development with care Limited 00 Report and Financi ts SE development with care The Banks Group Limited Company Number 2267400 Officers and advisors ..1 Strategic Report ..2 Report of the Directors ..6 Statement of Directors' Responsibilities ..8 Independent auditor?s report to the members of the Banks Group Limited ..9 Consolidated profit and loss account ..10 Consolidated balance sheet ..11 Company balance Sheet .. 12 Consolidated cash flow statement .. 13 Reconciliation of cash flow to movement in net debt .. 14 Notes to the financial statements ..15 BANG?r?uip development with care The Banks Group Limited Company Number 2267400 Officers and advisors Directors Secretary Registered office Auditors Bankers Banks Dunkley A Styles Gill Martin lnkerman House St John?s Road Meadowfield Industrial Estate Durham DH7 8XL Ernst 8: Young LLP Citygate St James? Boulevard Newcastle upon Tyne NE1 4JD HSBC Bank Team Valley Trading Estate Maingate Gateshead Tyne and Wear NE11 OBE development with care The Banks Group Limited Company Number 2267400 Strategic Report Review of Business Group Overview The results for the year and financial position of the company and the Group are shown in the annexed financial statements. The state of the Group?s affairs at 28 September 2014 was satisfactory. The consolidated profit and loss account of the Group is set out on page 10 and turnover is analysed in note 3. The Group has traded profitably during the year, and the directors expect this to continue for the foreseeable future. The Group's key ?nancial performance indicators for the year were: 2014 2013 Change ??000 ??000 2000 Turnover 128,320 97,372 30,948 Total operating profit 27,253 11,301 15,952 Profit on ordinary activities after taxation 16,519 4,877 11,642 Total shareholders? funds 48,066 34,855 13,211 Operational cash in?ow 61,776 12,130 49,646 Capital expenditure (7,983) (32,029) (24,046) Shareholder funds have increased due entirely to the level of retained profit realised in the year, offset by dividends of ?3.3 million (2013: ?22 million). The key activities which impacted on operating profit in the year are detailed below: Coal During the year under review, ongoing surface mining operations in Northumberland at both Shotton and Brenkley and in Scotland at Rusha produced strong performances. Shotton achieved coal production of 1,022,500 tonnes (2013: 942,000 tonnes) Brenkley achieved coal production of 371,000 tonnes (2013: 411,000 tonnes) and Rusha achieved coal production of 287,500 tonnes (2013: 117,000 tonnes). Shotton surface mine has estimated production reserves remaining of 2.7 million tonnes, which will be mined over the next four years. Brenkley surface mine has estimated production reserves remaining of 1.3 million tonnes, which will be mined over the next four years. Rusha surface mine has estimated production reserves remaining of 0.5 million tonnes which will be mined over the next two years. During the year, fonlvard prices for coal have declined significantly. Whilst fonNard sales contracts currently in place will enable the coal division to deliver similar trading results in 2015 to those in 2014, the directors expect profit levels to reduce in 2016 if prevailing market conditions continue. 2 BANGGiroup development with care The Banks Group Limited Company Number 2267400 Strategic Report (continued) Renewable Energy Generation activities from Hazelhead (6MW), Marr (8MW), Armistead (12MW) and Penny Hill (21MW) were achieved for the full year. Heysham South (8MW) commenced construction in the year and has an energisation date of April 2015. Construction of Hook Moor Wind Farm (10MW) has commenced recently. As at 6 March 2015 the company has a portfolio of wind farm developments at various stages of development with generation capacity as follows: MW Prior year MW Operational sites 47 47 Sites in construction 18 - Consented sites 186 64 Sites seeking planning determination 1_4_5_ 3_9_6_ The directors regularly review the carrying value of windfarm developments and make provision where the costs of individual developments are no longer assessed as recoverable. During the year ?3.8m of such provisions were made. (MW is a measure of the designated electrical power output of the Windfarms). Property Market conditions for property development have improved in the year which has resulted in there being increased activity across much of the Group's property development portfolio. The Group has interests in 21 projects (2013: 24 projects), involving 6,275 potential residential plots (2013: 5,350 residential plots) and 42,000 square feet (2013: 64,000 square feet) of potential office and commercial space. The Group received outline planning permission for the Mount Oswald development site in Durham in February 2013. Phase one of the development was unconditionally contracted for sale in September 2013, with phased payments due in 2014 and 2015. Phase two was contracted for sale during 2014. At the year end there was an indebtedness of?11.5m in respect of these two phases, of which ?5.5m has been received since the balance sheet date. Despite the improved market conditions the directors have considered it necessary to make further provisions against certain brownfield sites which were acquired prior to the financial downturn in 2008. Provisions were therefore made in the year of ?6,853,000 (2013: ?5,000,000) against the property development WIP. The valuation for property development sites is highly subjective and it is anticipated that the development and realisation of certain sites within the existing portfolio will take several years. The directors keep the development appraisal valuations under regular review. IBANGI 3 development with care The Banks Group Limited Company Number 2267400 Strategic Report (continued) Bank Facilities The Group has a ?50m banking facility entered into in March 2012, split between an amortising ?18m three year term loan, ?27m four year revolving credit facility and ?5m overdraft (renewable annually). The directors believe that these facilities are fully adequate for the Group's needs and allow the business to plan for future growth with confidence. In addition wind farm developments are funded by long term loans secured on the specific windfarm assets. - Principal risks and uncertainties Market price risk The Group is exposed to coal, fuel, power and property price risk as a result of its operations. Coal price risk is managed by entering into contracts with customers of varying tenor at fixed prices, up to 3 years forward prior to opening a new surface mine to ensure an adequate level of market price risk is hedged prior to commencing operations. In addition the Group has entered into coal hedging arrangements to reduce exposure to the variability of coal prices. Fuel price risk is managed by entering into contracts with suppliers at fixed prices for expected usage over the next 12 months. During the year the Group has entered into hedging arrangements which reduce exposure to the variability of fuel prices. Power price risk is managed by entering into long term power purchase agreements. The agreements allow for power prices to be fixed up to 36 months fonrvard. The Group is exposed to the risk that the valuation of property developments continues to fall or doesn?t recover due to lack of demand or lack of liquidity in the market. The directors regularly review the carrying value of the property development portfolio held by the Group. The carrying value of such assets is written down where future net realisable value (NRV) is assessed as being less than cost. NRV is assessed after considering the expected timing of property disposals and the fact that the directors anticipate market conditions for such developments will improve in the medium term. Political risk The potential for future onshore wind farm development may be adversely affected by the outcome of the next General Election. A Conservative administration may seek to remove subsidy entitlement for onshore wind farms consented after May 2015 which could cause such developments to be no longer commercially viable. Health, safety and environment Group mining and civil engineering operations are subject to potential health and safety risks and the possibility of pollution of the environment. Management continuously review procedures to reduce the number of health and safety incidents occurring and to increase the standards of environmental safety and protection. The Board oversees and promotes the importance of health and safety in the business. Health and safety training is provided to employees on an ongoing basis to ensure awareness of safety issues across the Group. 4 BANGGroulp development with care The Banks Group Limited Company Number 2267400 Strategic Report (continued) Principal risks and uncertainties (continued) Planninq approval risk The UK planning regime affects all aspects of our business and any major changes could affect the business either positively or negatively. Where individual property or windfarm sites are assessed as no longer being likely to achieve planning consent, the costs associated with those sites are written off. Mininq production risk Inherent to the nature of our business is the geology of the ground in which we are mining. Whilst bore holes are drilled and modern survey techniques offer better information, the extent of geological faulting or other conditions in the coal seam are not totally predictable. Restoration liabilities An obligation to incur restoration costs arises when environmental disturbance occurs on the commencement of site operations at a surface mine. The cost of the restoration liabilities is estimated using key assumptions such as the volume of overburden and soil replacement and the associated plant, fuel, labour and overhead costs. The present value of the obligations is provided for in the financial statements and will be funded by the Group as the liabilities arise. The costs of restoration are significant and the directors continually review and monitor the future cash ?ow needs of the business in light of this. The directors are confident of funding all of the Group?s restoration liabilities. Weather risk Mining operations can be significantly affected by extreme weather conditions. Windfarms are exposed to the level of prevailing wind at each site, which impacts the amount of power generated. On behalf of the Board Company Secretary 6 March 2015 BANGGirotwp development with care The Banks Group Limited Company Number 2267400 Report of the Directors Principal Activity The principal activity of the Group during the year was opencast coal mining, operation of wind farms and the development of interests in land for property development and wind farms. Dividends The directors have declared and paid the following dividends during the year ended 28 September 2014: 2014 2013 ??000 9000 Equity dividends on Ordinary shares of ?1 each Interim for 2014 1,654 - Final for 2013 1,654 - Interim for 2013 - 1,102 Final for 2012 - 1,102 3,308 2,204 Directors The directors of the company during the year were: Banks Dunkley A Styles 8 Klein (resigned 12 August 2014) Gill (Non-executive director) Martin is an alternate director. Financial risk management Credit risk The Group has implemented policies that require appropriate credit checks on potential customers before sales are made or long term agreements are entered into. Where debt finance is utilised, this is subject to pre-approval by the Board of directors and such approval is limited to financial institutions with a AA rating or better. Liguidity risk The Group relies in part on bank loan finance to fund its operations. The Group actively maintains a mixture of long-term and short-term debt finance that is? designed to ensure the Group has sufficient available funds for operations and planned expansions. The Group bank loan facilities fall into two categories, bank funding secured on group assets (?group secured bank loan?) and ring fenced bank funding secured on the individual wind farm assets to which they relate without recourse to the wider group (?wind farm secured bank loans"). 6 BANGGirouip development vw'th care The Banks Group Limited Company Number 2267400 Report of the Directors (continued) Financial risk management (continued) interest rate cash ?ow risk The Group has interest bearing liabilities and has entered into interest rate hedging agreements with its bankers. The Group has a policy of maintaining a significant proportion of long term debt at a ?xed rate to ensure certainty of future interest cash ?ows. Other principal risks and uncertainties are explained in the strategic report on pages 4 and 5. Future developments The Group will continue to develop its portfolio of coal, property and wind farm assets and thereby create sustainable profits in future years. Employees The Group?s criteria for the selection, development and promotion of staff are based on each person's ability and suitability regardless of sex, race, religion, age or disability. Where existing employees become disabled, it is the Group?s policy to provide continuing employment wherever practical in the same or an alternative position or to provide training to achieve this aim. The Group has continued to keep its employees informed on matters affecting them by newsletters, departmental meetings and other means. The Group employs a full time officer to protect the health, safety and welfare of its employees. Disclosure of information to the auditor So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group?s auditor, each director has taken all the steps that he is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor Ernst Young LLP were auditor of the Group during the year and have expressed their willingness to continue in office. On behalf of the Board ?ute; artin Company Secretary 6 March 2015 7 development with care The Banks Group Limited Company Number 2267400 Statement of Directors? Responsibilities The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial period. 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). The financial statements are required by law to give a true and fair view of the state of affairs of the company and the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: a) select suitable accounting policies and then apply them consistently; b) make judgements and estimates that are reasonable and prudent; c) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and d) prepare the financial statements on the going concern basis unless inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Independent auditor?s report to the members of The Banks Group Limited We have audited the company's ?nancial statements for the year ended 28 September 2014 which comprise the Consolidated Pro?t and Loss Account. the Consolidated Balance Sheet. the Company Balance Sheet, the Consolidated Cash Flow Statement, the Reconciliation of Group Operating Pro?t to Net Cash Flow from Operating Activities, the Reconciliation of Cash Flow to Movement in Net Debt and the related notes 1 to 32. The ?nancial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company?s members those matters we are required to state to them in an auditor?s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company?s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of director and auditor As explained more fully in the Directors' Responsibilities Statement set out on page 8. the directors are responsible for the preparation of the ?nancial statements and for being satis?ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the ?nancial statements in accordance with applicable law and international Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the ?nancial statements An audit involves obtaining evidence about the amounts and disclosures in the ?nancial statements suf?cient to give reasonable assurance that the ?nancial statements are free from material misstatement. whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company?s circumstances and have been consistently applied and adequately disclosed; the reasonableness of signi?cant accounting estimates made by the directors; and the overall presentation of the ?nancial statements. In addition. we read all the ?nancial and non-?nancial information in the Report and ?nancial statements to identify material inconsistencies with the audited ?nancial statements and to identify any information that is apparently materially incorrect based on. or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we became aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion In our opinion the ?nancial statements: 0 give a true and fair view of the state of the Group?s and of the parent company's affairs as at 28 September 2014 and of the pro?t of the Group for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and; 0 have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors' Report for the ?nancial year for which the ?nancial statements are prepared is consistent with the ?nancial statements Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the parent company ?nancial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration speci?ed by law are not made; or we have not received all the information and explanations we require for our audit. Mark Hatton (Senior statutory auditor) Ernst Young LLP. Statutory Auditor Newcastle upon Tyne 6 March 2015 development with care The Banks Group Limited Company Number 2267400 Consolidated profit and loss account for the year ended 28 September 2014 2014 2013 Notes ??000 ??000 Turnover 3 128,320 97,372 Cost of Sales - non-exceptional (76,325) (64,696) Cost of Sales - exceptional 4 (10,702) (8,682) Cost of Sales (87,027) (73,378) Gross profit 41,293 23,994 Administrative expenses (14,040) (12,693) Group operating profit 5 27,253 11,301 Profit on sale of fixed assets 125 - Interest receivable and similar income 122 39 Finance costs 8 (5,914) (4,379) Profit on ordinary activities before taxation 21,586 6,961 Tax charge on profit on ordinary activities 9 (5,067) (2,084) Profit for the financial year 24 16,519 4,877 The Group had no recognised gains or losses in the year other than those included in the profit and loss account set out above. All operations are continuing. The notes form part of these financial statements BANG?Lr?uilp> development with care The Banks Group Limited Company Number 2267400 Consolidated balance sheet as at 28 September 2014 2014 2013 Notes ??000 ??000 Fixed assets Tangible fixed assets 12 106,485 113,877 Investments and joint ventures 13 (21) (9) 106,464 113,868 Current assets Stocks 14 24,137 38,1 76 Debtors 15 26,516 28,421 Cash at bank and in hand 34,604 11,362 85,257 77,959 Creditors: amounts falling due within one year Wind farm secured loans (1,922) (689) Other creditors falling due within 1year 431,537) (33,020) 17 (33,459) (33,709) Net current assets 51,798 44,250 Total assets less current liabilities 158,262 158,118 Creditors: amounts falling due after one year Wind farm secured loans (52,257) (52,617) Other creditors falling due after one year (3,193) (19,491) 18 (55,450) (72,108) Provisions for liabilities 22 (55,110) (51,519) Net assets 47,702 34,491 Capital and reserves Called up share capital 23 2,205 2,205 Capital reserve 24 352 352 Capital redemption reserve 24 900 900 Profit and loss account 24 44,609 31,398 Total shareholders? funds 25 48,066 34,855 Minority interests 31 (364) (364) Capital employed 47,702 34,491 The financial statements were approved and authorised for issue by the Board of Directors on 6 March 2 and were signed on its behalf by: Dunkley Director 11 development with care The Banks Group Limited Company Number 2267400 Company balance Sheet as at 28 September 2014 2014 2013 Notes ??000 ??000 Fixed assets Tangible fixed assets 12 298 424 Investments 13 3,984 3,984 4,282 4,408 Current assets Debtors 15 83,890 108,064 Cash at bank and in hand 25,250 5,284 109,140 113,348 Creditors Amounts falling due within one year 17 (96,747) (87,547) Net current assets 12,393 25,801 Total assets less current liabilities 16,675 30,209 Creditors: amounts falling due after one year 18 (1,733) (16,651) Net assets 14,942 13,558 Capital and reserves Called up share capital 23 2,205 2,205 Capital redemption reserve 24 900 900 Profit and loss account 24 1 1,837 10,453 Equity shareholders? funds 25 14,942 13,558 The financial statements were approved and authorised for issue by the Board of Directors on 6 March 2015 and were signed on its behalf by: it Dunkley Director - development with care The Banks Group Limited Company Number 2267400 Consolidated cash flow statement for the year ended 28 September 2014 2014 2013 ??000 ??000 Cash inflow from operating activities 61,776 12,130 Interest received 122 39 Interest paid (4,123) (2,892) Interest element of finance lease payments ?06) (105) Returns on investments and servicing of finance (4,107) (2,958) Taxation (3,357) (480) Purchase of tangible fixed assets (8,423) (32,171) Disposal of tangible fixed assets 440 142 Capital expenditure and financial investment (7,983) (32,029) Equity dividends paid (1,252) (834) Cash flow before financing 45,077 (24,1 71) Capital element of finance lease payments (1,768) (1,653) New long term loans 1,504 35,663 Repayment of long term loans (21,571) (2,793) Financing (21 ,835) 31,217 Increase in cash 23,242 7,046 Reconciliation of Group operating profit to net cash flow from operating activities 2014 2013 ??000 ??000 Group operating profit 27,253 11,301 Depreciation 18,008 16,631 Loss on disposal of fixed assets - 221 Decrease in stocks 14,039 1,928 Decrease/(increase) in debtors 2,175 (18,467) Increase in creditors 624 917 Movement in provisions (323) (401) Cash inflow from operating activities 61,776 12,130 13 MNG@r?up development with care The Banks Group Limited Company Number 2267400 Reconciliation of cash flow to movement in net debt 2014 2013 Notes ??000 ?'000 Increase in cash 26 23,242 7,046 Repayment of long term loans Group secured bank loans 20,750 2,250 Repayment of long term loans wind farm secured loans 821 543 Repayment of capital element of ?nance leases 1,768 1,653 Cash in?ow from long term loans and finance leasing (1,504) (37,817) Decrease/(increase) in net debt resulting from cashflows 45,077 (26,325) Non-cash movements 26 (301) (266) Decreasel(increase) in net debt 44,776 (26,591) Net debt at beginning of year (73,497) (46,906) Net debt at end of year: Group secured bank loans (6,581) (27,219) Wind farm secured loans (54,179) (53,307) Finance leases (2,565) (4,333) Cash at bank and in hand 34,604 11,362 Total net debt at end of year 26 (28,721) (73,497) development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 Accounting policies 8) b) Basis of accounting The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards in the United Kingdom. Basis of consolidation The Group financial statements include the accounts of the company and its subsidiaries for the year. Exemption from audit The directors have taken advantage of the exemption from the requirement to have the financial statements for the year ended 28 September 2014, for certain of its subsidiaries listed below to be audited. They confirm that for the year ended 28 September 2014 the subsidiaries were entitled to the exemption relating to audit of the accounts under section 479A of The Companies Act 2006. Subsidiaries exempt from audit under section 479A: Company No Banks Renewables (Bank Field Wind Farm Limited 07669717 Banks Renewables (Bandirran Wind Farm) Limited 08231487 Banks Renewables (Birneyknowe Wind Farm) Limited 06903043 Banks Renewables (Croft Hill Wind Farm) Limited 07393156 Banks Renewables (Cruach An Lochain Wind Farm) Limited 08231520 Banks Renewables (Doles Wood Wind Farm) Limited 08239084 Banks Renewables (Green Lane Wind Farm) Limited 07884885 Banks Renewables (Harting Rig Wind Farm) Limited 08791006 Banks renewabies (High Cumnock Wind Farm) Limited 07767076 Banks Renewables (Hunt Law Wind Farm) Limited 08053179 Banks Renewables (Kiliington Wind Farm) Limited 07547476 Banks renewables (Knockendurick Wind farm) Limited 07767049 Banks Renewables (Kype Muir Wind Farm) Limited 06917667 Banks Renewables (Lamb's Hill Wind Farm) Limited 06798765 Banks Renewables (Lethans East Wind Farm) Limited 08332209 Banks Renewables (Lethans Wind Farm) Limited 08217768 Banks Renewables (Long Hill Wind Farm) Limited 06992601 Banks Renewables (Losk Lane Wind Farm) Limited 06536685 Banks Renewables (Manor Farm Wind Farm) Limited 07441382 Banks Renewables (Middle Muir Wind Farm) Limited 07376956 Banks Renewables (Mill Rig Wind Farm) Limited 08773091 Banks Renewables (Moor House Wind Farm) Limited 06969180 Banks Renewables (Sauchanwood Hill Wind Farm) Limited 08464595 Banks Renewables (South Dale Wind Farm) Limited 07408144 Banks Renewables (Thornton Moor Wind Farm) Limited 07749703 Banks Renewables (Weddicar Rigg Wind Farm) Limited 06388891 15 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 0) 8) Accounting policies (continued) Exemption from audit (continued) Banks Renewables (Whitley Lees Wind Farm) Limited 08239284 Banks Renewables (Windy Bank Wind Farm) Limited 06993031 Camvo 201 Limited 08843252 North Carrick Renewables Limited 05932153 Joint ventures and associates The appropriate share of the results and reserves of associated undertakings and joint ventures are included on the gross equity basis of accounting. Turnover The sale of coal and minerals is recognised when coal is delivered to the contracted delivery point. Sale of electricity is recognised when electricity is transferred into the distribution network. Turnover is recognised on property developments when they are subject to unconditional contracts for sale. Rental income from waste management assets and other income is recognised on a straight-line basis over the period of the contract. Turnover from haulage and plant hire is recognised as the services are provided. Revenue is measured at the fair value of the consideration received or receivable excluding VAT. Tanqible fixed assets Mine exploration and development costs are capitalised as mining assets. They are subsequently impaired if circumstances indicate that the site is not commercially viable and will not therefore be worked. Mine excavation costs incurred prior to coaling and the estimated costs of restoration are capitalised as mining assets at the commencement of operations and a separate provision for the outstanding restoration obligations is established. From commencement of coal production, mining assets are amortised over the estimated production tonnage of each site. Depreciation of other tangible fixed assets is provided on a straight line basis at rates to write off the cost of assets over their estimated useful lives, which are: 10 to 50 years Period of the lease 3 to 20 years 3 to 4 years Freehold buildings Leasehold property Plant and machinery Fixtures, fittings, tools and equipment Assets in the course of development comprise options for leases and directly associated land related costs for wind farm development sites, and the costs of constructing wind turbines and associated infrastructure. No depreciation is charged on such sites until the wind farm is commissioned. 16 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 1 g) h) Accounting policies (continued) Stocks and work in progress Fuel, spare parts and coal are valued at the lower of cost or net realisable value after making due allowance for obsolete and slow moving items. Coal is recognised as stock when lifted from the ground and stock piled on site. The cost of coal stock is the average production cost and comprises direct materials, plant costs, labour and relevant overheads. Net realisable value is based on estimated selling price less any disposal costs. Work in progress represents property and wind farm developments and is valued at the lower of cost or estimated net realisable value. Cost includes all direct third party expenditure and development cost in pursuing planning consent. Net realisable value is based on the directors? assessment of the net present value of estimated future selling price less any further costs expected to be incurred to completion and disposal. Site restoration An obligation to incur restoration costs arises when environmental disturbance occurs on the commencement of site operations at a surface mine. The estimated present value of the cost of restoring each site at the end of production is provided as the obligation arises and capitalised as mining assets. The key assumptions used in calculating restoration provisions are volume of overburden and soil replacement and the associated plant, fuel, labour and overhead cost. These costs are charged over the estimated production tonnage of each site through the depreciation of the asset as an operating cost and the unwinding of the discount on the provision as a finance cost. Changes in the estimated cost or timing of the restoration are added to or deducted from the related asset and provision in the period in which they arise or are reassessed. Deferred tax Deferred tax is recognised in respect of all material timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more or a right to pay less tax. Deferred taxation assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred taxation is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date. 17 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 1 Accounting policies (continued) k) Leasing contracts Assets acquired under finance leases and hire purchase agreements, which are those where substantially all the risks and rewards of ownership have passed to the Group, are capitalised and depreciated over their expected useful lives. Finance charges are allocated over the primary period of the lease. Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the lease term. Contingent rentals are recognised in the period when they accrue. Pension fund The assets of the defined contribution pension schemes are held separately from those of the Group in independently administered funds. Pension contributions are charged to the profit and loss account in the period to which they relate. Banks Group Employee Benefit Trust The assets, liabilities, income and costs of the trust are incorporated into the financial statements of the company and of the Group in the years to which they relate. 18 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 2 Staff Costs Employee costs 2014 2013 ??000 ??000 Wages and salaries 15,618 15,669 Social security costs 1,696 1,513 Pension costs 342 334 17,656 17,516 The average number of employees during the period was as follows: Number Number Office and management 157 158 Production 253 251 410 409 Directors' emoluments were as follows: 2014 2013 ?'000 ?'000 Directors? emoluments 853 651 Pension contributions to money purchase schemes 42 41 895 692 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 2 Staff Costs (continued) The number of directors to whom retirement bene?ts were accruing was as follows: 2014 2013 Number of directors accruing retirement benefits under money purchase schemes 2 3 Information regarding the highest paid director was as follows: ??000 ??000 Director?s emoluments 284 200 Pension contributions to money purchase schemes - 19 284 219 3 Turnover An analysis of turnover by class of business is given below. 2014 2013 ??000 ??000 Coal 93,881 78,044 Electricity generation 11,432 6,359 Land and property development 21,824 11,662 Waste site rental income 401 811 Other including haulage and plant hire 782 496 128,320 97,372 Turnover consists entirely of sales made in the United Kingdom. development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 4 Exceptional items 2014 2013 ??000 ??000 Provisions against property development land work in progress 6,853 5,000 Write down of Wind Farm asset development costs 3,849 3,682 10,702 8,682 In exceptional cases, provision is made to write down the cost of individual property developments and windfarm developments to the directors? assessment of their net realisable value. 5 Operating profit Operating profit is arrived at after 2014 2013 ??000 ??000 Depreciation of owned fixed assets 7,923 6,190 Depreciation of fixed assets under finance leases 793 932 Depreciation of mining assets 9,325 9,509 Loss on disposal of fixed assets - 221 Operating lease rental for plant and equipment 4,738 5,187 Operating lease rental for land and buildings 5,121 4,898 Operating lease income (662) (937) 6 Auditor's remuneration 2014 2013 ??000 ??000 Audit of the financial statements company and consolidation 13 12 Audit of the financial statements subsidiaries 73 72 Other fees to auditors advisory services - 23 Other fees to auditors taxation compliance services 49 45 Other fees to auditors taxation advisory services - 11 135 140 21 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 7 Interest receivable and similar income 2014 2013 ??000 ??000 Bank interest 92 10 Other interest 30 29 122 39 8 Finance costs 2014 201 3 ??000 ??000 Loan interest 3,981 2,966 Other interest 136 75 Hire purchase interest 106 105 Amortisation of debt issue costs 301 100 Unwinding of discount on provisions 1,390 1,133 5,914 4,379 22 BANG?ir?on development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 9 Taxation Analysis of the tax charge The tax on the profit on ordinary activities for the year was as follows: 2014 2013 ??000 ??000 UK corporation tax at 22% (2013: 23.5%) 5,209 1,452 Adjustments in respect of previous periods 129 (22) Current taxation (note 5,338 1,430 Deferred taxation mination and reversal of timing differences (note 16) (271) 654 5,067 2,084 Factors affecting the tax charge The current tax assessed for the year is different from the standard rate of corporation tax in the UK of 22% (2013: The difference is explained below: 2014 2013 ??000 ??000 Profit on ordinary activities before taxation 21,586 6,961 Profit on ordinary activities at 22% (2013: 23.5%) 4,749 1,636 Tax losses carried forward 712 917 Income not subject to corporation tax (50) (34) Expenses not deductible for tax purposes 391 395 Accelerated capital allowances (724) (1,359) Other short term timing differences 131 (87) Adjustments to tax charge in respect of prior periods 129 (38) Current taxation (note 5,338 1,430 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 9 Taxation (continued) 10 11 The UK government has announced its intention to reduce the UK corporation tax rate to 20% by 1 April 2015. A reduction from 23% to 21% came into effect on 1 April 2014. A hybrid rate of 22% therefore applies to current tax liabilities arising during the period. A further reduction in the rate of corporation tax from 21% to 20% was substantively enacted on 2 July 2013 and will be effective from 1 April 2015. As this change was not effective at the balance sheet date, it has no impact on current tax liabilities. The substantively enacted rate of 20% has however applied to deferred tax assets and liabilities arising at the balance sheet date. Profit of parent company As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company's profit for the financial year was ?4,692,000 (2013: loss of ?260,000). Dividends The following dividends were paid during the year: 2014 2013 ??000 ??000 Equity dividends on A ordinary shares Interim for 2014 1,654 - Final for 2013 1,654 - Interim for 2013 - 1,102 Final for 2012 - 1,102 3,308 2,204 24 The Banks Group Limited Company Number 2267400 BANGGiroup development with care Notes to the financial statements for the year ended 28 September 2014 (continued) 12 Tangible Fixed Assets Group Short Fixtures Assets in Freehold leasehold Mining Wind Farm Plant and and course of Property property assets" assets* Machinery Fittings development Total ??000 ??000 ??000 ??000 ??000 ??000 ??000 ??000 Cost 01 October 2013 2,896 381 64,258 666 108,802 2,213 4,092 183,308 Additions - - 3,946 - 1,899 354 4,765 10,964 Disposals (209) (58) - - (803) (100) (223) (1,393) Transfers - - - - (59) - 59 - 28 September 2014 2,687 323 68,204 666 109,839 2,467 8,693 192,879 Depreciation 01 October 2013 695 323 31,135 23 34,699 1,739 817 69,431 Charge for period 90 - 9,325 33 6,940 471 1,182 18,041 Disposals (146) - - - (648) (Q) (185) (1 ,078)_ 28 September 2014 639 323 40,460 56 40,991 2,111 1,814 86,394 Net book value 28 September 2014 2,048 - 27,744 610 68,848 356 6,879 106,485 30 September 201 3 2,201 58 33,123 643 74,103 474 3,275 113,877 The net book value of tangible fixed assets held under finance leases are as follows: 2014 2013 ?'000 ??000 Plant and equipment 4,934 5,727 The net book value of wind farm tangible fixed assets (such as turbines) held in Plant and Machinery: 2014 2013 ??000 ??000 51,403 54,300 Mining assets include development costs, precoaling costs and restoration costs. Wind farm assets include restoration costs 25 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 12 Tangible fixed assets (continued) Company Fixtures and fittings ??000 Cost 01 October 2013 1.689 Additions 327 Disposal (79L 28 September 2014 1,937 Depreciation 01 October 2013 1,265 Charge for period 453 Disposals 28 September 2014 1,639 Net book value 28 September 2014 298 30 September 2013 424 BANGCC?z?ireup development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 13 Fixed asset investments Group Other Joint ventures fixed assets Total ??000 ??000 ??000 Cost 01 October 2013 (101) 91 (10) Share of loss for the year (28) - (28) Additions - 25 25 Amortisation - (3) (31 28 September 2014 (129) 108 (21) 2014 2013 ??000 ??000 Investments in joint ventures: share of gross assets 2,444 2,444 Investments in joint ventures: share of gross liabilities (2,573) (2,545) Investments in joint ventures (129) (101 Other investments 108 92 (21) (91 Company 2014 201 3 ??000 ??000 Shares in Group undertakings stated at cost 3,984 3,984 27 BANG?roup development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 13 Fixed asset investments (continued) Company Principal subsidiary and joint venture companies, their principal activities and country of incorporation at 28 September 2014 were as follows. All subsidiaries are included in this consolidation: Company Principal activity 100% owned by the company Surface mining Holding company Renewable Energy Civil Engineering Banks and Company Limited Banks Developments Limited Banks Renewables Limited Banks (Construction) Limited 100% owned by Banks and Company Limited Banks Brothers Transport Limited Road haulage Banks (Mining) Limited Dormant HJ Banks (Shotton) Limited Dormant Crossco (281) Limited Site leasing 100% owned by Banks Renewables Limited Operational Wind Farm Operational Wind Farm Banks Renewables (Armistead Wind Farm) Limited Banks Renewables (Hazlehead Wind Farm) Limited Banks Renewables (Marr Wind Farm) Limited Operational Wind Farm Banks Renewables (Penny Hill Wind Farm) Limited Operational Wind Farm Banks Renewables (Heysham South Wind Farm) Limited Operational Wind Farm 100% owned by Banks Developments Limited Property development Property development Banks Property Limited Banks Property Development Limited 50% subsidiary owned by Banks Property Limited Banks Mount Oswald Limited Dormant 50% joint venture owned by Banks Property Limited Bates Regeneration Limited Property development Country England England England England England England England England England England England England England England Scotland England England In addition Banks Renewables Limited has 36 subsidiaries, all have the principal activity of wind farm development, incorporated in England. 28 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 14 Stocks Group 2014 2013 ??000 ??000 Fuel and spare parts 633 914 Work in progress 18,857 32,585 Coal 4,647 4,677 24,137 38,176 Work in progress comprises costs or written down values associated with the acquisition and development of land for residential or commercial purposes or the development of potential windfarm sites. The land held for residential use or commercial property is expected to be sold at various stages over the next 10 years as market conditions improve. Where the land is expected to be developed for windfarms or other renewable energy purposes it is expected to be developed at various points over the next 10 years and may be ultimately sold to third parties or retained within the Group once the windfarm is developed and operational. 15 Debtors Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 ??000 Trade debtors 18,425 12,451 - - Amounts owed by Group undertakings - - 82,238 106,295 Deferred tax asset (note 16) 1,150 879 481 147 Other debtors 122 91 471 998 Amounts recoverable on contracts - 11,500 - - Prepayments and accrued income 6,819 3,500 700 624 26,516 28,421 83,890 108,064 29 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 16 Deferred tax asset Group Group Company Company 2014 . 2013 2014 2013 ??000 ??000 ?'000 ??000 (Accelerated)ldecelerated capital allowances (1,092) (1,063) 115 73 Trading loss 1,750 1,660 - Short term timinLdifferences 492 282 366 74 1,150 879 481 147 Movement in deferred tax asset Group ??000 At 01 October 2013 879 Credit to the profit and loss account mote 9a) 271 At 28 September 2014 mote 15) 1,150 The Group has an unprovided deferred tax asset in respect of tax losses carried forward of ?246,000 (2013: ?309,000) in the property development companies. This has not been carried as an asset on the basis the directors believe there is insufficient evidence over timing of recovery. The assets will only be recovered following an upturn in the property market. BANGCe?rroup development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 17 Creditors: amounts falling due within one year Group Group Company Company 2014 2013 2014 2013 ?'000 ??000 ??000 2000 Group secured bank loans and overdraft 6,581 11,250 6,581 11,250 Wind farm secured bank loans 1,922 689 - - Obligations under finance leases 1,351 1,768 - - Trade creditors 4,162 7,024 114 434 Corporation tax 2,809 828 - - Amounts owed to Group undertakings - - 86,164 71,773 Other taxes and social security costs 5,458 2,409 - 15 Other creditors 3,923 3,819 3,092 3,331 Accruals and deferred income 7,253 5,922 796 744 33,459 33,709 96,747 87,547 18 Creditors: amounts falling due after more than one year Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 2000 Group secured bank loans - 15,969 - 15,968 Wind farm secured bank loans 52,257 52,617 - - Obligations under finance leases 1,214 2,565 - Accruals and deferred income 1,979 957 1,733 683 55,450 72,108 1,733 16,651 Wind farm secured loans relate to financing on operational windfarms at Hazelhead, Marr, Heysham South, Penny Hill and Armistead secured on assets of the individual wind farms. These loans are repayable in variable instalments over 15 years. between 2.4% and 3.1% above LIBOR. 31 Interest rates on these loans are charged at BANGGireup development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 19 Loans An analysis of the maturity of loans is given below: Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 ??000 Group secured bank loans Repayable in one year or less 6,581 11,250 6,581 11,250 Repayable between two and five years - 15,969 - 15,969 6,581 27,219 6,581 27,219 Wind Farm secured loans Repayable in one year or less 1,922 689 - Repayable between two and five years 2,710 9,926 - - Repayable after 5 years 49,547 42,691 - - 54,179 53,306 - Total Repayable in one year or less 8,503 11,939 6,581 11,250 Repayable between two and five years 2,710 25,895 - 15,969 Repayable after 5 years 49,547 42,691 - - 60,760 80,525 6,581 27,219 development with care The Banks Group Limited Company Number 2267400 Notes to the ?nancial statements for the year ended 28 September 2014 (continued) 20 Obligations under hire purchase contracts and leases Obligations under finance leases contracts are repayable as follows: Group Group 2014 2013 ??000 ??000 Within one year 1,437 1,875 In two to five years 1,286 2,723 2,723 4,598 Less finance charges included above (158) (265) 2,565 4,333 The following annual operating lease payments are committed to be paid: Plant Machinery Land 8. Buildings 2014 2013 2014 2013 ??000 ??000 ??000 ?'000 Expiring in less than one year 494 - - - Expiring between two and five years 3,485 4,341 735 825 Expiringiimore than 5 years - 262 34 3,979 4,341 997 859 21 Secured debts The following secured debts are included within creditors: Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 ??000 Bank secured loans and overdrafts 6,750 27,500 6,750 27,500 Wind farm secured bank loans 56,071 54,733 - - Obligations under finance leases 2,565 4,333 - - 65,386 86,566 6,750 27,500 Debt issue costs (2,061) (1,708) (169) (281) 63,325 84,858 6,581 27,219 The Group bank loans and overdraft facility are secured by fixed and ?oating charges over all assets of the Group. Hire purchase creditors are secured on the assets concerned. 33 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 22 23 Provisions for liabilities Group Onerous Wind farm site Mining site Lease restoration restoration Total ??000 ??000 ??000 ?000 01 October 2013 300 665 50,554 51,519 Provided 120 - 2,404 2,524 Unwinding of discount - - 1.390 1,390 Utilised (23) - (300) (323) 28 September 2014 397 665 54,048 55,110 Provisions are made for the total costs of the overburden and top soil replacement and aftercare of surface mines. Costs become payable after coal mining has been completed. The restoration provisions needed are reassessed annually based on the latest estimates of volumes, costs and timing of the restoration of the Shotton, Brenkley and Rusha sites. Restoration is expected to commence at Shotton in 2016/17, at Brenkiey in 2018/19 and at Rusha in 2016. Aftercare expenditure can extend after soil replacement for a period of up to 10 years. Provision is made for the cost of decommissioning and restoring windfarm sites which are expected to occur after 20 years. The onerous lease provision represents the net present value of a lease obligation. The directors have concluded that it is unlikely any future revenue will be generated by the property concerned and therefore an onerous lease provision is required. Called up share capital Group and company Allotted, Allotted, issued and issued and fully paid fully paid 2014 2013 ??000 ??000 Ordinary shares of ?1 each 2,205 2,205 Number Number Ordinary shares of ?1 each 2,204,832 2,204,832 34 BANGGrouip development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 24 Reserves Group Capital Profit Capital redemption and loss reserve reserve account ??000 ??000 ?000 01 October 2013 352 900 31,398 Profit for the financial year - - 16,519 Dividends - - (3,3081 At 28 September 2014 352 900 44,609 Company Capital Profit redemption and loss reserve account ??000 ?000 01 October 2013 900 10,453 Profit for the financial year - 4,692 Dividends - (3,308) At 28 September 2014 900 11,837 35 The Banks Group Limited Company Number 2267400 development with care Notes to the financial statements for the year ended 28 September 2014 (continued) 25 Equity Shareholders? funds Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 ??000 Profit/(loss) for the financial year 16,519 4,877 4,692 (260) Dividends (3,308) (2,204) (3,308) (2,204) Net change in shareholders' funds 13,211 2,673 1,384 (2,464) Shareholders' funds at 01 October 34,855 32,182 13,558 16,022 Shareholders? funds at 28 September 48,066 34,855 14,942 13,558 26 Analysis of changes in net debt Group At 28 AM October Non-cash September 2013 Cash?ow movement 2014 ??000 ?'000 ??000 ??000 Cash in hand 11,362 23,242 - 34,604 Group secured bank loans Due within one year (11,250) 9,000 (4,331) (6,581) Due after one year (15,969) 11,750 4,219 - Wind farm secured bank loans Due within one year (689) 821 (1,992) (1,860) Due after one year (52,618) (1,504) 1,803 (52,319) Finance leases (4,333) 1,768 - (2,565) (73,497) 45,077 (301) (28,721) 27 Pension commitments Group companies contribute to money purchase schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. Pension contributions payable to the funds for the year amounts to ?501,000 (2013: ?333,000). Outstanding contributions at the year end were ?609,000 (2013: ?1,091,000). 36 BANGGrougo development with care The Banks Group Limited Company Number 2267400 Notes to the ?nancial statements for the year ended 28 September 2014 (continued) 28 29 Contingent liabilities Group There is a contingent liability in respect of counter indemnities to Insurance Companies for bonds granted to guarantee outstanding site costs of coal and major property developments amounting to ?8,745,000 (2013: ?8,622,000). The statutory accounts include a full provision for all site restoration obligations. For VAT purposes a Group registration scheme is in Operation. Under these arrangements there is a joint and several liability among the companies in the Group for amounts owed to Revenue and Customs. Derivatives The Group has the following derivatives:- - interest rate swaps to manage interest rate risk volatility. - FonNard foreign currency hedge contracts to hedge currency exposure on firm future commitments. Fonlvard fuel price hedge contracts to hedge price exposure on expected future commitments. - Coal price hedge contracts to manage coal price risk volatility. These derivatives are used to manage commodity price risk in addition to other physical fixed price contracts for fuel and coal. The fair values of the derivatives held at the balance sheet date, determined by reference to their market values, are as follows:- 2014 ?000 Interest rate swaps - Group (191) Interest rate swaps - windfarms (4,060) Fuel price hedge contracts (1,537) Coal price hedge contracts 3,249 (2,539) 30 Capital commitments Group Group Company Company 2014 2013 2014 2013 ??000 ??000 ??000 ?'000 Contracted but not provided for 6,115 689 - - - 37 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 31 Related party disclosures Directors and related parties: Current account balances due to directors and related parties by the Group and company: 2014 2013 ??000 ??000 Banks 1,540 1,741 Banks 521 416 A Banks 1,031 1,173 Interest paid to directors and related parties on loan accounts by the Group and company: 2014 2013 ??000 ??000 Banks 35 41 Banks 9 8 A Banks 23 26 Bates Regeneration Limited 28 28 Loan account balances earn interest at a rate equivalent to that paid by the company on its overdraft. Dividends paid to directors: Mr Banks: ?1,515,002 in respect of ordinary shares (2013: ?1,010,001) Amounts owed to the Group by non-wholly owned subsidiaries and joint ventures: 2014 2013 Entity Site ??000 ??000 Amounts due from joint ventures Bates Regeneration Limited Thoroton Croft 1,017 1,108 Amounts due from Group undertakings Banks Mount Oswald Limited Mount Oswald 364 364 38 development with care The Banks Group Limited Company Number 2267400 Notes to the financial statements for the year ended 28 September 2014 (continued) 31 Related party disclosures (continued) The company is exempt under the terms of Financial Reporting Standard 8 from disclosing related party transactions with its subsidiaries where the Group controls 100% of the share capital. 32 Ultimate controlling party Mr Banks is the controlling party by virtue of his controlling interest in the equity share capital of The Banks Group Limited.