Retained controlling Total capital premium earnings Total interest equityGroup £000 £000 £000 £000 £000 £000 Balance at 4 March 2013 - - - - - -Issuance of ordinary shares 4,246 91,467 - 95,713 - 95,713Acquisition of subsidiary - - - - 1,174 1,174Loss for the period - - (857) (857) - (857)Other comprehensive income - - (1,447) (1,447) - (1,447) Balance at 30 June 2013 4,246 91,467 (2,304) 93,409 1,174 94,583

Issuance of ordinary shares 103 103,537 - 103,640 - 103,640Profit for the year - - 13,418 13,418 (12) 13,406Other comprehensive income - - (4,338) (4,338) - (4,338) Balance at 30 June 2014 4,349 195,004 6,776 206,129 1,162 207,291

Non Share Share Retained controlling Total capital premium earnings Total interest equityCompany £000 £000 £000 £000 £000 £000 Balance at 4 March 2013 - - - - - -Issuance of ordinary shares 4,246 91,467 - 95,713 - 95,713Profit for the period - - - - - -Other comprehensive income - - - - - - Balance at 30 June 2013 4,246 91,467 - 95,713 - 95,713 Issuance of ordinary shares 103 103,537 - 103,640 - 103,640Profit for the year - - 2,201 2,201 - 2,201Other comprehensive income - - - - - - Balance at 30 June 2014 4,349 195,004 2,201 201,554 - 201,554


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY for the year ended 30 June 2014


CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2014

Year ended Period ended 30 June 30 June 2014 2013 Notes £000 £000 Cash flows from operating activities Cash (used in) / generated from operations A (35,539) 12,090 Interest paid (13,308) (821)Interest received - 7Corporation tax paid (659) -

Net cash (used in) / generated from operating activities (49,506) 11,276 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (81,191) (55,250)Deferred consideration (20,000) -Purchases of property, plant and equipment (828) (24)Dividends received from joint ventures 5,740 -

Net cash used in investing activities (96,279) (55,274) Cash flows from financing activities Proceeds from issuance of ordinary shares 103,640 90,643Advance of loans to joint ventures (212) (256)Repayment of loans from joint ventures - 1,981Proceeds from issuance of fixed rate loan notes 74,913 35,070Repayment of bank loans (133,708) (134,894)Drawdown of bank loans 106,000 74,800Proceeds received for financing transaction costs - 12,720Financing transaction costs - (11,726)

Net cash generated from financing activities 150,633 68,338 Net increase in cash and cash equivalents 4,848 24,340Cash and cash equivalents at the beginning of the period 24,340 -

Cash and cash equivalents at the end of the period 29,188 24,340

46 47





Year ended Period ended 30 June 30 June 2014 2013A. Cash generated from operations £000 £000 Profit before income tax 22,978 1,569Adjustments for: Finance costs - net 13,380 1,755 Share of profit from joint ventures (1,281) (547)Negative goodwill on acquisition - (3,712)Depreciation charge 830 196Loss on disposal of fixed assets 14 -Excess of contributions paid over pension current service cost (997) 106Movements in working capital: (Increase) / decrease in inventories (120,922) 13,325(Increase) in trade and other receivables (1,732) (183)Increase / (decrease) in trade and other payables 52,346 (204)(Increase) in available for sale financial assets (155) (215) Cash (used in) / generated from operations (35,539) 12,090

B. Reconciliation of net cash flow to net debt £000 £000 Increase in cash in the year 4,848 24,340Net debt excluding cash & overdrafts acquired with subsidiaries (133,708) (116,423)Cash inflow from decrease in amounts owed by joint ventures 212 (1,725)Issuance of loan notes (74,913) (35,070)Proceeds from borrowings (106,000) -Net repayment of bank loans 133,708 60,094 Change in net debt resulting from cash flows (175,853) (68,784) Net debt as at 1 July / 4 March 2013 (68,784) - Net debt as at 30 June (244,637) (68,784)

C. Analysis of net debt As at On Cash As at 1 July acquisition flow 30 June 2013 2014 Cash and cash equivalents : £000 £000 £000 £000 Cash at bank and in hand 24,442 6,611 (1,865) 29,188Bank overdrafts (102) - 102 - 24,340 6,611 (1,763) 29,188

Loans : Amounts owed by joint ventures 6,746 - 212 6,958 Debt : Bank loans (64,800) (133,708) 27,708 (170,800)Loan notes (35,070) - (74,913) (109,983) (99,870) (133,708) (47,205) (280,783) Net debt (68,784) (127,097) (48,756) (244,637)

48 49


STATEMENT OF ACCOUNTING POLICIES for the year ended 30 June 2014



CALA Group (Holdings) Limited (‘the company’) and its subsidiaries (together, ‘the group’) are a national homebuilder. The Company is

a limited company and is incorporated and domiciled in the UK. The address of the registered office is CALA House, 54 The Causeway,

Staines-Upon-Thames, Surrey, TW18 3AX.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies

have been consistently applied.

BASIS OF PREPARATION

The consolidated financial statements of CALA Group (Holdings) Limited have been prepared in accordance with International Financial

Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), the Companies Act 2006 that applies to companies

reporting under IFRS, and IFRIC interpretations. The consolidated financial statements have been prepared under the historical cost

convention, as modified by the revaluation of available-for-sale financial assets and financial assets and liabilities (including derivative

instruments) at fair value through profit or loss. The consolidated financial statements are presented in sterling (£) which is the group’s

functional and presentational currency.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires

management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of

judgement or complexity are particularly around the carrying value of land and work in progress, future sales volumes and margins on

sites. These judgements have been carefully made based on all available internal information and supported by information from various

external sources where appropriate.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

a) New and amended standards adopted by the group

The group has adopted the following new standards and amendments to standards which became effective for financial years beginning

on or after 1 January 2013. None of these standards or amendments have had a material impact on these financial statements.

• IFRS 13, ‘Fair value measurement’

• Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on offsetting financial assets and financial liabilities

• Amendment to IAS 12, ‘Income taxes’ on deferred tax

b) New standards and interpretations not yet adopted

The following pronouncements may have a significant effect on the group’s financial statements but are not applicable for the year ending

30 June 2014 and have not been applied in preparing these financial statements. Except as disclosed below, the full impact of these

accounting changes is being assessed by the group.

• IFRS 10 ‘Consolidated Financial Statements’, effective annual periods beginning on or after 1 January 2014. The objective of IFRS 10

is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more

other entities to present consolidated financial statements. It defines the principle of control, and establishes controls as the basis for

consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must

consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements.

• IFRS 11 ‘Joint Arrangements’, effective annual periods beginning on or after 1 January 2014. IFRS 11 provides a more realistic

reflection of joint arrangements by focusing on the rights and obligations of the parties to the arrangement rather than its legal

form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has

rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and

expenses. Joint ventures arise where the joint venture has rights to the net assets of the arrangement and therefore equity accounts for

its interest. Proportional consolidation of joint ventures is no longer allowed.

• IFRS 12 ‘Disclosure of Interests in Other Entities’, effective annual periods beginning on or after 1 January 2014. IFRS 12 includes the

disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles

and other off balance sheet vehicles.

• IAS 28 (Revised 2011) ‘Associates and joint ventures’, effective annual periods beginning on or after 1 January 2014. IAS 28 (revised

2011) includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (CONTINUED)

• Amendment to IAS 32, ‘Financial instruments:Presentation’, on offsetting financial assets and financial liabilities, effective annual

periods beginning on or after 1 January 2014. This amendment updates the application guidance in IAS 32, ‘Financial instruments:

Presentation’, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

• Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures, effective annual periods beginning on or after 1

January 2014. These amendments address the disclosure of information about the recoverable amount of impaired assets if that

amount is based on fair value less costs of disposal.

• Amendment to IAS 19 regarding defined benefit plans. These narrow scope amendments apply to contributions from employees

or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are

independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed

percentage of salary. At the date of this report the amendment has not yet been endorsed by the EU.

• IFRS 9 ‘Financial Instruments’, effective annual periods beginning on or after 1 January 2015. IFRS 9 is the first standard issued as

part of a wider project to replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary

measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business

model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets

and hedge accounting continues to apply. At the date of this report the standard has not yet been endorsed by the EU.

• Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an interest in a joint operation, effective annual periods beginning on

or after 1 January 2016. This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation

that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. At the date of this

report the amendment has not yet been endorsed by the EU.

• Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ’Intangible assets’, on depreciation and amortization, effective

annual periods beginning on or after 1 January 2016. In this amendment the IASB has clarified that the use of revenue based methods

to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset

generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that

revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an

intangible asset. At the date of this report the amendment has not yet been endorsed by the EU.

• IFRS 15 ‘Revenue from contracts with customers’, effective annual periods beginning on or after 1 January 2017. IFRS 15, ‘Revenue

from contracts with customers’ is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the

financial reporting of revenue and improve comparability of the top line in financial statements globally. At the date of this report the

amendment has not yet been endorsed by the EU.

• Amendments to IFRS 9,‘Financial instruments’, regarding general hedge accounting, effective annual periods beginning on or after

1 January 2018. These amendments to IFRS 9, ‘Financial instruments’, bring into effect a substantial overhaul of hedge accounting

that will allow entities to better reflect their risk management activities in the financial statements. The amendment has not yet been

endorsed by the EU.

GOING CONCERN

The directors have prepared these financial statements on the going concern basis.

The consolidated balance sheet at 30 June 2014 shows the group had net assets of £207.3 million.

The group’s most recent financial projections show that for the foreseeable future net assets remain in a positive position at each financial year

end and the group is able to comply with its banking covenants at each test date. In addition, the financial projections have been sensitised to

assess the impact of poorer market conditions on the profit and loss account, borrowings profile, balance sheet and financial covenants.

As a result the projected trading position for the group and associated sensitivity analysis enables the directors to form a judgment that the

company and group have adequate resources to continue to trade for the foreseeable future and that the group will be able to realise its

assets and discharge its liabilities in the normal course of business.

For these reasons the directors believe it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

50 51





BASIS OF CONSOLIDATION AND GOODWILL

The consolidated financial statements comprise those of the company and all its subsidiaries. Subsidiaries are all entities over which the

group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the

voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing

whether the group controls another entity. The group also assesses existence of control where it does not have more than 50% of the

voting power but is able to govern the financial and operating policies by virtue of de-facto control. Subsidiaries are fully consolidated

from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a

subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests

issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration

arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured

initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-

by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s

identifiable net assets.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the

fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit

or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its

subsequent settlement is accounted for within equity.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses

resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been

changed where necessary to ensure consistency with the policies adopted by the group.

JOINTLY CONTROLLED ENTITIES

A jointly controlled entity is an entity in which the group holds an interest with one or more other parties where a contractual arrangement

has established joint control over the entity. Jointly controlled entities are accounted for using the equity method of accounting.

REVENUE RECOGNITION

Revenue consists of the sales of houses net of discounts and sales incentives, land and commercial properties, and joint venture

management fees. Sales of houses are recognised on legal completion. Sales of land and commercial property are recognised when

contracts are exchanged or missives concluded and, where appropriate, construction is complete. Management fees which represent

a reimbursement of costs incurred on behalf of joint ventures are recognised as invoiced. Other management fees are recognised as

turnover when realised or in proportion to the group’s share in the respective joint ventures.

NET OPERATING EXPENSES

Net operating expenses include, inter alia, the overhead costs of all office based employees, including construction and sales management

not based permanently on-site.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is carried at historic purchase cost less accumulated depreciation. Cost includes the original purchase price

of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation on property, plant and equipment is provided on a straight line basis at rates estimated to write off the cost of the relevant

assets over their expected useful lives. The annual rates used are:

Buildings 2%

Computers 25 - 33%

Plant and equipment 25%

Freehold land is not depreciated.

INTANGIBLES

a) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the group’s interest in the

fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest

in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Cash Generating Units

(‘CGUs’), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the

goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential

impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value

less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Negative goodwill arising on the acquisition of subsidiaries is credited to the income statement immediately.

b) Brand

Internally generated brands are not held on the balance sheet. The group carries assets on the balance sheet only for brands that have

been acquired. Acquired brand values are calculated based on discounted cash flows. No amortisation is charged on brand intangibles,

as the group believes that the value of the brands is maintained indefinitely. The factors that result in the durability of the brands

capitalised are that there are no material legal, regulatory, contractual, competitive, economic or other factors that limit the useful life

of these intangibles. The acquired brands are tested annually for impairment by performing a value in use calculation, using a discount

factor based on the group’s pre-tax weighted average cost of capital, on the branded revenue stream.

COST OF SALES

Home building cost of sales includes land, construction, design, advertising and site overheads. All such costs are written off on a site

by site basis by comparing turnover to date with turnover forecast for the whole site, and applying the resulting proportion to the total

forecast costs.

FINANCE COSTS

Interest incurred by the group is charged to the profit and loss account in that period. Interest incurred by joint venture development

companies is treated as a development cost and carried in work-in-progress. It is charged to the profit and loss account in accordance

with the stage of completion of the development. Interest incurred by joint venture development companies which relates to land without

the benefit of a planning consent is charged to the profit and loss account in that period. Interest incurred by joint venture companies

which hold property for trading purposes is charged to the profit and loss account as incurred.

EXCEPTIONAL ITEMS

Exceptional items comprise items of income and expense that are material in amount and unusual or infrequent in nature and which merit

separate disclosure in order to provide an understanding of the group’s underlying performance. Examples of events giving rise to the

disclosure of income and expense as exceptional items include, but are not limited to, reorganisation of operations and economic events

which necessitate a review of asset valuations including land and work in progress.

TAXATION

Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the statement of comprehensive

income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using enacted or substantially enacted tax rates, and adjusted

for any tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amount of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences

52 53





TAXATION (CONTINUED)

are not provided for: goodwill, the initial recognition of assets or liabilities that affect neither accounting or taxable profit, and differences

relating to investment in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax

provided is based on the carrying amount of assets and liabilities, using the prevailing tax rates.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset

can be utilised. Deferred tax assets are reviewed at each balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax

liabilities when the group intends to settle its current tax assets and liabilities on a net basis.

DERIVATIVE FINANCIAL INSTRUMENTS

The group has entered into derivative financial instruments in the form of interest rate swaps to manage the interest rate risk arising from

the group’s sources of finance. The group does not use derivative financial instruments for speculative purposes.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured to their

fair value at each balance sheet date. The resulting gain or loss is recognised in the profit or loss immediately.

FINANCIAL ASSETS

Non-derivative financial assets are classified as either ‘available for sale financial assets’ or ‘loans and receivables’. The classification

depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

AVAILABLE FOR SALE FINANCIAL ASSETS

Receivables on extended terms granted as part of a sales transaction are secured by way of a second legal charge on the respective

property, and are stated at fair value. Gains and losses arising from changes in fair value are recognised in the other comprehensive

income section of the statement of comprehensive income, with the exceptions of impairment losses, changes in future cash flows and

interest calculated using the effective interest rate method, which are recognised within profit for the year. Where the asset is disposed

of, or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income is included in the

income statement for the period.

IMPAIRMENT OF FINANCIAL ASSETS

Trade and other receivables are assessed for indicators of impairment at each balance sheet date and are impaired where there is

objective evidence that the recovery of the receivable is in doubt.

Objective evidence of impairment could include significant financial difficulty of the customer, default on payment terms or the customer

going into liquidation.

The carrying amount of trade and other receivables is reduced through the use of an allowance account. When a trade or other receivable

is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are

credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.

For financial assets classified as available for sale, a significant or prolonged decline in the value of the property underpinning the value

or the loan or increased risk of default are considered to be objective evidence of impairment.

TRADE AND OTHER RECEIVABLES

Trade receivables on normal terms do not carry any interest, are stated at amortised cost and are assessed for recoverability on an

ongoing basis. Trade and other receivables are classified as ‘loans and receivables’.

INVENTORIES

Inventories are valued at the lower of cost and net realisable value. Net realisable value for home building is assessed internally after

taking account of any relevant available market information. Land option premiums are amortised over the life of the option or written off

in full if planning is unlikely to be achieved. All other option costs are written off as incurred.

INVENTORIES (CONTINUED)

Where land is held under option and planning permission is achieved the contractual value of the land is recognised in inventory once the

option is exercised and a contractual commitment exists.

CASH AND CASH EQUIVALENTS

In the consolidated statement of cash flows, cash and cash equivalents include cash in hand and bank overdrafts.

TRADE AND OTHER PAYABLES

Trade payable on normal terms are not interest bearing and are stated at amortised cost. Trade payables on extended terms, particularly

in respect of land purchases, are initially recorded at their fair value at the date of acquisition of the asset to which they relate by

discounting at prevailing market interest rates at the date of recognition. The discount to nominal value, which will be paid in settling the

deferred purchase terms liability, is amortised over the period of the credit term and charged to finance costs using the effective interest

rate method.

BANK BORROWINGS

Interest bearing bank loans are recorded at the proceeds received, net of direct issue costs. Finance costs are recognised as an expense in

the income statement in the period to which they relate. Bank arrangement fees are amortised over the term of the bank borrowings.

PROVISIONS

Provisions are recognised when the group has a present obligation as a result of a past event, and it is probable that the group will be

required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation

at the balance sheet date and are discounted to present value where the effect is material.

SHARE CAPITAL

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a

deduction, net of tax, from the proceeds.

PENSIONS

The group operates a defined benefit pension scheme and also operates a defined contribution scheme for employees who are not

member of a defined benefit scheme.

The liability in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date,

less the fair value of the scheme’s assets, together with adjustments for actuarial gains and losses. The defined benefit obligation is

calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation

is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated

in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension

obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited

to equity in other comprehensive income in the period in which they arise. Defined benefit pension costs are assessed in accordance with

the advice of qualified actuaries.

For defined contribution plans, the group pays contributions to privately administered pension insurance plans on a mandatory,

contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are

recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash

refund or a reduction in the future payments is available.

INVESTMENTS IN SUBSIDIARIES

Investments are carried in the balance sheet at the lower of cost and net realisable value, which is dependent upon management

assessment of future trading activity and is therefore subject to a degree of inherent uncertainty. Provisions are made where necessary to

reflect any impairment.

54 55


NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2014

FINANCE AND OPERATING LEASES

Where assets are financed by leasing agreements which give rights approximating to ownership (finance leases) the assets are treated

as if they had been purchased outright and the corresponding liability to the leasing company is included as an obligation under finance

leases. Depreciation on leased assets is charged to the profit and loss account on the same basis as other fixed assets. Leasing payments

are allocated between capital and interest and the interest is charged to the profit and loss account in proportion to the reducing capital

element outstanding. Costs in respect of operating leases are charged to the income statement as incurred.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In applying the group’s accounting policies which are described in the accounting policies note, the directors have made no individual

judgements that have a significant impact upon the financial statements, except those involving estimation, which are dealt with below.

The key sources of estimation uncertainty at the balance sheet date are:

LAND AND WORK IN PROGRESS

Valuations which include an estimation of costs to complete and remaining revenues are carried out at regular intervals throughout the

year, during which site development costs are allocated between units built in the current year and those to be built in future years. These

assessments include a degree of inherent uncertainty when estimating the profitability of a site and in assessing any impairment provisions

which may be required.

The group has conducted a review of the net realisable value of its inventory carrying values which resulted in no change to the inventory

value. The reviews were conducted on a site by site basis, using valuations that incorporated selling price and development cost

movements, based on local management and the board’s assessment of market conditions existing at the balance sheet date. If there are

significant movements in UK house prices or development costs beyond management’s expectations then further impairments/reversals of

previous write downs of land and work in progress may be necessary.

IMPAIRMENT OF BRAND INTANGIBLES

The determination of the impairment calculation for the group’s indefinite life brand requires an estimation of the value-in-use of the

brand. The value-in-use calculation requires an estimate of the future cash flows expected from the brand as part of the review of the

carrying value of goodwill, including the anticipated growth rate of revenue and costs, and requires the determination of a suitable

discount rate to calculate the present value of the cash flows. The discount rate used is based upon the average capital structure of the

group and current market assessments of the time value of money and risks appropriate to the group’s home building business. Changes

in these may impact upon the group’s discount rate in future periods. The carrying amount of indefinite life brands at 30 June 2014 was

£8.6m with no impairment recognised during the year ended 30 June 2014.

DEFINED BENEFIT PENSION SCHEME

The directors engage a qualified independent actuary to calculate the group’s liability in respect of its defined benefit pension scheme. In

calculating this liability it is necessary for actuarial assumptions to be made, which include discount rates, salary and pension increases,

price inflation, the long-term rate of return upon scheme assets and mortality.

As actual rates of increase and mortality may differ from those assumed, the pension liability may differ from that included in these

financial statements. Note 21 details the main assumptions in accounting for the group’s defined benefit pension scheme along with

sensitivity analysis.

1. REVENUE

All revenue relates to residential home building and originates in the United Kingdom.

2. EXCEPTIONAL ITEMS Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Cost of sales: Land and work in progress write backs : Home building (1,974) - Net operating expenses:Acquisition costs 5,283 12,720Negative goodwill on acquisition - (3,712) Rebranding costs 250 -Bank underwrite fees 531 -Release of provision for acquisition costs (1,512) -Reorganisation costs 99 -Finance costs: Bank facility arrangement fees 1,676 - 4,353 9,008

The carrying value of stocks has been reviewed to take account of market conditions and trading performance. The group made significant write downs to the carrying value of stock in prior years. At the year end the directors have carried out a review of these which has resulted in some write backs which are disclosed separately above to distinguish from any further write downs made. The review of land and work in progress has been carried out on a site-by-site basis using internal valuations incorporating projected sales rates and prices that reflect both current and anticipated trading conditions. Where appropriate, external market research has been used to support land valuations. Current year acquisition costs relate wholly to the acquisition of 100% of the share capital of Banner Homes Group Plc as described in note 23. The costs incurred related primarily to amounts paid to legal and professional advisors.

Arrangement fees relating to the old bank facilities were written off during the year when the new facilities were put in place following the acquisition of Banner Homes Group Plc by CALA Group (Holdings) Ltd. The group also incurred costs associated with rebranding as CALA existing office facilities and sales sites, in addition to costs of reorganisation. The prior period acquisition costs, and the current year provison release, relate wholly to the acquisition of 100% of the share capital of CALA Group Ltd. The costs incurred related primarily to amounts paid to legal and professional advisors.

56 57



Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Highest paid director: Aggregate emoluments 742 159Defined contribution plan - company contributions 29 8 Defined benefit pension scheme:Accrued pension at 30 June 89 80 Retirement benefits are accruing to two (2013: two) directors under the group defined benefit scheme and defined contribution scheme.





4. EMPLOYEES Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Average monthly number of employees during the period (including directors):

Home building: site 231 199Home building: office 411 192Commercial property - 1 642 392

Employment costs during the period: Wages and salaries 27,732 5,878Social security costs 3,599 729Other pension costs 1,571 271 32,902 6,878 Directors’ remuneration: Aggregate emoluments 1,279 276Defined contribution plan - company contributions 42 12

3. PROFIT BEFORE INCOME TAXATION Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Stated after charging/(crediting): Staff costs (note 4) 32,902 6,878Depreciation 830 196Operating leases: - plant and machinery 675 167 - land and buildings 960 247Auditors’ remuneration: Fees payable to the company’s auditor for the audit of the company’s

financial statements 49 69Fees payable to the company’s auditors and its associates for other services: The audit of the company’s subsidiaries 192 133 Audit-related assurance services 13 18 Tax compliance services 58 42 Tax advisory services 10 24 Other non-audit services 3 764Rental income - operating leases (158) (48)

The group audit fee disclosed above includes £19,000 (2013: £18,000) in respect of the company. The tax fee disclosed above includes £1,050 (2013: £1,020) in respect of the company.

5. FINANCE INCOME AND COSTS Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Finance costs: Interest expense on bank loans, overdrafts and other borrowings 11,001 1,664Imputed interest on deferred land payables 1,594 268Other finance costs / (income) (809) 83Bank facility arrangement fees 2,317 117 Finance costs 14,103 2,132 Finance income:Imputed interest on available for sale financial assets (201) (48)Fair value gains on interest rate swaps (513) (322)Interest receivable (9) (7) Finance income (723) (377) Net finance costs 13,380 1,755

4. EMPLOYEES (CONTINUED)

58 59

7. INTANGIBLE ASSETS Group Goodwill Brand Total £000 £000 £000

Cost At 30 June 2013 - 8,586 8,586Acquisition of subsidiary (note 23) 40,144 - 40,144 As at 30 June 2014 40,144 8,586 48,730 Accumulated amortisation and impairment At 30 June 2013 - - -Amortisation charge - - - As at 30 June 2014 - - - Carrying amount at 30 June 2014 40,144 8,586 48,730 Carrying amount at 30 June 2013 - 8,586 8,586

Impairment test for brand The group does not amortise the brand acquired with CALA Group Limited, being CALA Homes, valued at £8.6 million, as the directors consider that this has an indefinite life. The directors consider that this brand has an indefinite life due to the fact that the group intends to hold and support the brand for an indefinite period and there are no factors that would prevent it from doing so. The group tests its indefinite life brand annually for impairment, or more frequently if there are indications that it might be impaired. The recoverable amount is determined using a value-in-use calculation. The value-in-use was determined by discounting expected future cash flows. The first four years of cash flows were determined using cash flow forecasts derived from the most recent financial budgets approved by management. The cash flows for year five onwards were extrapolated in perpetuity using an estimated growth rate of 2.5%, which is based upon the expected long-term growth rate of the UK economy.

The key assumptions for the value-in-use calculation are those regarding the discount rate, expected changes in selling prices for completed houses and expected changes in site costs to complete. The directors estimate the discount rate using pre-tax rates that reflect current market assessments of the time value of money and risks appropriate to the housebuilding business. Accordingly the rate of 13.75% is considered by the directors to be the appropriate pre-tax risk adjusted discount rate. Changes in selling prices and direct costs are based upon past experience and expectations of future changes in the market. Impairment test for goodwill The group tests its goodwill annually for impairment, or more frequently if there are indications that it might be impaired. The recoverable amount is determined using a value-in-use calculation. The value-in-use was determined by discounting expected future cash flows from the legacy Banner companies, acquired in March 2014 (note 23). The first four years of cash flows were determined using cash flow forecasts derived from the most recent financial budgets approved by management. The cash flows for year five onwards were extrapolated in perpetuity using an estimated growth rate of 2.25%. The key assumptions for the value-in-use calculation are those regarding the discount rate, expected changes in selling prices for completed houses and expected changes in site costs to complete. The pre-tax discount rate of 13.75% has been used to determine the value-in-use. Changes in selling prices and direct costs are based upon past experience and expectations of future changes in the market.





6. INCOME TAX EXPENSE Year ended Period ended 30 June 2014 30 June 2013 £000 £000

GroupCurrent tax:Current tax on profits for the period at 22.5% (2013: 23.75%) 1,145 207Adjustments in respect of prior years (449) 128 Total current tax 696 335 Deferred tax (note 18): Origination and reversal of timing differences 8,876 2,091 Total deferred tax 8,876 2,091 Income tax expense 9,572 2,426

The tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

Profit before tax 22,978 1,569 Tax calculated at UK corporation tax rate of 22.5% (2013: 23.75%) 5,170 362 Effects of: Joint ventures’ results reported net of tax 113 -Expenses not deductible for tax purposes 1,530 2,657Adjustments in respect of prior years 93 (297)Re-measurement of deferred tax - change in tax rate 4,355 893Utilisation of losses (292) (87)Non taxable income (668) (1,155)Deferred tax recognised, previously unrecognised (729) -Accelerated capital allowances and other timing differences - 53 Group tax charge 9,572 2,426 Factors affecting future tax charges: The rate of corporation tax was reduced to 21% effective from 1 April 2014. The impact of the reduction in the corporation tax rate is reflected in the table above. In addition to the changes in rates of corporation tax disclosed above a further change to the UK corporation tax rate was substantively enacted as part of the Finance Bill 2013 on 2 July 2013. The change was to reduce the main rate to 20% from 1 April 2015. As this change had been substantively enacted at the balance sheet date the effect is included in these financial statements.

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8. PROPERTY, PLANT AND EQUIPMENT Group Land and Plant and buildings Computers equipment Total £000 £000 £000 £000

Cost: At 30 June 2013 86 1,405 505 1,996Acquisitions through business combinations (note 23) 302 1,068 1,473 2,843Additions - 343 485 828Disposals - (15) (399) (414) At 30 June 2014 388 2,801 2,064 5,253 Accumulated depreciation: At 30 June 2013 - 132 64 196Acquisitions through business combinations (note 23) 102 903 1,043 2,048Provided during the period 3 427 400 830Disposals - (10) (390) (400) At 30 June 2014 105 1,452 1,117 2,674 Carrying amount at 30 June 2014 283 1,349 947 2,579 Carrying amount at 30 June 2013 86 1,273 441 1,800

Land and buildings are freehold and heritable. The company has no property, plant and equipment.

9. AVAILABLE FOR SALE FINANCIAL ASSETS Group Group 2014 2013 £000 £000 At 1 July 2013 / 4 March 2013 2,019 -Acquisitions (Note 23) 606 1,756Additions 155 215Imputed interest 201 48 At 30 June 2,981 2,019 Available for sale financial assets comprise shared equity loans, largely with a ten year term and variable repayment amounts, provided as part of sales transactions that are secured by way of a second legal charge on the related property. The assets are recorded at fair value, being the estimated future amount receivable by the group, discounted to present day values. The fair value of future anticipated cash receipts takes into account the directors’ view of future house price movements, the expected timing of receipts and the likelihood that a purchaser defaults on a repayment. The directors’ revisit the future anticipated cash receipts from the assets at the end of each financial reporting period. The difference between the anticipated future receipt and the initial fair value is credited over the estimated deferred term to finance income, with the financial asset increasing to its full expected cash settlement value on the anticipated receipt date. Credit risk, which the directors currently consider to be largely mitigated through holding a second legal charge over the assets, is accounted for in determining fair values and appropriate discount factors are applied. The directors review the financial assets for impairment at each balance sheet date. There were no indicators of impairment at 30 June 2014.

10. INVENTORIES Group Group 2014 2013 £000 £000 Home building: Land and options 331,004 141,164Part exchange stocks 6,891 11,400Work in progress and other stocks 210,170 72,711 548,065 225,275 The cost of inventories recognised as an expense and included in ‘cost of sales’ amounted to £205.7 million (2013: £70.5 million). Land creditors are shown in note 16.

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11. INVESTMENTS IN SUBSIDIARIES Company £000 Cost of investments in subsidiary undertakings:At 1 July 2013 90,643Additions - At 30 June 2014 90,643 The directors believe that the carrying value of the investments is supported by their underlying net assets. The principal and active subsidiary undertakings of the group are shown below: % of £1 ordinary Accounting Name of Company shares held year end Nature of business CALA Group Limited 100 30 June Administrative & holding company CALA 1999 Limited 100 30 June Administrative & holding company CALA Limited 100 30 June Administrative & holding company CALA 1 Limited 100 30 June Administrative & holding company CALA Management Limited 100 30 June Home building & commercial property CALA Homes (North) Limited * 100 30 June Home building CALA Homes (East) Limited * 100 30 June Home building CALA Homes (West) Limited * 100 30 June Home building CALA Homes (Midlands) Limited * 100 30 June Home building CALA Homes (Chiltern) Limited * 100 30 June Home building CALA Homes (Thames) Limited * 100 30 June Home building CALA Homes (South Home Counties) Limited * 100 30 June Home building CALA Homes (North Home Counties) Limited * 100 30 June Home building CALA Ventures Limited 100 30 June Home building CALA Properties (Holdings) Limited 100 30 June Commercial property Banner Homes Group Limited 100 30 June Administrative & holding company Banner Management Limited 100 30 June Home building Banner Construction Limited 100 30 June Home building Banner Homes Central Limited 100 30 June Home building Banner Homes Bentley Priory Limited 100 30 June Home building Banner Homes Ventures Limited 100 30 June Home building Banner Developments Limited 100 30 June Home building Banner Homes Limited 100 30 June Home building Banner Homes Southern Limited 100 30 June Home building Banner Homes Midlands Limited 100 30 June Home building All the above companies are incorporated in Great Britain and 100% of the voting rights are held by the group. CALA Management Limited is the group’s principal operating subsidiary. All other companies marked * above are agents of CALA Management Limited. All subsidiary undertakings are fully consolidated in these financial statements.

12. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES Group £000 Cost At 30 June 2013 5,079Share of results of jointly controlled entities 1,281Distributions (5,740)Transfer to provisions 3

At 30 June 2014 623 The group’s share of assets and liabilities of jointly controlled entities is as folllows: Group Group 2014 2013 £000 £000 Current assets 1,597 6,524Currrent liabilities (974) (1,445) Net assets of jointly controlled entities 623 5,079 The group’s share of current assets and liabilities in respect of joint ventures represents: trade debtors and creditors arising in the normal course of business; tangible stocks of land and work-in-progress on each development; and loan balances due to the joint venture partners and financial institutions. The group’s share of the income and expenses of jointly controlled entities is as follows: Group Group 2014 2013 £000 £000

Revenue 8,736 4,148Expenses (6,965) (3,438) 1,771 710Tax (490) (163) Share of results of jointly controlled entities 1,281 547 The principal joint venture companies are: % of £1 ordinary Accounting Nature ofName of company shares held year end business CALA Evans Restoration Limited 50 30 June Home building CALA Campus Limited 50 31 December Home building All the above companies are incorporated in Great Britain. The joint venture companies were formed for the purpose of carrying out large site-specific housing developments where the group considered the additional risks and funding requirements attaching to such projects merited a sharing arrangement. These developments are project managed by a subsidiary of the group on normal commercial terms negotiated on an arm’s-length basis. Each company has a properly constituted Board which meets on a regular basis. Systems are in place to ensure regular reporting of financial information to each board, and to the group, and such financial information is sufficient to give a full understanding of the financial position of the joint venture company. Where required, each company is separately funded by a financial institution on either a non-recourse or limited guarantee basis, secured over the assets of that company. Additional unsecured loan funding is provided by the joint venture shareholders at varying rates of interest.

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13. TRADE AND OTHER RECEIVABLES Group Group Company Company 2014 2013 2014 2013 £000 £000 £000 £000 Non-current assets Trade receivables 415 - - -Prepayments and accrued income - 350 - -Other debtors - - - - 415 350 - - Current assets Trade receivables 3,605 1,481 - -Amounts owed by group companies - - 110,911 -Amounts owed by joint ventures 6,958 6,746 - -Other receivables 5,060 6,898 - 5,070Corporation tax 201 - - -Prepayments and accrued income 4,475 2,290 - - 20,299 17,415 110,911 5,070 All non-current receivables are due within five years from the end of the reporting period. Trade and other receivables are non-interest bearing, and the group has no concentration of credit risk, with exposure spread over a large number of customers. The directors consider that the carrying value of trade receivables approximates to their fair value. Of the period end trade receivables the following were overdue but not impaired: Group Group 2014 2013 £000 £000

Ageing of overdue but not impaired receivables Less than 3 months 99 164Greater than 3 months 175 185 274 349

The carrying value of trade and other receivables are stated after the following allowance for doubtful receivables: At start of period 94 -On acquisition 17 79Charge for the year 23 21Amounts written off during the period as uncollectable - (6) At 30 June 134 94

14. DERIVATIVE FINANCIAL INSTRUMENTS Group Group 2014 2013 Assets Assets £000 £000 Interest rate swaps - fair value hedges 834 322 Total 834 322 The group has entered into interest rate swap arrangements to manage interest rate risks as explained in note 17. The swap arrangements expire on 21 March 2019. The group does not enter into any derivatives for speculative purposes. The arrangements are at fixed interest rates of between 0.785% and 2.3575%, excluding margin. The notional principal amounts of the outstanding interest rate swap contracts at 30 June 2014 was £140.0 million (2013: £50.0 million). This amount varies throughout the period of the swap arrangements. The remaining debt is at floating rates of interest. Changes in fair values of interest rate swaps are recorded within finance income in the income statement (note 5).

The fair value of the instruments is based on on the market price of these instruments at the balance sheet date. In accordance with IFRS 7, the interest rate swaps are considered to be level 2 with the fair value being calculated at the present value of the estimated future cash flows using market rates.

15. LOANS AND BORROWINGS Group Group 2014 2013 £000 £000

Current liabilities Loans and other borrowings - 102 Non-current liabilities Loans and other borrowings 280,783 99,870 All issue costs in respect of capital instruments are offset against debt immediately after issue. Finance costs, including provisions for redemption premia are allocated to periods over the term of the debt at a constant rate on the carrying amount. Group Group 2014 2013(a) Analysis by instrument: £000 £000 Bank overdrafts - 102Term loan 100,000 -Revolving credit facility 70,800 64,800Unsecured redeemable fixed rate loan notes 109,983 35,070 280,783 99,972

In March 2014, as part of the acquistion of Banner Homes Group Limited (note 23), the group amended its facilities. The maturity date of the facilities is 21 March 2019. The amended facilities bear interest of LIBOR plus 3.75%. The revolving credit facility varies depending on the working capital requirements of the group and as such there are no fixed contractual interest payments. The unsecured redeemable fixed rate loan notes bear interest of 9% with a maturity date of 18 March 2023.

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15. LOANS AND BORROWINGS (CONTINUED)(b) Borrowing facilities The group had undrawn committed borrowing facilities of £127.7 million (2013: £20.2 million) in respect of which all conditions precedent had been met. (c) Security Bank borrowings of £170.8 million are secured by way of a bond and floating charge, guarantees and fixed charges granted by CALA Group Limited and the following main subsidiaries: CALA 1999 Limited, CALA Limited, and CALA Management Limited. A number of other bonds and floating charges, fixed securities, debentures and share pledges over land and assets have been granted by certain subsidiaries of the company in favour of the bank. Group Group 2014 2013(d) Maturity analysis £000 £000 Repayments fall due as follows: Within one year, or on demand - 102After more than one year 280,783 99,870 280,783 99,972Repayments due after more than one year are analysed as follows: Between one and two years 15,000 -Between two and three years 25,000 -Between three and four years 30,000 -Between four and five years 100,800 64,800After five years 109,983 35,070 280,783 99,870

16. TRADE AND OTHER PAYABLES Group Group 2014 2013 £000 £000

Current liabilities: Trade payables: Land - in development 27,503 11,522 Land - not yet acquired or in development 30,324 17,024 Other 55,391 25,761Amounts owed to joint ventures - 1Other taxation and social security costs 721 694Other payables 6,196 20,917Accruals 10,853 7,220 130,988 83,139Non-current liabilities Trade payables: Land - in development 35,115 8,536 Land - not yet acquired or in development 21,743 32,952 56,858 41,488

Total trade payables include accruals of £114.7 million (2013: £70.0 million) for development land under contract but not yet acquired. Total land payables also include £45.5 million (2013: £17.2 million) which is secured by way of legal charge against land acquired for development. Land payables are reduced for imputed interest, which is charged to the income statement over the credit period of the purchase contract.

17. FINANCIAL RISK MANAGEMENTThe principal operational risks of the business are detailed on pages 28 to 30. i) Financial Risks

The group’s activities expose it to a variety of financial risks: market risk, interest rate risk, liquidity risk and credit risk. This note presents basic information regarding the group’s exposures to these risks and the group’s objectives, strategy and process for measuring and managing exposure to them.

UK housing market price risk The group is fundamentally affected by the level of UK house prices. These in turn are affected by factors such as credit availability, employment levels, interest rates, consumer confidence and supply of land with planning. Whilst it is not possible for the group to fully mitigate such risks on a national macroeconomic basis the group does continually monitor its geographical spread within the UK, seeking to balance its investment in areas offering the best immediate returns with a long term spread of its operations throughout the UK to minimise the risk of local microeconomic fluctuations. The UK housing market affects the valuation of the group’s non-financial assets and liabilities and the critical judgements applied by management in these financial statements, including the valuation of land and work in progress and brand. The value of the group’s available for sale financial assets is directly linked to the UK housing market. At 30 June 2014 these assets were carried at a fair value of £3.0 million (2013: £2.0 million). Sensitivity analysis At 30 June 2014, if UK house prices had been 5% higher/lower, and all other variables were held constant, the group’s house price linked financial instruments, which are solely available for sale financial assets, would increase/decrease in value, excluding any affects of current or deferred tax by £0.3 million. Interest rate risk The group’s policy is to minimise the exposure to interest rates by ensuring an appropriate balance of fixed and floating rates. The group’s primary funding is at floating rates through its bank facilities. In order to manage the associated interest rate risk, the group uses interest rate swaps to vary the mix of fixed and floating rates. At 30 June 2014, £140.0 million (2013: £50.0 million) of the net debt of £244.6 million (2013: £68.7 million) was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 1:1.74 (2013: 1:1.37). The group has no formal target for a ratio of fixed to floating funding. The responsibility for setting the level of fixed rate debt lies with the directors and is continually reviewed in the light of economic data provided by a variety of sources. Sensitivity analysis If in the period ended 30 June 2014 UK interest rates had been 0.5% higher/lower then the group’s pre-tax profit would have increased/decreased by £0.5 million. This sensitivity has been prepared in respect of the direct impact of such interest rate change on the net financing expense of financial instruments only, and does not attempt to estimate the indirect effect such a change may have on the wider economic environment such as house pricing and mortgage availability. Liquidity risk Liquidity risk is the risk that the group does not have sufficient financial resources available to meet its obligations as they fall due. The group manages liquidity risk by continuously monitoring forecast and actual cash flows, matching expected cash flow timings of financial assets and liabilities with the use of term cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities. Funding headroom is maintained above forecast peak requirements. The group’s banking arrangements outlined in note 15 are considered to be adequate in terms of flexibility and liquidity for its medium term cash flow needs, mitigating its liquidity risk. The group’s approach to assessment of liquidity risk is further outlined in the section of the Directors’ Report relating to Risk Management which can be found on pages 28 to 30.

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17. FINANCIAL RISK MANAGEMENT (CONTINUED)

Maturity of financial liabilities The table below analyses the group’s financial liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

2014 Carrying Contractual Less than 1 - 2 2 - 5 Over amount cash flows 1 year years years 5 yearsGroup £000 £000 £000 £000 £000 £000

Loans and borrowings 280,783 413,696 - 15,000 155,800 242,896Trade and other payables 72,440 72,440 72,440 - - -Land payables 62,618 119,574 58,648 36,178 14,617 10,131

Financial liabilities 415,841 605,710 131,088 51,178 170,417 253,027 2013 Carrying Contractual Less than 1 - 2 2 - 5 Over amount cash flows 1 year years years 5 yearsGroup £000 £000 £000 £000 £000 £000

Loans and borrowings 99,972 147,660 102 - 64,800 82,758Trade and other payables 53,898 53,898 53,898 - - -Land payables 70,034 74,554 28,735 14,205 20,414 11,200 Financial liabilities 223,904 276,112 82,735 14,205 85,214 93,958 Trade and other payables exclude amounts owed to joint ventures, tax and social security and other non-financial liabilities. The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant.

Credit risk The nature of the UK housing market and the legal framework surrounding it results in the group having a low exposure to credit risk. In the majority of cases the full cash receipt for each sale occurs on legal completion, which is also the point of revenue recognition under the group’s accounting policies. In certain specific circumstances the group has entered into shared equity loan arrangements (not applicable to the Company) which are classified as available for sale financial assets. The group has £3.0 million of available for sale financial assets which expose it to credit risk, although this asset is spread over a large number of properties. As such, the group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The group manages credit risk in the following ways:- The group has a credit policy that is limited to financial institutions with high credit ratings as set by international credit rating agencies and has a policy determining the maximum permissible exposure to any single counterparty.- The group only contracts derivative financial instruments with counterparties with which the group has an ISDA Master Agreement in place. These agreements permit net settlement, thereby reducing the group’s credit exposure to individual counterparties. The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the group’s maximum exposure to credit risk. Capital risk management The capital structure of the group consists of net cash/debt (borrowings as detailed in note 15 offset by cash and bank balances) and equity of the group (comprising issue capital, reserves and retained earnings as detailed in the statement of changes in shareholders’ equity). The group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and meet its liabilities as they fall due whilst maintaining an appropriate capital structure. Close control of deployment of capital is maintained by detailed management review procedures for authorisation of significant capital commitments, such as land acquisitions, capital targets for local management and a system of internal interest recharges, ensuring capital cost impact is understood and considered by all management tiers.

17. FINANCIAL RISK MANAGEMENT (CONTINUED)Decisions regarding the balance of equity and borrowings, dividend policy and all major borrowing facilities are reserved for the board. If appropriate the group can manage its short-term and long-term capital structure by adjusting the level of ordinary dividends paid to shareholders (assuming the company is paying a dividend), issuing new share capital, arranging debt to meet liability payments, and selling assets to reduce debt. ii) Fair value of financial assets and financial liabilities Financial assets The carrying values and fair values of the group’s financial assets are as follows: 2014 2014 2013 2013 Fair Carrying Fair Carrying value value value valueGroup £000 £000 £000 £000 Loans and receivables: Trade and other receivables 8,665 8,665 8,379 8,379 Cash and cash equivalents 29,188 29,188 24,442 24,442Assets at fair value through profit and loss: Derivative financial instruments 834 834 322 322 Available for sale financial assets 2,981 2,981 2,019 2,019 Total financial assets 41,668 41,668 35,162 35,162 Trade and other receivables excludes accrued income, prepayments, amounts owed by joint ventures and tax and social security.

The following table provides an analysis of financial assets that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: • Level 1 fair value measurements are those dervied from quoted prices (unadjusted) in active markets for identical assets; • Level 2 fair value measurements are those dervied from inputs other than quoted prices included within Level 1 that are observable for the

asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset that are not based on observable

market data (unobservable inputs).

2014 Level 1 Level 2 Level 3 TotalGroup £000 £000 £000 £000 Derivative financial assets - 834 - 834Available for sale financial assets - - 2,981 2,981 Total - 834 2,981 3,815 2013 Level 1 Level 2 Level 3 TotalGroup £000 £000 £000 £000 Derivative financial assets - 322 - 322Available for sale financial assets - - 2,019 2,019 Total - 322 2,019 2,341

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18. DEFERRED TAXATION The deferred tax asset recognised comprises: Group Group 2014 2013 £000 £000 Accelerated capital allowances (745) (763)Retirement benefit obligation (1,306) (738)Trading losses (28,765) (35,926)Other timing differences 1,723 619 Deferred tax assets: Amount provided (29,093) (36,808) Amount not provided (1,201) (10,820)

The following are the major deferred tax assets and liabilities recognised by the group and movements thereon during the current reporting period. Accelerated Retirement Other capital benefit Trading timing allowances obligation losses differences Total £000 £000 £000 £000 £000 At 1 July 2013 (763) (738) (35,926) 619 (36,808)Acquisition of subsidiary (note 23) - - - (427) (427)Charged/(credited) to the income statement 17 166 7,161 1,532 8,876Charged/(credited) to other comprehensive income - (734) - - (734) At 30 June 2014 (746) (1,306) (28,765) 1,724 (29,093) No recognition has been made in these financial statements for the deferred tax asset of £1.2 million (2013: £10.8 million) (shown above as unprovided) which relates wholly to commercial property trading losses.

17. FINANCIAL RISK MANAGEMENT (CONTINUED) Financial liabilities The carrying values and fair values of the group’s financial liabilities are as follows: 2014 2014 2013 2013 Fair Carrying Fair Carrying value value value valueGroup £000 £000 £000 £000 Financial liabilities at amortised cost: Trade and other payables (note 16) 72,440 72,440 53,898 53,898Borrowings (note 15) 280,783 280,783 99,972 99,972 Total financial liabilities 353,223 353,223 153,870 153,870 Trade and other payables exclude amounts owed to joint ventures, tax and social security and other non-financial liabilities. iii) Summary of methods and assumptions Interest rate swaps Fair value is based on market price of these instruments at the balance sheet date. Available for sale financial assets The group determines the fair value of its available for sale financial assets through estimation of the present value of expected future cash flows. Cash flows are assessed taking into account expectations of the timing of redemption, future house price movements and the risks of default. An instrument-specific market assessed interest rate is used to determine present value via discounted cash flow modelling. Current borrowings The fair value of current borrowings and overdrafts approximates to the carrying amount because of the short term maturity of these instruments. Non-current borrowings The fair value of non-current borrowings approximates to the carrying value reported in the balance sheet as all debt is raised on a floating rate basis where payments are reset to market rates at intervals of less than one year.





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19. SHARE CAPITAL 2014 2013 Number of Shares Number of Shares Equity share capital: ‘A’ ordinary shares of £0.001 each 190,312,591 89,274,567‘B’ ordinary shares of £1.00 each 1,872,259 1,872,259‘C’ ordinary shares of £1.00 each 779,934 779,934‘D’ ordinary shares of £1.00 each 462,372 462,372‘E’ ordinary shares of £1.00 each 462,372 462,372‘F’ ordinary shares of £1.00 each 577,134 577,134‘G1’ ordinary shares of £0.001 each 4,886,889 2,285,057‘H1’ ordinary shares of £0.00001 each 11,306,250 - At 30 June 210,659,801 95,713,695 2014 2013 £000 £000 Equity share capital: ‘A’ ordinary shares of £0.001 each 190 89‘B’ ordinary shares of £1.00 each 1,872 1,872‘C’ ordinary shares of £1.00 each 780 780‘D’ ordinary shares of £1.00 each 463 463‘E’ ordinary shares of £1.00 each 463 463‘F’ ordinary shares of £1.00 each 577 577‘G1’ ordinary shares of £0.001 each 4 2‘H1’ ordinary shares of £0.00001 each - - At 30 June 4,349 4,246 The ‘A’ ordinary shares carry 75% of the votes attaching to all shares. The ‘B’, ‘C’, ‘D’, ‘E’ and ‘F’ ordinary shares each carry 5% of the votes attaching to all shares. The ‘G1’ and ‘H1’ ordinary shares have no voting rights. Each class of share is entitled pari passu to dividend payments or any other distribution. During the year, 101,038,024 ‘A’ Ordinary shares, 2,601,832 ‘G1’ Ordinary shares and 11,306,250 ‘H1’ Ordinary shares were issued for a total consideration of £103.6 million, including share premium of £103.5 million.





20. FINANCIAL COMMITMENTS At 30 June 2014 the future aggregate minimum lease payments under non-cancellable operating leases are as follows: Land and Plant and Land and Plant and buildings machinery buildings machinery 2014 2014 2013 2013 £000 £000 £000 £000

- No later than 1 year 689 434 843 502- Later than 1 year and no later than 5 years 2,269 377 2,231 832- Later than 5 years 1,739 - 1,081 - 4,697 811 4,155 1,334 Operating lease payments primarily represent rentals payable by the group for certain office properties and motor vehicles.

21. RETIREMENT BENEFITS The group operates various post-employment schemes, including both defined benefit and defined contribution pension plans. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income. The Scheme is a funded, defined benefit, career average revalued earnings (CARE) pension plan, which provides benefits to members in the form of a guaranteed level of pension payable for life. Prior to 1 January 2008 the Scheme was a final salary pension plan. All benefits accrued prior to 1 January 2008 are linked to the members’ Final Pensionable Salary at 31 December 2007. The Scheme closed to new members on 31 December 2007. The level of benefits provided depends on members’ length of service and their salary in each year of pensionable service. Some pensions in payment receive inflationary increases in line with RPI (Retail Prices Index) inflation. The benefit payments are from trustee-administered funds. The amount of contributions to be paid is decided jointly by the employer and the Trustees of the Scheme. Assets held in trust are governed by UK regulations and practice. The Scheme’s investment strategy is decided by the Trustees, in consultation with the employer. The board of Trustees must be composed of representatives of the employer and plan participants in accordance with the Scheme’s legal documentation.

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21. RETIREMENT BENEFITS (CONTINUED) CALA Group (Holdings) Limited (‘the company’) was incorporated on 4 March 2013, in advance of the change in ownership of the CALA group of companies. The change in ownership formally took place on 18 March 2013. To account for this, the Scheme’s assets and liabilities were recognised in the company’s accounts from 18 March 2013 and the amounts transferred are shown in the line ‘acquired in a business combination’ in the table above. The significant actuarial assumptions were as follows: 2014 2013 Discount rate 4.40% 4.95%RPI inflation 3.25% 3.40% Assumptions regarding future mortality are set based on actuarial advice taking into account mortality expectations based on members’ postcodes. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65: 2014 2013 • Male 23 23• Female 25 25

Retiring 20 years after the end reporting period: • Male 24 24• Female 27 26 The sensitivity of the defined benefit obligation to changes in the principal assumptions is: Impact on defined benefit obligation Change in Increase in Decrease in assumption assumption assumption Discount rate 0.25% decreases by 5% increases by 5%RPI inflation 0.25% increases by 3% decreases by 3% Increase by Decrease by 1 year in 1 year in assumption assumption Life expectancy increase by 3% decrease by 3%

The above sensitivity analysis on the discount rate is based on a change in assumption while holding all other assumptions constant. The change in RPI inflation assumption impacts on the CPI (Consumer Prices Inflation), CARE revaluation and pension increase assumptions. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position.

21. RETIREMENT BENEFITS (CONTINUED) The amounts recognised in the balance sheet are determined as follows: 2014 2013 £000 £000 Present value of funded obligations 64,462 56,249Fair value of plan assets (57,930) (53,389) Deficit of funded plans 6,532 2,860Present value of unfunded obligations - - Total deficit of defined benefit pension plans 6,532 2,860Impact of minimum funding requirement/asset ceiling - - Liability in the balance sheet 6,532 2,860 The movement in the net defined benefit obligation over the accounting period is as follows: Present Fair value Present Fair value value of of plan value of of plan obligation assets Total obligation assets Total £000 £000 £000 £000 £000 £000 At 30 June 2013 / 4 March 2013 56,249 (53,389) 2,860 - - - Current service cost 866 - 866 258 - 258Interest expense/(income) 2,770 (2,653) 117 790 (772) 18 3,636 (2,653) 983 1,048 (772) 276

Remeasurements:• Return on plan assets excluding amounts included in interest expense/(income) - (1,483) (1,483) - 1,487 1,487• (Gain)/loss from change in demographic assumptions - - - - - -• (Gain)/loss from change in financial assumptions 5,890 - 5,890 - - -• Experience (gains)/losses 145 - 145 - - -• Change in asset ceiling, excluding amounts included in interest expense - - - - - - 6,035 (1,483) 4,552 - 1,487 1,487

Contributions: • Employers - (1,863) (1,863) - (152) (152)• Plan participants 327 (327) - 82 (82) -Payments from plans: • Benefit payments (1,785) 1,785 - (375) 375 -• Settlements - - - - - -Acquired in a business combination - - - 55,494 (54,245) 1,249 At 30 June 2014 64,462 (57,930) 6,532 56,249 (53,389) 2,860





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21. RETIREMENT BENEFITS (CONTINUED) Plan assets are comprised as follows: 2014 2013 Quoted Un-quoted Total Quoted Un-quoted Total £000 £000 £000 £000 £000 £000 Equities 5,889 - 5,889 7,679 - 7,679Corporate bonds - - - 22,215 - 22,215Property 2,664 - 2,664 1,972 - 1,972Diversified growth fund 10,660 - 10,660 11,830 - 11,830Global absolute return fund 12,153 - 12,153 9,679 - 9,679Liability Driven Investment (LDI) 12,513 - 12,513 - - -Multi Asset Credit (MAC) 13,949 - 13,949 - - -Cash and cash equivalents 102 - 102 14 - 14 Total 57,930 - 57,930 53,389 - 53,389

Through its defined benefit pension plan, the company is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. The Scheme holds a significant proportion of growth assets (equities, diversified growth fund and global absolute return fund) which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. The allocation to growth assets is monitored such that it is suitable with the Scheme’s long term objectives. Changes in bond yields A decrease in corporate bond yields will increase the Scheme’s liabilities, although this will be partially offset by an increase in the value of the Scheme’s bond holdings. Inflation risk The majority of the Scheme’s benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.

Life expectancy The majority of the Scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. The Scheme uses corporate bonds as matching assets. The remainder of assets are used as growth assets. A review of the Scheme’s investment strategy will be undertaken in the next financial year. The employer has agreed that it will aim to eliminate the Scheme deficit (as assessed on the ongoing funding basis) by 31 December 2018. The current agreed employer level is 13.8% of contribution salaries in respect of future benefit accrual and death in service premiums and £1.0 million per annum in respect of deficit recovery contributions. Funding levels are monitored on an annual basis and the next triennial valuation is due to be completed as at 6 April 2015. Expected employer contributions to the Scheme for the year ending 30 June 2015 are £1.9 million. The weighted average duration of the defined benefit obligation is 21 years.





22. CONTINGENT LIABILITIES

Group Group 2014 2013 £000 £000

Bank guarantees 392 90Indemnities for performance bonds 1,237 1,685 The performance bonds consist of road, sewer and other development agreements entered into in the normal course of business. The company has also guaranteed the performance of certain subsidiary and joint venture obligations arising from normal trading agreements.

23. BUSINESS COMBINATIONS In March 2014, the group acquired 100% of the share capital of Banner Homes Group Plc (‘Banner’), a premium national homebuilder in the UK. The following table summarises the consideration paid for Banner, the fair value of assets acquired and liabilities assumed. 2014Consideration transferred £000

Total cash consideration 82,447

Recognised amounts of identifiable assets acquired and liabilities assumed £000 Cash and cash equivalents 6,601Property, plant and equipment (note 8) 795Available for sale financial assets (note 9) 606Deferred income tax assets (note 18) 427Inventories 192,618Trade and other receivables 605Trade and other payables (25,641)Borrowings (133,708)

Total identifiable net assets 42,303

Non-controlling interest -Goodwill 40,144

Total 82,447 Acquisition related costs of £5.3 million have been charged to administrative expenses in the consolidated income statement and shown as an exceptional item (note 2). The revenue included in the consolidated income statement since the acquisition date contributed by Banner was £50.0 million. Banner also contributed profit after tax of £4.4 million over the same period. Had Banner been consolidated from 1 July 2013, the consolidated statemement of income would show revenue of £133.5 million and profit before tax of £5.9 million as prepared on a UK GAAP basis. There is no significant difference between the carrying value and the fair value of trade and other receivables. During the year the group paid £20 million deferred consideration in respect of its acquisition of CALA Group Ltd during 2013. For full disclosure of the transaction refer to the prior year accounts.

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23. BUSINESS COMBINATIONS (CONTINUED)

In November 2013, the group acquired 100% of the issued share capital of CALA Homes (Cults) Ltd. (formerly P & J Anderson Ltd.). The fair values attributed to the net assets/(liabilities) acquired on acquisition are outlined below. Consideration transferred £000

Cash 5,355Deferred consideration 4,250 Total consideration 9,605

Recognised amounts of identifiable assets acquired and liabilities assumed £000 Cash and cash equivalents 10Inventories 9,250Trade and other receivables 400Trade and other payables (55) Total identifiable net assets 9,605 The deferred consideration of £4.25 million is unconditional and is payable in two tranches : £1.5 million is payable 1 year from the acquisition date and £2.75 million is payable 2 years from the acquisition date. The revenue and profit before tax included in the consolidated income statement since 20 November 2013 contributed by CALA Homes (Cults) Limited was nil. Had CALA Homes (Cults) Limited been consolidated from 1 July 2013, the consolidated statemement of income would show revenue of nil and profit before tax of £399,000 as prepared on a UK GAAP basis. There is no significant difference between the carrying value and the fair value of trade and other receivables.

24. RELATED PARTY DISCLOSURES

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the group and its joint ventures are disclosed below. 2014 2013 £000 £000

Relating to joint ventures: Amounts owed by joint ventures 6,958 6,746Fees received from joint ventures - 3 Key management, as defined under IAS 24 ‘Related Party Disclosures’ includes directors and members of the Operations Board. The compensation paid or payable to key management for employee services is shown below: Year ended Period ended 30 June 2014 30 June 2013 £000 £000

Key management remuneration: Salaries and other short-term employee benefits 3,142 575Post-employment benefits 77 18 3,219 593

24. RELATED PARTY DISCLOSURES (CONTINUED)

2014 2013 £000 £000

Loans from related parties: Loans from key management of the company: At start of period 2,479 -Loans advanced during the year 1,236 2,416Interest charged 260 63 At 30 June 3,975 2,479

25. ULTIMATE CONTROLLING PARTY

The immediate and ultimate parent company is Haut Investments Limited. Haut Investments Limited is owned by a number of investors, with no individual investor having control.



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FalkirkEdinburgh

Aberdeen

Henley-in-Arden

THE UK’S BEST DEVELOPMENT 2013

BEST CUSTOMER SATISFACTION INITIATIVE

We are proud that our passion and pride for delivering industry-leading customer service and building homes of

exceptional design and quality, has been recognised with a host of awards during 2013.

Our site managers received an outstanding 14 NHBC awards, including a Regional Award and four Seals of

Excellence and we have achieved, for the fifth year running, a five star rating for customer service from the Home

Builders Federation.

What House? Awards are the pinnacle of achievement for housebuilders and we are delighted to have won in 2013

‘Best Medium Housebuilder’ for the second year in a row and the ‘UK’s Best Development’ 2013.

BEST MEDIUM HOUSEBUILDER 2013

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CALA Group - Head Office

Adam House,

5 Mid New Cutlins,

Edinburgh, EH11 4DU

T: 0131 535 5200

CALA Homes (North) Ltd

Anderson House,

1 Kingshill Park,

Venture Drive,

Arnhall Business Park,

Westhill, AB32 6FL

T: 01224 737 800

CALA Homes (East) Ltd

Cairnlee House,

Callendar Business Park,

Callendar Road,

Falkirk, FK1 1XE

T: 01324 600 000

CALA Homes (West) Ltd

Cairnlee House,

Callendar Business Park,

Callendar Road,

Falkirk, FK1 1XE

T: 01324 600 000

CALA Homes (Midlands) Ltd

Brook House,

Birmingham Road,

Henley-in-Arden,

Warwickshire, B95 5QR

T: 01564 797 640

CALA Homes (North Home Counties) Ltd

1 Falcon Gate,

Shire Park,

Welwyn Garden City,

Hertfordshire, AL7 1TW

T: 01784 225 300

(office opening 2015)

CALA Homes (Chiltern) Ltd

Riverside House,

Holtspur Lane,

Wooburn Green,

High Wycombe,

Buckinghamshire, HP10 0TJ

T: 01628 536 200

CALA Homes (Thames) Ltd

CALA House,

54 The Causeway,

Staines Upon Thames,

Surrey, TW18 3AX

T: 01784 225 300

CALA Homes (South Home Counties) Ltd

Tilford House,

Farnham Business Park,

Weydon Lane,

Farnham,

Surrey, GU9 8QT

T: 01628 536 200NINE ’QUALITY AWARD‘

FOUR ’SEAL OF EXCELLENCE‘ONE ‘REGIONAL AWARD’

Welwyn Garden CityHigh WycombeStainesFarnham

SOME OF OUR NHBC PRIDE IN THE JOB WINNERS: TOP ROW, MARK FOLEY (EAST), BILLY HAMILTON (EAST), MIKE HARDING (EAST) BOTTOM ROW, MICHAEL CARRIGAN (WEST), JON CHANNON (THAMES), WILLIE MCCALLUM (CHILTERN)

OFFICE LOCATIONS BUILDING ON SUCCESS

CALA.CO.UK

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