FAIRFAX_ACQUISITIONS_LIMI - Accounts

The directors present the strategic report for the year ended 31 March 2020.

Land is at the heart of Fairfax Acquisitions Limited business. The company continuously seeks to acquire new land and has an excellent track record of achieving planning consents for development and maximising land value potential. Fairfax Acquisitions Limited objective is to be recognised as a trusted partner who works with landowners and local communities to deliver positive outcomes for all parties.

Review of the Business

2020 was a positive year for Fairfax Acquisitions Limited with the successful completion of a number of projects generating a gross profit of £3.4m. This demonstrates that Fairfax Acquisitions Limited has access to the resources and expertise needed to generate success for both the company and its business partners. In this regard Fairfax Acquisitions Limited continues to strengthen its relationship with its key suppliers to ensure that it has access to an increasing bank of dedicated land specialists.

The directors consider that the main business risks and uncertainties are:

• Reduced access to sites with planning potential.

• Changes to the UK planning process that give rise to restrictions on development potential.

• A decline in the demand for development sites from the UK’s primary housebuilders.

• Continued access to appropriate credit lines.

These risks are mitigated by working closely with all interested parties including, individual landowners, planning authorities, leading professional practitioners and the UK’s primary housebuilders. As part of this process Fairfax strives to engage fully with local communities to address their needs and promote positive outcomes for all parties.

Furthermore, the company has received confirmation from its ultimate parent undertaking that it will provide continued financial support.

The most relevant indicators for the business are:

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2020.

The results for the year are set out on page 7.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

On 7 September 2020 Group Audit Services Limited trading as Wilkins Kennedy Audit Services changed its name to Azets Audit Services Limited. The name they practice under is Azets Audit Services and accordingly they have signed their report in their new name.

The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and of the profit or loss of the company 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;

•     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 enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

We have audited the financial statements of Fairfax Acquisitions Limited (the 'company') for the year ended 31 March 2020 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 March 2020 and of its loss for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•     adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•     the financial statements are not in agreement with the accounting records and returns; or

•     certain disclosures of directors' remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Fairfax Acquisitions Limited is a private company limited by shares incorporated in England and Wales. The registered office is Buncton Barn, Buncton Lane, Bolney, Haywards Heath, United Kingdom, RH17 5RE.

These financial statements were authorised for issue by the directors on 30 June 2021.

The principal activity is the development of land and residential housing.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

•     Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

•     Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ Interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

•     Section 33 ‘Related Party Disclosures

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

Fairfax Acquisitions Limited is a wholly owned subsidiary of Fairfax Classical Properties Limited and the results of Fairfax Acquisitions Limited are included in the consolidated financial statements of Fairfax Classical Properties Limited which are available from Buncton Barn, Buncton Lane, Bolney, Haywards Heath, RH17 5 RE.

WGT Limited has confirmed that they will provide support to enable the company to fulfil its financial obligations as and when they fall due.true

The directors have prepared cashflow forecasts and have assessed that the operating cashflows generated, together with the financial support outlined above is adequate to ensure that the company will meet its liabilities as and when they fall due for a period of at least twelve months from the date from which these accounts were approved. On this basis the directors are of the opinion that the financial statements should be drawn up on a going concern basis.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised.

Sale of property interests

Revenue from the sale of property interests is recognised when all of the following conditions are satisfied:

- the company has transferred the significant risks and rewards of ownership to the buyer;

- the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the properties sold;

- the amount of revenue can be measured reliably;

- it is probable that the company will receive the consideration due under the transaction; and

- the costs incurred or to be incurred in respect of the transactions can be measured reliably.

Revenue is recognised upon stage of completion.

Other revenue

Other revenue represents amounts receivable for rent of investment properties, as well as for contract administration, management fees and advisory services and is recognised to the extent that it is probable that the economic benefit will flow to the company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

Work in progress is valued on the basis of direct costs only. Provision is made for forseen losses where appropriate. No element of profit is included in the valuation of work in progress.

work in progress comprises

- property and land held for development and sale

- promotion agreements, whereby the company acts on behalf of the owners of the land. Under the agreement the company promotes land through the planning process and may incur a fee for entering into the agreement and subsequently costs are incurred in promoting the land. Upon sale of land any fee and certain costs incurred, as set out under the promotion agreement are reimbursed and the company receives an agreed percentage of the net proceeds from a successful sale.

- Options to purchase land, whereby the company has the option to acquire land from the owners within a certain period of time. During this period, generally the owner of the land is not permitted to enter into a sale with a third party unless agreed. The company promotes land through the planning process and if successful will take up the option to acquire the land.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Critical accounting estimates and key sources of estimation uncertainty

Significant estimates and judgements

The preparation of financial statements in compliance with FRS 102 requires management to make judgements, estimates and assumptions that affect the application of policies and reported profits during the financial year. Estimates and judgements are continually evaluated and are based on experience and other factors that are believed to be reasonable under current circumstances. Although these estimates are management's best knowledge of the amount, events or actions, actual results ultimately may differ from these estimates.

The directors have made the following significant estimates and judgements which they consider to be applicable to the financial statements.

Work in progress

Consideration has been given by the directors to the recoverability of work in progress. In determining this the directors have used their knowledge of the market and guidance from independent valuation tools.

Investment Properties

The fair value of land and buildings is appraised primarily on the basis of internal valuations. The best evidence of fair value are current prices in an active market for similar property investments.

Auditors' remuneration is paid within the fees charged to Fairfax Classical Properties Limited, the immediate parent undertaking.

The average monthly number of persons (including directors) employed by the company during the year was:

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

Factors that may affect future tax charges

Reductions to the UK corporation tax rate were substantially enacted on 6 September 2017. The changes proposed to reduce the rate to 17% for the year commencing 1 April 2020. It was further announced as part of the finance Act 2020, which was enacted on 22 July 2020, that the UK corporation tax rate would remain at 19% for the financial tax years beginning 1 April 2020 and 1 April 2021 respectively. The standard rate of corporation tax in the UK will change from 19% to 25% with effect from 1 April 2023.The effect on the company of these proposed changes will be reflected in the company's financial statements in future years, as appropriate.

Valuation of investment property

Investment properties are valued by the directors having consideration to current prices in an active market for similar property investments.

In the opinion of the directors there is no material difference between the historical value and the fair value of the investment property.

Details of the company's subsidiaries at 31 March 2020 are as follows:

Details of the company's joint ventures at 31 March 2020 are as follows:

Stock recognised in cost of sales during the year as an expense was £9,566,311 (2019: £12,675,340).

Loans

Creditors: Amounts falling due within one year includes:

A loan of £2,032,364 (2019: £1,662,364) in relation to a specific project and is repayable in full on completion of the project and sale of the developed property together with accrued interest of £438,795 (2019 £203,840). Interest is charged on the loan at 10% until 30 November 2019 and thereafter 15% per annum. Interest of £234,955 (2019: £203,840) has been charged in the year.

Secured Loans

Creditors: Amounts falling due after more than one year are represented by the following:

A loan of £3,000,000 (2019: £nil) is secured against a specific property stock and as at 31 March 2020 is due for repayment together with accrued interest on 15 May 2021. Interest is charged on the loan at 5.5% per annum and at the financial reporting date accrued interest is £142,849 (2019 £Nil).

On the 26 March 2021, a variation agreement was entered into whereby the repayment date for the loan facility was extended to 15 May 2022 with revised security against investment property held by Fairfax Acquisitions Limited and investment property held by another group undertaking, Fairfax Land Acquisitions Limited.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Included in other creditors is a loan from a related party, FCP Land 3 Limited, a company incorporated in England and Wales. The total balance due to this company at the Statement of financial position date was £523,775 (2019: £523,775). The loan is unsecured, interest-free and repayable on demand.

Included in debtors under group undertakings is a loan to Kerazar Ultimate Enterprises Limited. The total balance due from this company at the Statement of financial position date was £2,200,000 (2019: £1,400,000). The loan is unsecured, interest-free and repayable on demand.

Included in trade debtors is a balance due from a connected party, Fairfax (Somerton) Limited. The total balance due from this company at the Statement of financial position date was £Nil (2019: £832,800).

Included in trade debtors is a balance due from a connected party, FCP Land 4 Limited. The total balance due from this company at the Statement of financial position date was £Nil (2019: £852,240).

Included in trade debtors is a balance due from a connected party, FCP Land Two Limited. The total balance due from this company at the Statement of financial position date was £Nil (2019: £800,000).

Included in trade debtors is an amount due from a connected party Fairfax Sussex Limited. The total amount due from this company at statement of financial position date was £180,000 (2019: £Nil).

Included in trade debtors is an amount due from a connected party Fairfax (Rottingdean) LLP. The total amount due from this company at statement of financial position date was £2,200,000 (2019: £Nil).

Included in other debtors is an amount due from a connected party Fairfax Sussex Limited. The total amount due from this company at statement of financial position date was £Nil (2019: £150,000).

Included in trade creditors is an amount due to a connected party Fairfax Sussex Limited. The total amount due to this company at statement of financial position date was £Nil (2019: £2,709,718).

Included in other creditors is a loan due to a connected party, Fairfax (Rottingdean) LLP. The total amount due to this entity at financial position date was £1,980,715 (2019: £Nil). Interest is charged on the loan at 10% per annum. Interest of £37,986 has been accrued during the period. As at financial position date included in accruals and deferred income as owed to this entity is £37,986 (2019 £nil).

Included in accruals and deferred income is an amount due to a connected party, Fairfax Sussex Limited. The total amount due to this company at statement of financial position date was £Nil (2019: £38,918).

As at the statement of financial position date, included in other creditors is £400,000 (2019 £Nil) owed to WGT Limited, the ultimate controlling party, in relation to their administrative services.

The directors have considered the potential impact of Covid19 and the various measures that have been taken to contain it, on the operations of the Company in the future. In response to the expected economic downturn caused by the Covid19 pandemic, the directors have taken the following steps to mitigate any associated risks:

• Take a cautious look on investment

• Work closely with its suppliers and local authorities to minimise disruption to its operations

At the same time the directors have considered the potential impact of Covid19 on its future revenue streams from both a slowdown in the planning approval process and a fall in demand from its traditional customer base. Having regard for the results of these reviews and the fact that WGT Limited has confirmed that they will provide support to enable the company to fulfil its financial obligations as and when they fall due, the directors do not consider that Covid19 has had a lasting impact on the carrying value of its work in progress and investment property.

The immediate parent company of Fairfax Acquisitions Limited is Fairfax Classical Properties Limited by virtue of its ownership of 100% of the shares issued by the company. It is the belief of the Directors that the ultimate controlling party is WGT Limited as trustee of The Westminster Group Trust, a company which is resident in Jersey.

Fairfax Classical Properties Limited, whose registered office address is Buncton Barn, Buncton Lane, Bolney, Haywards Heath, RH17 5RE prepares consolidated financial statements in which Fairfax Acquisitions Limited trading results are included.