keepmoat plc annual report and accounts 2010

ANNUALREPORT ANDFINANCIALSTATEMENTS

2010

The leading service provider to the public sector offering comprehensive andsustainable regeneration solutions, innovativeproducts and services in affordable housingand investing in community infrastructure.

Community regeneration is complex, creating numerouschallenges and opportunities. Government policy,through strategic drivers and demanding performancemeasures, creates an environment where LocalAuthorities and public agencies ie Registered SocialLandlords need to innovate constantly, in order to meet these Government targets and, at the same time,satisfy the needs of their customers.

Regeneration means working with all stakeholders within communities to transform quality of life, acrossthe built environment, place shaping and deliveringservices for younger people through to our oldergeneration. Now more than ever, the UK’s public sectoris facing greater pressure to achieve and deliver.

For over 80 years, Keepmoat has been assisting itspartners to meet the demands of their markets andcustomers, by working with them in innovative ways to deliver regeneration services that provide long-term and sustainable benefits for their communities.

Annual Report— Financial Summary 2

— Chief Executive’s Review 4

— Business Review 7

— The Keepmoat Board 12

— Directors’ report 14

— Statement of Directors’ responsibilities 16

— Independent auditors’ report 18

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Contents Keepmoat Limited Annual Report and Financial Statements for the year ended 31 March 2010

Financial Statements— Consolidated profit and loss account 21

— Consolidated statement of total recognised gains and losses 22

— Balance sheets 23

— Consolidated cash flow statement 24

— Statement of accounting policies 25

— Notes to the financial statements 28

Annual Report and Financial Statements — 2010

Financial Summary


Performance £m 2010 2009 Growth

Revenue 604.4 570.5 6%

EBITDA† 70.7 65.7 7%

Adjusted operating profit* 68.9 63.7 11%

Financial indicators 2010 2009

Net cash flow from £59.7m £52.5moperating activities

Cash conversion to EBITDA 85% 80%

Dividends paid £42m £44.4m

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

2009 20102008

682

2009(adjusted)

20102008

68.863.961.7

2009 20102008

2009 20102008

557 570 604

43449.843.540.5 358

2009 20102008

682

2009(adjusted)

20102008

68.863.961.7

2009 20102008

2009 20102008

557 570 604

43449.843.540.5 358

Turnover (£m)

Profit before taxation (£m)

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

New homes to the social housing sector

03Annual Report and Financial Statements — 2010

245Considerate ConstructorAwards

£200,000donated to community projects

97%Customersatisfaction

300Trainees andapprenticeships

Outstanding training record with over

12,000days training providedto employees

With the new coalition government in place, spending cuts are widely expected across all sectors ofpublic services. The uncertainties over the limitedvisibility of public expenditure in our markets will liftwith the budget and the autumn’s comprehensive spending review. Both parties to the coalitiongovernment have made pre-election commitments to the UK’s socio-economic agendas on public services, regeneration and social inclusion.

The fragile recovery of the British economy and theunprecedented credit malfunction in the financial system hasreflected for another year on consumer confidence. Therehas been marginal improvement of the housing market.Interest rates have remained at an unprecedented low level,yet first and second-time house buyers are faced with majorobstacles in obtaining affordable mortgages.

Amidst indications of major difficulties for mainstream house builders, Keepmoat remains positive and realisticabout the state of the markets in which it operates. Demandfor affordable homes is strong, despite the limited availability of mortgages to first and second time buyers. Our markets clearly link housing with regeneration and theprovision of affordable, ecological and modern homes.Irrespective of the economic background and the ensuingausterity environment on public services, one thing is pretty certain: demand for regeneration services will increase. Keepmoat is relishing the chance to prove that it can deliver integrated regeneration solutions in a difficulteconomic environment.


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Chief Executive’sReview

Keepmoat is at the forefront of the housing regenerationagenda. Being selected to 11 out of 14 Housing MarketRenewal (HMR) Pathfinders as the preferred partner, we aspire to offer products and services of unparalleledquality and innovation to government, local authorities andlocal communities. Through efficiencies, value engineering,design and manufacturing innovations, Keepmoat willprovide a range of affordable, quality and environmentallyfriendly homes.

Our partners express their commitment and confidence toKeepmoat, as a stakeholder, facilitator, innovator and partner to deliver comprehensive community regenerationsolutions. It is our belief that the new political era will bring about more autonomy to local government to provideregeneration solutions and address pressing housing issuesof their communities. In excess of 4.5 million people needsocial housing in the UK, including more than 600,000families that are living in unsuitable and overcrowdedaccommodation and 57,000 families that local authoritiesacross the UK classify as homeless.

Through a range of internal and external measures aimed at increasing our efficiencies, we have been capable of shaping the Keepmoat Group in the most optimal way to face the challenges of the future. Our people, with their resilience to adversity and their eagerness to adoptchange have pioneered over the past year a phenomenaltransformation of the way we go about delivering community regeneration.

We predict that modern solutions to the constructionprocess, such as modular construction, together withefficient traditional build methods will offer our customersvalue for money options and unblock many new-buildframeworks. We have embraced such innovative solutions andwe have integrated them to our comprehensive range ofaffordable homes for sale, mixed use and tenure regenerationinitiatives, extra care and retirement solutions and responsiveand planned maintenance.

Keepmoat is passionate in raising living standards, increasingcommunity capacity, providing social enterprise andcontributing towards social and environmental sustainability.We believe that community regeneration will be deliveredthrough innovative synergies between the public and privatesectors. We will offer holistic solutions to customers inexisting and new geographical markets, aligning our strategywith government policy and remaining totally committed tothe pivotal role regeneration and housing play in socialcohesion in the UK.

Keepmoat’s corporate ethos is underpinned by wellembedded principles such as prudent management,customer satisfaction, quality products and services,innovation and continuous development. We firmly believe inmarket making opportunities and through tested publicprivate partnerships, will offer genuine solutions incommunity regeneration to central and local government.

The financial performance for the year 2009-2010 reflectson a remarkable effort of the Keepmoat Group amidst adifficult and uncertain economic environment which allowedus to deliver exemplary results for our shareholders and ourpeople. Keepmoat’s focus for the year ahead will be onsustainable growth of our products and services in existingand new geographical markets.

I take immense pride and pleasure to announce this set ofresults which reflect on the quality and dedication of ourpeople and express an enormous debt of gratitude to myfellow Directors for their hard work and loyalty to Keepmoat.

David BluntChief Executive Officer, Keepmoat Limited

We have established a distinctively integrated approach tobusiness development, an approach which aspires to bring a variety of solutions and services to our public sectorcustomers and stakeholders. Our business developmentapproach brings together traditional features of networkingand marketing with a range of sophisticated sustainablesolutions including investment to solve current problems andissues faced by local authorities, RSLs and ALMOS. We havereceived very encouraging feedback from our customers that the Keepmoat offering is unique to the market.

We forecast that there will be an increased demand for new build social housing across the UK, which, combinedwith a sustainable demand for refurbishment and responsivemaintenance of existing housing stock, will allow theKeepmoat Group to offer a one-stop shop, andcomprehensive range of solutions to our public sectorpartners. We also believe that there will be a huge demand for retrofitting the housing stock of the UK tocomply with environmental requirements. We have pioneeredthe sustainability agenda by having completed severalsuccessful pilot ‘eco refurbishment’ projects to save energy,water and waste and we were the first provider ofSustainable Homes Level 4 in England. We are working onone of the first zero carbon developments in the UK. We seea huge potential to introduce energy from micro-generationtechnology to community level solutions, as well asintegrating energy and CO2 considerations with broadersustainability impacts of EcoHomes and we look forward todeveloping and demonstrating projects to our stakeholdersin the near future.

On the Health and Safety front, Keepmoat has achievedOHSAS 18001, a milestone standard that points ourdelivery of affordable homes towards its future direction.

More than 3,000new home completionsprojected for 2010 / 2011


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Committed todeveloping our peoplethrough the Keepmoat Academy

Employing over

3,000people across the business

Over

1,500new homes for sale, rent and shared ownershipevery year

Experts ininnovative asset-based Public PrivatePartnerships

NHBCaccredited as ‘Excellent’ for 7 years running

A forwardorder book of

£3bn

contracts. As a consequence, the Board is confident ofachieving long-term growth.

In January 2010, the Group acquired Milnerbuild Limited, acompany providing responsive maintenance to the PublicSector in the North of England. This acquisition strengthensour position as a service provider of integrated maintenancesolutions. We look forward to working closely with theMilnerbuild management team in developing their businesswithin the Keepmoat Group.

We have and will continue to commit significant resources to Public-Private Partnerships (PPPs) and the government’sagenda for affordable housing through the HMRIPathfinders, as well as integrating a sustainable developmentprogramme in new lines of products and services, such asoffsite modular construction of new build homes andresponsive maintenance solutions.

CORPORATE CULTURE AND PEOPLEOur mission is Delivering Community Regeneration Services.Our values embrace a corporate philosophy which is basedon business integrity, total commitment to our partners,respect of people and delivery to the highest standards. We are genuinely passionate about raising living standards,increasing the capacity of affordable housing, providingsocial enterprise and contributing towards sustainability. We believe community regeneration is best delivered through the partnership between the public and privatesectors. Our role is of a stakeholder, facilitator, innovator and partner. We have embraced partnering as the best wayto deliver social housing solutions and we have pioneeredsuccessful and award-winning housing and regenerationpublic-private partnerships.

We are committed to equality of opportunities and a policythat encourages job creation from all sectors of thecommunity. This is demonstrated in the diversity of thepeople recruited across the Group. We continue to grow our reputation as an employer of choice due to our ability to attract, develop and retain high quality people. This issupported by human resource initiatives such as theKeepmoat Academy, our senior management development

The Group’s expertise in comprehensive social housingsolutions and affordable homes for sale demonstratesthe compatibility and responsiveness of our strategy withpublic policies. The Group works closely as a serviceprovider of integrated regeneration solutions with LocalAuthorities, Registered Social Landlords, Arms LengthManagement Organisations (ALMO’s), New Deal forCommunities Boards, Regional Development Agenciesand Homes and Communities Agency on numerousDecent Homes and Housing Market Renewal Initiatives(HMRI) across the North and Midlands of England.

REVIEW OF THE YEAR AND FUTURE OUTLOOKDuring the year the Group achieved a 6% increase inturnover to £604m (2009: £570m), and an 11% increase in adjusted operating profit to £70.6m (2009: £63.7m)which the Board believe to be an excellent performancegiven the very difficult economic environment. This strong performance is attributed to our strategic focus as a key public housing solutions provider in the UK. Wehave achieved year on year growth in turnover through an increase in business with public sector partners. This has offset the downturn in the private housing marketcaused by the shortage of mortgage finance. A detailedfinancial review of the year is contained in the FinanceDirector’s report.

The Group has an impressive social housing regenerationorder book of £1.3bn (2009 £1.5bn), and secured plots in hand totalling 11,557 (2009: 7,463) which positionsKeepmoat as a major provider in the sector. We haveachieved turnover of £130.0m (2009: £79.1m) on newbuild homes to the social housing sector representing21.5% (2009: 13.9%) of total group turnover. We areplanning to increase our activity in this sector to 50% of total group turnover over the next 3 years. Thegovernment’s Decent Homes programme has been asignificant driver of growth over the last five years, and the target completion date for this scheme is nowanticipated to be 2012. Local Authorities spending isexpected to continue beyond this point, together with new multi-service agreements for repairs and maintenance

Business Review


07

programme and clear succession plans. We have alsobrought new blood in to our industry by offering 350traineeships and apprenticeships across the Group. Ourhuman resource policies are continually reviewed and refinedin line with changing regulations and legislation.

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

CORPORATE GOVERNANCE AND REGULATORYINTERFACEThe Group takes corporate governance seriously. Throughour detailed knowledge of industry regulatory regimes, weare able to provide a workable and fully compliant approachto health and safety, employment, competition, environment,data protection and freedom of information. We haveadopted and implemented detailed policies and complianceregimes in all the above areas.

We have instigated risk management as a theme in ourbusiness. Every group company closely monitors risk andassesses its probability and consequences in a widespectrum of corporate patterns, ranging from regulatorycompliance, to commercial risk and business continuity.We also have a unique approach to the requirements


08

imposed by the best value regime. We assist our customersand partners to comply with this regime by recording and monitoring key performance indicators anddemonstrating best practice. We provide benchmarks forregulatory impact assessment for future best valueinspections. We have a dedicated and well establishedresearch and development team that monitors governmentand industry regulatory trends and develops our responsesfor compliance and best practice.

HEALTH AND SAFETYCompliance with health and safety is a top priority on ourcorporate agenda. We strive to create a safe workingenvironment for all. This year, we refurbished over 49,500homes (2009: 43,500) and our work has been carried outaround the daily lives of some 160,000 residents. As atestament to the careful, safe and caring approach of ourpeople, we are pleased to report that the Group shows a50% better than average site safety performance whencompared to the industry. (NHBC H&S fourth quarterMarch 2010).

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

‘09

of commercial and retail schemes, medical centres andeducational or government buildings. Our residentsatisfaction score has increased to 95% (2009: 93%).We invest considerably in local communities, utilising locallabour and sub-contractors, and providing much neededtraining and meaningful employment to local people.

We also provide strategic investment in the regenerationarea through:— The integration of local supply chain and effective

selection of local sub contractors and suppliers— Identification of skills and priority recruitment for

local labour— The promotion of “micro” enterprise culture by assisting

the start-up of small businesses.

PUBLIC PRIVATE PARTNERSHIPSOne of the Group’s major strengths is our ability to establish and deliver successful public-private sector social housing and community regeneration partnershipsthat have set national standards and received governmentpraise and recognition. The Group is in the forefront of the HMRI programme. We have developed legal and financial models which support our clients’ requirements.Our models offer local authorities and governmentregeneration agencies the opportunity to stretch publicfunding and achieve much more than traditionalprocurement and contractual methods. A distinctive featureof our partnerships is the profit-sharing arrangements weprovide for our public sector partners. We have establishedjoint venture companies such as the Durham VillagesRegeneration, that reduce potential risks for the public

SUSTAINABILITYSustainable communities require the successful integrationof environmental, social and economic considerations. Weplace great emphasis on implementing sustainability bestpractice into our products and services. Environmentalprotection and sustainable development is an increasinglysignificant part of our operations. The Group consistentlyapplies ISO 14001 standards and has introduced innovativeproduction methods that are beneficial to the environment,such as modern construction methods, heating andinsulation, water harvesting and recycling features. Over98% of our affordable homes are built on brownfield sites.

Our other sustainability achievements include:— We are currently constructing homes in accordance with

Level 3 of the Code for Sustainable Homes and were thefirst provider of a Level 4 dwelling in England

— We have constructed over 100 Homes at Level 6 (Zero Carbon)

— With 27% of all carbon emissions coming from existinghomes we are also one the first companies to havecompleted several successful pilot ‘eco refurbishment’projects to save energy, water and waste.

DELIVERING COMMUNITY REGENERATION THROUGHSYNERGY WORKINGWe work together with the public sector, communities,strategic allies and key stakeholders to deliver holistic andsustainable community regeneration. We deploy our ownresources as well as mobilise resources available to strategicalliances. Our aim is to achieve seamless, ‘one-stop shop’successful and sustainable regeneration through the delivery


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sector, yet deliver the regeneration and financial resultsrequired by the public sector.

SUPPLY CHAIN MANAGEMENTOur effective supply chain management strategy is founded upon the principles of collaboration, trust andtransparency resulting in the operation of long termpartnering frameworks with many of our key suppliers andsub contractors. Such arrangements generate economies through leveraging our expenditure and benchmarkingdeliverables, which ultimately provide more efficient bettervalue solutions to the public sector.

We continually innovate to deliver efficiency and value for money benefits to our clients. Over the past 12 monthswe have continued to develop the use of e-procurementhaving successfully launched Keepmoat E-Sourcing Solutions in 2009. This cutting edge procurement tool has transformed our supply chain interface resulting in significant efficiencies, process improvements and cost savings

SOCIAL ENTERPRISE AND CORPORATE SOCIALRESPONSIBILITYKeepmoat has pioneered the delivery of social enterprise in regeneration areas. We create a platform for the launch of socio-economic initiatives, such as training and employment schemes, which provide opportunities for local people to train and obtain a vocational qualification in construction and construction-relatedactivities, and to find meaningful employment with long term prospects. We also establish an enterprise culture, whereby small sub contractors and suppliers can flourish and benefit from the regeneration investment.We raise the aspiration of young people to engage in


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their community and neighbourhood matters, raiseenvironmental awareness and contribute towards social inclusion.

We continue to invest in the communities where we work.One such investment is our SOAR Build social enterprise, anexcellent example of partnership working with the publicsector. Through SOAR Build we are helping to changecommunities for the long-term by improving skills andproviding training and employment opportunities for localpeople. This approach goes well beyond the traditionalprivate sector investment in corporate social responsibility.As a private sector Group, we are particularly proud that ourwork with, and investment in local communities, has beenpraised by the Government.

We have undertaken an audit of industry-wide best practicewith the committed support of senior managementthroughout the Group. We benchmark our performance yearon year against best practice in the following six key areas:community; environment; health & safety; people; vision andvalues and marketplace.

The Keepmoat Foundation is an institution that supportsprojects which develop skills, strengthen communities andimprove the employment prospects of young people. Thisyear the Keepmoat Foundation has invested over £200,000(2009: £200,000) in community and youth projects anddirectly and positively affected many peoples’ lives. TheKeepmoat Foundation also supports Outward Bound Trust,by offering an opportunity to over 60 young persons fromthe areas the Group regenerates to acquire transferable skillsand employment aptitude. Our association with OutwardBound Trust has been awarded the Big Tick Business in theCommunity accreditation for two consecutive years.

Over

49,500refurbished homes per year - that’s 1 home every 2 minutes


WALKER REPORTOn 20th November 2007 David Walker published his‘Guidelines for Disclosure and Transparency in Private Equity’ (the Walker Report) which recommends thatportfolio companies of private equity firms, amongst otherthings, can make certain enhanced disclosures in theirfinancial statements.

The Keepmoat Group, lead by Lakeside 1 Ltd, has chosen tocomply with these guidelines. Full disclosure meeting therequirements of the Walker Report is contained in the annualreport of our ultimate parent company, Lakeside 1 Ltd.

MBO SHAREHOLDERS AND DIRECTORSThe Group was the subject of a management buy-out inAugust 2007. This was financially backed by Bank ofScotland Integrated Finance (BOSIF). A combination of Debtand Equity was raised to fund this transaction. Subesquentto the year end, BOSIF have transferred their 18% equitystake to Cavendish Square Partners LP, a special purposevehicle owned approximately 70% by Coller Capital andapproximately 30% by Lloyds Banking Group. All of theother shareholders are Directors and Senior Managers withinthe Group. David Cowie, a Non-Executive Director ofLakeside 1 Ltd, is a Partner in Caird Capital LLP, the advisorto Cavendish Square Partners LP’s General Partner.

FINANCIAL POSITION AND RISKSThe key measures of our financial performance are EBITDA (Earnings before Interest, Tax, Depreciation andAmortisation) and cash flow. For the Group as a whole, theoperating cash in flow for 2010 was £59.6m (2009:£61.7m) and EBITDA was £70.2m (2009: £65.7m).

The amount of working capital required to service theGroup’s operations is closely monitored and controlled on aregular basis, and forms a key part of the informationpresented to the Board each month. The current assetsmainly comprise trade receivables, work in progress and land held for development of private housing and ofaffordable housing through partnering schemes. The Groups’ strategic focus is on public sector customers and as a result there is no history of bad or doubtful debts. We invested £19.8m of our free cash flow in growing working capital during the year, and cash balances increasedby £72.1m after paying £42m in dividends and receiving an inter-company debt repayment of £63.9m from our non-operating holding company. In the course of its ordinaryactivities, the Group is exposed to some financial risks whichinclude liquidity and credit risks.

Liquidity risk relates to the Group generating sufficient cashflow to meet our operational requirements, while meetingdividend payments to enable our parent companies’ toservice their debt interest requirements. The Group doesnot hold any of the debt in relation to the MBO. This debtis held by the parent companies of Keepmoat Ltd. A crossguarantee in relation to this debt is disclosed in note 23 ofour Annual Report and Financial Statements 2010.Management projections indicate significant headroom onbanking covenants for the forseeable future.

Credit risk is in relation to trade receivables from customers.As a result of the Group’s strategy to generate the majorityof our revenue from services to the public sector andregulated organisations, the exposure to potential bad debtsis extremely limited.


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David BluntChief Executive

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

Chris BovisDirector of Corporate Governance

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

Tom AllisonNon-Executive Chairman

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

Allen HicklingDirector of Regeneration

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

The Keepmoat Board


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Peter HindleyDirector of Homes

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

John ThirlwallFinance Director

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

Richard BrandonCompany Secretary (Non-Executive)

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

CHARITABLE CONTRIBUTIONSThe charitable contributions made by the Group during theyear to community Groups, local community projects andschools amounted to £201,000 (2009: £200,000).

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

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

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

The Directors present their report and the auditedconsolidated financial statements of the Group for the yearended 31 March 2010.

PRINCIPAL ACTIVITIESKeepmoat Limited (Keepmoat) is an intermediate holdingCompany of a Group which is principally engaged in therefurbishment and construction of residential dwellings. The Group’s operating subsidiaries are listed in note 11 tothe financial statements.

BUSINESS REVIEW The Group's profit for the financial year is £67,710,000(2009: £50,654,000). The Company paid ordinarydividends of £42,000,000 (2009: £44,400,000). A summary of the results and performance is presented inthe Financial Summary, Chief Executive’s Review and Business Review on pages 3 to 11.

DIRECTORSThe Directors of the Company during the year and at thedate of signing the financial statements, were: T AllisonD Blunt C Bovis A HicklingP Hindley J Thirlwall

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


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Directors’ report

(d) Financial ManagementIn the course of its ordinary activities, the Group is exposedto some financial risks which include liquidity, credit, andinterest rate risks. The Group monitors and manages theserisks through robust policies and procedures.

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

KEY PERFORMANCE INDICATORSThe Group uses a number of Key Performance Indicators tomeasure the performance of its operations. Details of theseare provided on page 2.

By order of the Board

R H J BrandonCompany Secretary13 September 2010

The Directors set out the principal risks facing the business:

(a) Procurement The Group’s supply chain strategy is an integral part of ouroverall business performance. The Directors have developedlong-term strategic partnering agreements with customersand major suppliers, and the associated risk is managedthrough effective risk management processes and the use ofkey performance indicators.

(b) People The Directors recognise that achieving Keepmoat’s growth strategy is heavily dependent on the performance of its people.

A continuing drive to become an employer of choice isunderpinned by an effective human resource strategy, whichenables the recruitment and retention of people of sufficientcalibre at all levels in the organisation.

(c) Housing MarketThe Directors recognise that the medium term growth plans could be affected by the Group’s ability to generate additional turnover which is partly dependant on the market for new homes in the private and socialhousing sectors. The Group monitors this risk through a regular and thorough market analysis which results inrobust forecasting.


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

Company law requires the Directors to prepare financialstatements for each financial year. Under that law theDirectors have prepared the financial statements inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standardsand applicable law). Under company law the Directors mustnot approve the financial statements unless they aresatisfied that they give a true and fair view of the state ofaffairs of the Company and of the profit or loss of theCompany for that period. In preparing these financialstatements, 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 UK Accounting Standards have

been followed, subject to any material departuresdisclosed and explained in the financial statements;

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

The Directors are responsible for keeping adequateaccounting records that are sufficient to show and explainthe Company’s transactions and disclose with reasonableaccuracy at any time the financial position of the Companyand enable them to ensure that the financial statementscomply with the Companies Act 2006. They are alsoresponsible for safeguarding the assets of the Company andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.


16

Statement of Directors’ responsibilities

DISCLOSURE OF INFORMATION TO AUDITORSAll Directors, at the date this report is approved, confirmthat, as far as they are aware, there is no relevant auditinformation (information needed by the Company’s auditorsin connection with preparing their report) of which theCompany’s auditors are unaware, and that they have takenall the steps that they ought to have taken as Directors inorder to make themselves aware of any relevant auditinformation and to establish that the Company’s auditors areaware of that information.

By order of the Board

R H J BrandonCompany Secretary13 September 2010


17

We have audited the Group and parent Company financialstatements (the ‘‘financial statements’’) of Keempoat Limitedfor the year ended 31 March 2010 which comprise theGroup Profit and Loss Account, the Group and ParentCompany Balance Sheets, the Group Cash Flow Statement,the Group Statement of Total Recognised Gains and Losses,the Accounting Policies and the related notes. The financialreporting framework that has been applied in theirpreparation is applicable law and United KingdomAccounting Standards (United Kingdom Generally AcceptedAccounting Practice).

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSAs explained more fully in the Directors’ ResponsibilitiesStatement the Directors are responsible for the preparationof the financial statements and for being satisfied that theygive a true and fair view. Our responsibility is to audit thefinancial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the AuditingPractices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared forand only for the Company’s members as a body inaccordance with Chapter 3 of Part 16 of the Companies Act2006 and for no other purpose. We do not, in giving theseopinions, accept or assume responsibility for any otherpurpose or to any other person to whom this report isshown or into whose hands it may come save whereexpressly agreed by our prior consent in writing.


Independent auditors’ report to themembers of Keepmoat Limited

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTSAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud orerror. This includes an assessment of: whether theaccounting policies are appropriate to the Group’s andparent Company’s circumstances and have been consistentlyapplied and adequately disclosed; the reasonableness ofsignificant accounting estimates made by the Directors; andthe overall presentation of the financial statements.

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

and the parent Company’s affairs as at 31 March 2010and of the Group’s profit and cash flows for the yearthen ended;

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

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

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

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

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

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

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

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

Derek Coe (Senior Statutory Auditor)For and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsSheffield13 September 2010


19


20

Constructing over 100 homes to the higherlevel of the Code forSustainable Homes –Level 6, Zero Carbon

Consolidated

profitand

lossaccount

fortheyearended

31M

arch2010

21


ResultsBefore Exceptional

Exceptional itemsItems (Note 6)

2010 2009 2009 2009£'000 £'000 £'000 £'000

Note

1 Turnover 604,417 570,470 - 570,470 Cost of sales (499,760) (472,397) (18,881) (491,278)Gross profit 104,657 98,073 (18,881) 79,192Administration expenses (35,747) (34,324) (1,179) (35,503)

4 Operating profit 68,910 63,749 (20,060) 43,689 5 Net interest (payable) / receivable (61) 125 - 125

Profit on ordinary activities before taxation 68,849 63,874 (20,060) 43,814 7 Tax on profit on ordinary activities (19,924) 1,223 5,617 6,84019 Profit for the financial year 48,925 65,097 (14,443) 50,654

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

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

Consolidated

statement

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2010 2009£'000 £'000

Profit for the financial year 48,925 50,654Actuarial (losses) / gains on pension scheme (Note 24) 366 (382)Movement on deferred tax relating to pension scheme (Note 24) (102) 107Total recognised gains for the year 49,189 50,379

Balancesheets

asat31

March

2010

23


Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

Note Fixed assets

10 Intangible assets 4,904 - - -11 Tangible assets 14,895 13,825 - -12 Investments - - 10,490 4,696

19,799 13,825 10,490 4,696Current assets

13 Land held for and under development 36,815 41,781 - -14 Stocks and work in progress 27,081 31,199 - -15 Debtors - amount falling due after one year 12,501 7,980 2 6815 Debtors - amount falling due within one year 101,221 146,251 14,568 73,983

Cash at bank and in hand 102,584 28,641 - -280,202 255,852 14,570 74,061

16 Creditors: amounts falling due within one year (179,273) (155,125) (20,897) (73,571)Net current assets / (liabilities) 100,929 100,727 (6,327) 490Total assets less current liabilities 120,728 114,552 4,163 5,186

17 Provisions for liabilities and charges - (625) - (233)Net assets excluding pension asset 120,728 113,927 4,163 4,953

24 Pension asset 893 505 - -Net assets including pension asset 121,621 114,432 4,163 4,953

Capital and reserves

18 Called up share capital 313 313 313 31319 Share premium account 690 690 690 69019 Profit and loss reserve 118,551 111,362 2,757 3,54719 Merger reserve 186 186 186 18619 Other reserve 51 51 - -19 Capital redemption reserve 217 217 217 21719 Investment revaluation reserve 1,613 1,613 - -

Total shareholders' funds 121,621 114,432 4,163 4,953

The financial statements on pages 21 to 48 were approved by the Board of Directors on 31 August 2010 and were signed on its behalf by:

D Blunt J Thirlwall

Chief Executive Financial Director

Consolidated

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2010 2009£'000 £'000

Note

20 Net cash inflow from operating activities 59,517 52,547Returns on investment and servicing of finance

Interest (paid)/received (91) 46Net cash inflow from returns on investment and servicing of finance (91) 46Taxation

UK corporation tax paid (90) (42)Capital expenditure and financial investment

Purchase of tangible fixed assets (2,899) (371)Sale of tangible fixed assets 197 204Net cash outflow from capital expenditure and financial investment (2,702) (167)Acquisitions

Purchase of subsidiary undertakings (5,436) -Cash acquired with subsidiary undertakings 674 -Net Cash out flow from acquisitions (4,762) -Financing

Equity dividends paid (42,000) (44,400)Decrease in inter company debtor funding 64,071 -Net cash inflow / (outflow) from financing 22,071 (44,400)

21 Increase / (decrease) in cash 73,943 7,984

Statement

ofaccountingpolicies

25


Basis of preparation

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

Basis of consolidation

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

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

Joint ventures

Joint ventures comprise investments in undertakings where the Group holds an interest on a long-term basis and jointlycontrols the commercial and financial policy of the venture with one or more other ventures under a contractualarrangement. The Group share of the result of its investment in joint ventures is included in the consolidated profit and lossaccount if material to the Group. In the consolidated balance sheet the investment in joint ventures is included as the Groupshare of net assets of the year end.

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

Turnover and profit recognition:

Private house building, property development and land sales

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

Contracts

Turnover and profit on short term contracts are recognised when the contracts have been completed. Turnover on long-termcontracts represents the value of work done, and excludes value added tax and trade discounts.

For long-term contracts, attributable profits are calculated based on the Directors' estimate of total forecast value less total forecast costs and are recognised based on the proportion of cost incurred to date compared to total costs expectedto be incurred.

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

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

Statement


26


Rental income

Rental income is accounted for as it falls due in accordance with the lease. Any lease incentives are spread across the initialperiod of the lease so as to recognise income evenly up to the first rent review.

Goodwill

Goodwill arising on consolidation is recorded at cost, which includes associated costs of acquisition, less the fair value ofassets acquired. Goodwill is being amortised over its useful economic life, which is estimated to be 20 years.

Tangible fixed assets

Tangible fixed assets are stated at their historic purchase cost less accumulated depreciation. The cost of fixed assets is theirhistoric purchase cost, together with any incidental costs of acquisition. Depreciation is calculated so as to write off the costof tangible fixed assets on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

%

Freehold properties 2 Long leasehold properties Over the terms of the leases Plant and equipment 10 - 25 Trade fixtures, office furniture and equipment 10 - 33 Motor vehicles 25

No depreciation is provided on freehold land.

Operating leases

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

Exceptional items

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

Stocks, work in progress and land held for development

Short term contract work in progress is valued at cost less any provision for foreseeable losses. Cost comprises directexpenditure together with an appropriate proportion of production overheads. Progress payments certified and receivable by the year end are deducted from work in progress balances; where progress payments exceed work in progress balancesthe net amount is included in current liabilities as payments on account. Long-term contracts are included in the balancesheet at the value of turnover less the value of progress payments certified and receivable. Where turnover exceeds progresspayments the net balance is included in debtors as amounts recoverable on contracts; where progress payments exceedturnover the net balance is included in current liabilities as payments on account. The costs on long-term contracts not yet taken to the profit and loss account less related foreseeable losses and payments on account are shown in stocks aslong-term contract work in progress.

Property developments, private house building, land held for development and under development and other stocks arevalued at the lower of cost (as defined for short term contracts above) and net realisable value. Net realisable valuerepresents the estimated amount at which stock could be realised after allowing for the cost of completion and realisation.

Statement


27


Shared Equity debtors

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

Deferred taxation

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

Provision for long-term performance plan

Provisions for the cost of benefits arising under a long-term performance plan are calculated on the basis of performance todate and an assessment of the likelihood of the target out-turn, over the term of the plan, being met.

Pension scheme arrangements

The Group contributes to a defined benefit pension scheme, for the benefit of its employees, the assets of which are held inindependently administered funds.

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

The Company is unable to identify its share of the underlying assets and liabilities of the Group scheme, and the Group has applied the multi-employer exemption provisions of Financial Reporting Standard Number 17, and therefore the scheme is accounted for by the Company as a defined contribution scheme under Financial reporting Standard Number 17.The Company charges contributions to the scheme when they become payable.

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

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

Costs under the Company's defined contribution scheme represent the amounts payable in the year.

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1 Turnover

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

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

2 Employee information

Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

Wages and salaries 95,373 96,528 5,104 4,685Social security costs 9,541 9,551 620 609Pension costs 1,501 1,586 173 169Staff costs 106,415 107,665 5,897 5,463

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

Group Company

2010 2009 2010 2009By activity Number Number Number Number

Production 2,231 2,274 - -Selling and distribution 27 38 - -Administration 705 769 38 40

2,963 3,081 38 40

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3 Directors' emoluments

2010 2009£'000 £'000

Aggregate emoluments 2,373 2,529Company pension contributions to money purchase scheme 71 81

2,444 2,610

Retirement benefits are accruing to five Directors (2009: five) under a money purchase pension scheme.Aggregate emoluments include Directors severance costs of £nil (2009: £519,000).

Highest paid Director

2010 2009£'000 £'000

Aggregate emoluments 688 551Company pension contributions to money purchase scheme 25 25

4 Operating profit

2010 2009£'000 £'000

Operating profit is stated after charging / (crediting): Depreciation of tangible fixed assets- owned assets 1,809 1,965Profit on disposal of fixed assets (177) (41)Hire of machinery and equipment 7,283 8,059Other operating lease rentals 1,561 1,384Exceptional items (Note 6) - 20,060Auditors' remuneration for:- Audit of parent Company and consolidated accounts 33 42- The auditing of the financial statements of subsidiaries of the Company

pursuant to legislation 159 161- Services relating to taxation 159 73Other services to the Company and its subsidiary 62 45

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5 Net interest (payable) / receivable

2010 2009£'000 £'000

Bank interest receivable - 46Net return on pension scheme assets 30 79Bank interest payable (70) -Other finance charges (21) -

(61) 125

6 Exceptional items

2010 2009£'000 £'000

Impairment of land held for and under development - 18,88Restructuring costs - 1,179

- 20,060

Impairment of land held for and under development

As a result of the difficult market conditions in the house-building sector in 2009, the market value of land has significantlyreduced. The land write down represented an impairment based upon the latest available cash flow information at that time.

Restructuring costs

Restructuring costs relate to redundancy and restructuring costs incurred during the prior year.

No exceptional items have been incurred in the current year.

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7 Tax on profit on ordinary activities

2010 2009£'000 £'000

Current tax

UK corporation tax on profit of the year at 28% (2009: 28%) 18,787 (1,322)Adjustments in respect of previous years 627 (387)Total current tax charge / (credit) 19,414 (1,709)

Deferred tax

Origination and reversal of timing differences 766 (4,890)Adjustment to tax charge in respect of previous period (304) -Change in tax rate - impact on deferred tax asset - (272)Pension cost charge in excess of pension cost relief 48 31Total deferred tax charge / (credit) 510 (5,131)Tax charge / (credit) on profit on ordinary activities 19,924 (6,840)

The tax assessed for the year is higher (2009: lower) than the standard rate of corporation tax in the UK 28% (2009: 28%). The differences are explained below.

2010 2009£'000 £'000

Profit on ordinary activities before tax 68,849 43,814Profit on ordinary activities multiplied by the standard rate in the UK 28% (2009: 28%) 19,278 12,268Effects of:Expenses not deductible for tax purposes 313 208Adjustment to tax charge in respect of previous period 627 (387)Accelerated capital allowances and other timing differences (804) 4,890Group relief claimed for no consideration - (18,688)Current tax charge for the year 19,414 (1,709)

No provision has been made for deferred tax on gains recognised on revaluing property to its market value. Such tax would become payable only if the property was sold without it being possible to claim rollover relief. The total amount unprovidedfor is £452,000 (2009: £452,000).

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Deferred taxation

Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

Deferred taxation comprises:

Accelerated capital allowances (1,031) (647) - -Other timing differences (4,170) (5,016)Deferred tax asset (5,201) (5,663) - -Pension deferred tax liability (see below) 346 196 - -Deferred tax asset including pension (4,855) (5,467) - -At 1 April (5,467) (229) - -Deferred tax credit to profit and loss account 510 (5,131) - -Deferred tax charge /(credit) to statement of total recognised gains and losses 102 (107) - -At 31 March - asset (4,855) (5,467) - -

Deferred tax liability relating to pension deficit

Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

At 1 April 2009 196 272 - -Deferred tax charge 48 31 - -Deferred tax charge / (credit) to the statementof total recognised gains and losses 102 (107) - -At 31 March 2010 346 196 - -

The deferred tax liability of £346,000 (2009: £196,000) has been deducted in arriving at the net pension asset on thebalance sheet.

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8 Profit for the financial year

As permitted by Section 408 of the Companies Act 2006, the parent Company's profit and loss account has not been included in these financial statements. The parent Company's profit for the financial year was £40,916,000 (2009: £46,260,000).

9 Dividends

2010 2009£'000 £'000

Dividends on ordinary shares:

Ordinary paid of £134.19 per share (2009: £141.85) 42,000 44,400

10 Intangible assets

Group £,000

Additions (Note 26) 4,904Net book amount at 31 March 2010 4,904

The Company had no goodwill at 31 March 2010.

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

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11 Tangible assets

Plant and

equipment,

Long Freehold fixtures

leasehold land and and motor

properties properties vehicles Total

The Group £'000 £'000 £'000 £'000

Cost

At 1 April 2009 798 9,407 12,596 22,801Additions - 1,957 941 2,898Disposals - (12) (232) (244)At 31 March 2010 798 11,352 13,305 25,455

Accumulated depreciation

At 1 April 2009 202 739 8,035 8,976Charge for the year 10 338 1,461 1,809Disposals - (6) (219) (225) At 31 March 2010 212 1,071 9,277 10,560

Net book value

At 31 March 2010 586 10,281 4,028 14,895

At 31 March 2009 596 8,668 4,561 13,825

The Company has no tangible assets.

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12 Investments

Company £'000

Interests in subsidiary and associated undertakingsCost at 1 April 2009 4,696

Additions (note 25) 5,794

Net book value at 31 March 2010 10,490

The Directors consider that the book value of investments is supported by their underlying net assets.

The following information relates to those subsidiary undertakings all of which are 100% owned by the Lakeside Group and registered in Great Britain whose results or financial position, in the opinion of the Directors, principally affect thefigures of the Group:

Name of Company Principal activities

Bramall Construction Limited Housing regeneration

Frank Haslam, Milan & Company Limited Housing regeneration

Keepmoat Homes Limited House building

Keepmoat Site Services Limited Hire of site accommodation for Group use

Keepmoat Property Limited Property development and the holding of properties forinvestment purposes

Keepmoat Regeneration Limited Housing regeneration intermediate holding Company

Milnerbuild Limited Maintenance, improvement, refurbishment and management of homes.

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

Description of shares

and proportion of Proportion

nominal value of value of voting Accounting

Name of undertaking that class held rights held year end

Trading

SOAR Build Limited Ordinary shares 50% 31 March of £1each (50% held)

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

Dormant

Hull & Gipsyville Housing B class ordinary shares 50% 31 MarchVenture Limited of £1 each (81% held) Doncaster 2000 Limited B class ordinary shares 50% 31 March

of £1 each (81% held)

Durham Villages Regeneration Limited is a joint venture between Keepmoat and Durham County Council. Its principal activityis house building. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL.

SOAR Build Limited is a joint venture with SOAR Enterprises Limited. Its principal activity is delivery of construction services.The Company’s registered office is: 11 Southey Hill, Sheffield, S5 8BB.

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

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

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

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13 Land held for and under development

2010 2009Group £'000 £'000

Land held for and under development 36,815 41,78136,815 41,781

The Company has undertaken a detailed review of the net realisable value of land held for and under development bothrelating to plots currently in development, and land and phases of sites not yet in development. This review recognises theimpact of lower selling prices and reduced activity levels being experienced across the business in recent years.

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

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

At the year end the net realisable value provision amounts to £15.8m (2009: £18.9m) with the movement of £3.1m in theyear reflecting utilisation of provision.

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

14 Stocks and work in progress

2010 2009Group £'000 £'000

House building developments in progress 27,081 31,199

The Company had no stocks or work in progress at 31 March 2010 (2009: £nil)

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15 Debtors

Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

Amounts falling due after more than one year:

Shared equity debtors 7,300 2,317 - -Deferred tax (Note 8) 5,201 5,663 2 68

12,501 7,980 2 68Amounts falling due within one year:

Trade debtors 76,776 60,778 14 7Amounts recoverable on contracts 10,033 6,966 - -Amounts owed by group undertakings - - 4,504 260Amounts owed by parent undertakings 811 64,592 811 64,592Amounts owed by associated undertakings (Note 27) 7,071 8,750 7,071 8,458Corporation tax recoverable 39 579 27 -Other debtors 3,994 2,258 2,009 676Prepayments and accrued income 2,497 2,328 132 -

101,221 146,251 14,568 73,983

Amounts owed by Group, parent and associated undertakings are unsecured, interest free and repayable greater than one year.

Long-term debtors due under the 'Shared Equity' scheme are due for repayment at the earlier of 10 years, or the date onwhich there is a future sale of the related property. Interest is not charged on these amounts, which are discounted topresent value at a discount rate which reflects the estimated cost of finance for the loan.

16 Creditors - amounts falling due within one year

Group Company

2010 2009 2010 2009£'000 £'000 £'000 £'000

Bank overdraft (secured) - - 17,595 70,352Trade creditors 95,987 91,743 622 266Payments on account 31,518 30,111 - -Amounts owed to Group undertakings 18,785 - 171 179Amounts owed to associated undertakings 73 - - -Corporation tax - - - 69Taxation and social security 13,382 8,465 1,249 113Other creditors 1,361 933 358 -Accruals and deferred income 18,167 23,873 902 2,592

179,273 155,125 20,897 73,571

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

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17 Provisions

Long-term

performance plan

Group £'000

At 1 April 2009 625 Utilised during the year (625)At 31 March 2010 -

Company

At 1 April 2009 233Utilised during the year (233)At 31 March 2010 -

The Group and Company have provided for the cost of benefits arising under a long-term performance plan. The 3 year planfinished on 31 March 2010.

18 Called up share capital

2010 2009£'000 £'000

Authorised

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

313,000 ordinary shares of £1 each 313 313

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19 Reserves

Share Profit Capital Investment

premium and loss Merger Other redemption revaluation

account reserve reserve reserves reserve reserve

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

At 1 April 2009 690 111,362 186 51 217 1,613 Retained profit for the year - 48,925 - - - -Dividends - (42,000) - - - -Actuarial gain on pension asset - 366 - - - -Movement on deferred tax relating to pension asset - (102) - - - - At 31 March 2010 690 118,551 186 51 217 1,613

Pension asset (893)Profit and loss reserve excluding pension asset 117,658

Company

At 1 April 2009 690 3,547 186 - 217 - Profit for the year - 41,120 - - - -Dividends - (42,000) - - - - At 31 March 2010 690 2,757 186 - 217 -

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

2010 2009£'000 £'000

Operating profit 68,910 43,689 Depreciation on tangible fixed assets (net of profit on disposals) 1,633 1,924Decrease in land held for development 4,966 19,266 Decrease in stocks 4,571 8,694 Decrease / (increase) in debtors (23,776) (26,299) Increase in creditors 3,355 5,942Increase / (decrease) in provision for long-term performance plan - (571) Difference between pension charge and cash contributions (142) (98) Net cash inflow from operating activities 59,517 52,547

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21 Reconciliation of net cash flow to movement of net funds

2010 2009£'000 £'000

Increase in cash in year 73,943 7,984Net funds at 1 April 28,641 20,657Net funds at 31 March 102,584 28,641

22 Other financial commitments

At 31 March 2010 the Group had annual commitments under non-cancellable operating leases expiring as follows:

2010 2010 2009 2009

Land and Other Land and Other

buildings buildings

£'000 £'000 £'000 £'000

Expiring within one year 287 427 187 398Expiring between two to five years inclusive 935 1,748 762 2,105 Expiring over five years 318 - 618 1

1,540 2,175 1,567 2,504

23 Contingent liabilitiesThe Group has entered into performance guarantees in the normal course of business which, at 31 March 2010, amountedto £9,616,000 (2009: £8,609,000). In the opinion of the Directors, no loss will arise in respect of these guarantees.

The Company has given guarantees in respect of its own bank borrowings and the bank borrowings of Castle 1 Limited, itssubsidiary company. At 31 March 2010 borrowings covered by both these guarantees amounted to £863,126,000 (2009:£809,033,000). The guarantees are in the form of a fixed charge over freehold land and building and floating charges overthe assets of the certain group companies.

On 17 April 2008 the Office of Fair Trading (“OFT”) issued a Statement of Objections following an investigation into tenderactivity in the construction industry. Included in this document were details of alleged potential breaches of competition lawin respect of three tenders submitted by Bramall Construction Limited and Frank Haslam Milan Limited (both wholly ownedsubsidiaries) between 2001 and 2004. The investigation has been concluded in the year with no fine being levied on FrankHaslam Milan, and Bramall Construction Limited, being fined £455,000. This amount has been fully recovered from thevendors of Keepmoat Limited under the terms of an indemnity provided as part of the purchase of Keepmoat Limited by theCompany in 2007.

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24 Pension commitments

The Group operates a defined benefit pension scheme, the Keepmoat Pension Plan, with assets held in independently administered funds. In addition, the Company runs a money purchase scheme.

A full actuarial valuation of the defined benefit scheme was carried out at 5 April 2007 and this has been updated to 16 August 2007 and 31 March 2010 by a qualified independent actuary. The scheme assets are stated at their market value at 31 March 2010. The major assumptions used by the actuary to calculate the liabilities of the Keepmoat GroupPension Plan are:

2010 2009 % %

Discount rate 5.6 6.8Rate of inflation 3.7 2.6Rate of increase in salaries 2.0 2.0Rate of increases in pension in payment 0.0 0.0

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

2010 2009 £'000 £'000

Longevity at age 65 for current pensioners: - Men 22.1 22.0 - Women 25.0 24.9

Longevity at age 65 for future pensioners: - Men 23.2 23.1- Women 26.0 25.9

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

Long-term Value Long-term Valueexpected expected

rate of rate of return return

31 March 31 March 31 March 31 March 2010 2010 2009 2009

% £'000 % £'000

Equities 7.0 4,993 7.5 3,351 Bonds and cash 4.5 1,087 3.0 1,165 Total market value of assets 6,080 4,516Present value of scheme liabilities (4,841) (3,851) Pension scheme surplus 1,239 701 Related deferred tax liability (346) (196) Net pension asset 893 505

Reconciliation of present value of scheme liabilities

31 March 31 March2010 2009£'000 £'000

1 April 3,815 4,895Current service cost 81 81 Interest cost 259 337Actuarial losses / (gains) recognised in the year 1,030 (1,067)Benefits paid (344) (431)31 March 4,841 3,815

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Reconciliation of fair value of scheme assets

31 March 31 March2010 2009£'000 £'000

1 April 4,516 5,801Expected return on scheme assets 289 416 Actuarial gains / (losses) recognised in the year 1,396 (1,449)Employers contributions 170 107Employee contributions 53 72Benefits paid (344) (431)31 March 6,080 4,516

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

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

Analysis of amounts charged to operating profit:

Operating profit

2010 2009 £'000 £'000

Current service cost 81 81

Other finance income

2010 2009£'000 £'000

Expected return on pension scheme assets 289 416Interest on pension scheme liabilities (259) (337)Net return 30 79

History of experience gains and losses 2010 2009 2008 2007 2006

Defined benefit obligation (4,841) (3,815) (5,516) (17,922) (15,434)Plan assets 6,080 4,516 6,422 18,323 15,345Surplus / (Deficit) 1,239 701 906 401 (89)Experience adjustments on plan assets:Amount (£'000) 1,396 (1,449) (442) 150 689Experience adjustment on plan liabilities:Amount (£'000) (380) 615 418 331 (309)Total actuarial gains and losses recognisedin the statement of recognised gains and losses:Amount (£'000) 366 (382) 341 388 142

The pension cost charged to the profit and loss account in respect of the defined contribution scheme was £1,562,000(2009: £1,505,000) representing contributions payable in the period.

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25 Acquisition

Keepmoat Limited purchased Force Solutions Limited and its trading subsidiary Milnerbuild Limited on 6 January 2010 andthe results are included in the consolidated balance sheet from this date. The aggregated results of the subsidiaries acquiredin the period prior to acquisition were as follows:

£'000

Period from 1 February 2009 to 8 January 2010

Turnover 6,468

Operating profit 612

Taxation (161)

Total recognised loss for the period 451

Total Fair value Total fair

adjustments value

£'000 £'000 £'000

Intangible assets 4 - 4

Fixed assets 71 - 71

Stock 453 - 453

Debtors 786 - 786

Cash 674 - 674

Creditors (1,024) - (1,024)

Provisions (74) - (74)

Net assets acquired 890 - 890

Goodwill (note 10) 4,904

Consideration 5,794

Consideration satisfied by:

Cash 5,436

Deferred cash consideration 358

5,794

The book values of the assets and liabilities have been taken from the consolidated management accounts of Force SolutionLimited at 6 January 2010.

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26 Related party disclosures

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

(a) Durham Villages Regeneration Limited

Under agreements between Keepmoat Homes Limited, Durham Villages Regeneration Limited and Durham City Council (on 1 April 2009 Durham City Council merged into the Unitary Authority of Durham County Council), Keepmoat HomesLimited has a license to build on land owned by Durham Villages Regeneration Limited. Keepmoat Homes is a wholly ownedsubsidiary of Keepmoat Limited. Durham Villages Regeneration Limited is a company in which Keepmoat Limited holds a 50% interest. During year the value of services provided under this arrangement amounted to £1,035,000 (2009:£268,000). At 31 March 2010, the amounts due to Durham Villages Regeneration Limited amounted to £73,000 (2009:due from £237,000) and are included in amounts owed to related parties in note 15.

Keepmoat Property Limited did not provide services to Durham Villages Regeneration Limited during the year (2009: £288,857).

The net amount due to Keepmoat Property Limited at 31 March 2010 was £nil (2009: £45,666). Keepmoat Limited did notprovide services to the Company, during the year (2009: £18,908). Keepmoat Limited also provided a medium term loan toDurham Villages Regeneration Limited for a principal sum of £7,887,088 (2009: £7,887,088). At 31 March 2010 the amountdue from Durham Villages Regeneration Limited, which includes accrued interest was £7,030,743 (2009: £8,434,796) andare included in amounts owed by associated undertakings in Note 14. Interest is accruing at 1% above base rate.

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(b) SOAR Build Limited

During the year, SOAR Build Limited provided services to Frank Haslam Milan & Company Limited and Bramall ConstructionLimited. Amounts charged by SOAR Build Limited to the Group during the year were £2,083,335 (2009: £1,180,590).Frank Haslam Milan & Company also charged SOAR Build Limited for services during the year amounting to £539,653(2009: £354,202). At the balance sheet date SOAR Build Limited owed the Group £12,000 (2009: £14,593).

(c) Doncaster 2000 Limited

At 31 March 2010, Keepmoat Limited was owed by Doncaster 2000 Limited amounts of £Nil (2009: £10,812).

(d) Other related party transactions

Show home sales

During the year the Company sold nine (2009: ten) show homes to James Blunt (the son of David Blunt, who is a Directorof Lakeside 1 Limited, the ultimate parent Company) for £900,000 (2009: £916,000 and five of these show homes weresold to James on behalf of his brother Philip). Under the terms of the sale, the show homes will be leased back to theCompany for an unspecified period of time at a cost of £54,000 (2009: £73,000) per annum.

On the sale of each show home, the sales price achieved over and above the original purchase price will be shared equallybetween the Company and either James or Philip Blunt, provided that the Company sell the property within 4 weeks of thetermination of the lease agreement. Any losses are borne in full by the purchaser. In the current year one show home wassold under the above arrangement which resulted in the Company receiving additional consideration of £22,000,representing its share of the profit.

Director house sale

During the year the Company sold a property to John Thirlwall, a Director of the Company, for £65,000. The purchase wasmade under the Company's shared equity scheme with 15% of the purchase price being financed by the Company. Thegross balance owing to the Company at the year end amounts to £9,750, which is included within shared equity debtors atits discounted net present value of £7,550.

27 Ultimate parent undertaking and controlling party The immediate parent undertaking is Castle 1 Limited.

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

Lakeside 1 Limited is the parent undertaking of the smallest and the largest group of undertakings to consolidate thesefinancial statements at 31 March 2010. The consolidated financial statements of Lakeside 1 Limited are available from:

The Company Secretary Keepmoat Limited The Waterfront Lakeside Boulevard Doncaster DN4 5PL

The Directors do not consider that there is one overall controlling party following the acquisition of the Group bymanagement in August 2007.


Directors

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T AllisonD Blunt C BovisA HicklingP HindleyJ Thirlwall

Secretary

R Brandon

Registered Office

The WaterfrontLakeside BoulevardDoncasterSouth YorkshireDN4 5PL

Registered number

1998780

Independent auditors

PricewaterhouseCoopers LLP1 East ParadeSheffieldS1 2ET

Solicitors

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

Bankers

Bank of ScotlandLevel ThreeNew Uberior House 11 Grey StreetEdinburghEH3 9BN

DESIGNED BY The Ideas Facility www.theideasfacility.com

The WaterfrontLakeside BoulevardDoncasterSouth Yorkshire DN4 5PL

Telephone01302 346620

Facsimile01302 346621

[email protected]

Webwww.keepmoat.com

keepmoat plc annual report and accounts 2010

Documents

financial statements

financial summaryannual

financial indicators

directors report

regeneration services

community regeneration

public agencies

uks public sectoris