Annual Report & Accounts 2016

Group Financial Summary

Chairman's Statement

I am delighted to have joined your Board during the year and pleased to present my first statement as Chairman of CH Bailey plc.

The Group has seen a continued recovery in the traditional engineering division, although our tourism business has still to pick up significantly. However, the main focus of the Group is to purchase, develop and operate property to provide high end accommodation, serviced office and retail space. During the year the company completed the purchase of two further development properties in Malta and a hospitality property in South Africa.

Results

Your Company in the year under review made a loss after tax of £0.4m (2015: profit £5.8million). This significant difference is attributable to the fact that the company made no property sales in the period under review. Underlying trading has improved with an operating profit of £33,400 compared to an operating loss before profit on sale of property in 2015 of £793,441.

Revenues over the period have increased by 4% to reach £5.2 million. The gross profit margin has increased to

29.95% which reflects the first full year following the completion of the Phase III development which houses The Oyster Bay Suites, serviced offices, a bank and a premium restaurant. Administration costs for the year have decreased by 21% to £1,711,538 due to increased efficiencies.

The overall loss per share was 5.60p (2015: earnings per share 76.74p).

Africa

Revenue derived from our business in Africa was £3,589,486, (2015: £3,173,552) representing approximately

62% (2015: 64%) of total Group revenue. It reflects the first full year following the completion of the Phase III

development which houses the Oyster Bay Suites, serviced offices, a bank and a premium restaurant.

Our hospitality sales are now only 18% (2015: 19%) of the Tanzanian revenues and we are hopeful that The Oyster Bay Suites will lead a recovery next year in Tanzania where the Board anticipate further growth in the serviced commercial and retail property market.

The sale of Mikumi Wildlife Camp has been agreed. We are now waiting for the final paperwork confirming the purchaser`s internal restructuring before we finalise the terms with the bank on the structure of the financing, bond and final payment.

During the year, a new hospitality venue in South Africa was purchased for £839,215. This started well as a

hospitality unit and achieved break even in its early months of trading. We have taken advantage of the current low season in South Africa to enhance the existing property and are exploring further interesting development opportunities for the site.

Africa Corporate Social Responsibility

This year together with READ International and the Hassan Maajar Trust, we have continued our programme to renovate primary and secondary school classrooms and create school libraries at schools close to where we have operations.

Malta

The Malta division now has three development properties having completed on the purchase of two properties during the year for £1,260,543 following the purchase of 16-18 Charles Street in Valletta in the previous year. Applications have been made to the Malta Tourism Authority and MEPA for planning consent to develop

boutique serviced accommodation. The Board believes that, given the proposed government upgrade to the surrounding area in Valletta, the developments will add to both the revenue and profitability of the Group within the next couple of years when planning and construction is complete.

Engineering

Revenue derived from our engineering division in the United Kingdom increased by 3% to £1,425,101 (2015:

£1,388,891). The operating loss was reduced to £36,813 (2015: loss £74,819). Engineering in South Wales is experiencing significant uncertainty, with the situation at Tata Steel unclear, but we are cautiously optimistic, as other customers have increased their orders.

Board and senior management matters

During the year, I was appointed as a director and non-executive chairman of the Company and Christopher Fielding was appointed as a non-executive director. Christopher has brought strong financial, analytical and commercial skills which will contribute significantly to the continued development of the Group. He is a partner of Charme Capital Partners, the pan-European private equity fund, with a specific focus on UK investments, having previously spent 9 years at Doughty Hanson, working on the acquisition, transformation and exit of UUE Entertainment and the IPO of Tumi Holdings Inc, the board of which Christopher continues to sit.

Also, during the year, Mrs Sarah Bailey and Mr Rod Reynolds resigned as directors of the company. I would like to express the thanks of the board to them for their significant contribution to the Group.

Dividend

The Board does not recommend the payment of a dividend for the year (2015: 20 pence per share). As previously mentioned we hope to now create consistent trading profits so that we can offer our shareholders a return via an increase in share price or, subject to profitability, a dividend payment.

People

As always, the success of any Group is down to the hard work and dedication of the people employed. I take thi s

opportunity to thank the team on the Board's behalf for all of their collective efforts over the last year.

Outlook

The Group continues to face a number of challenges. The Board has considered the impact of Brexit and has concluded that its main impact on the Group will relate to the change in value of £ sterling against the US $. Tanzanian revenues are largely denominated in US $, which protects the revenue from £ Sterling falls.

The Board will seek to further invest in our existing asset base and will consider potential new investments. We are confident in our strategy to achieve and maintain profitability and the Board believes the Company is well positioned to grow in the future.

David Wilkinson

Chairman

05 August 2016

Strategic Report

Principal objectives and strategy

Your Company's principal objective is to achieve profitability from the existing asset base to allow further investment when opportunities arise and provide a return on investment to shareholders or increase the value of the investment to shareholders. The Board intends to do this through growth, by purchasing, developing, operating and trading in property in the existing geographical areas in which we operate or new areas where we have knowledge and with which we have associations. It is envisaged that such properties will be specifically targeted for their development and operating opportunities in the hospitality, leisure, residential, retail and commercial sectors. Our existing properties in Malta, Tanzania and South Africa all have the potential for significant increases in value.

Key performance indicators

Key properties

The key properties owned by the group and their current uses are as follows: Malta

- 30 St Barbara Bastions Office

- 123 St Lucia Street For office development

- 16-18 Charles Street Planning permission in progress

- 149 Archbishop Street Planning permission in progress

Tanzania

- Oyster Bay Hotel Hospitality

- Oyster Bay Suites Serviced apartments

- Oyster Bay offices Serviced units

- Oyster Bay Shopping Centre Retail

South Africa

- Hauts de Montagu Hospitality

- Hauts de Montagu farm Development land

- Little Bean Farm Development land

Engineering operational performance

Revenue derived from our engineering division in the United Kingdom increased by 3% to £1,425,101 (2015:

£1,388,891). The operating loss was reduced to £36,813 (2015: loss £74,819).

Africa operational performance

Commercial property continues to be the main driver of profitability in Tanzania, with occupancy levels at 93%

for the offices and 97% for the retail premises.

Sales in the Tanzanian hospitality division continue to be badly affected by numerous factors affecting tourism in the region. Sales decreased during the elections in Tanzania however, following this there has been a slow but steady improvement in forward bookings. The Board believe this is part of an African cycle and there will be continued growth in the future.

Malta operational performance

The Group now owns four properties in Malta. The property at 30 St Barbara Bastions is complete and is currently being used as the group's offices in Malta.

Work has now started on the property at 123 St Lucia Street, which is just behind the Valletta law courts, to create much needed legal office space. The Board expects this development to be completed by the end of the year and will commence marketing in the near future.

The process to obtain planning permission is currently in progress for the remaining two development properties.

Risk management

The group's principal risks are as follows:

Going concern

The board remains satisfied with the group's funding and liquidity position. The group has operated within its

current bank facility both throughout the period under review and subsequently.

The group's forecasts and projections indicate that the group should continue to operate within current bank facilities. The board considers that the group has considerable financial resources together with a diverse base of operations across different geographical areas and industries. As a consequence, the board believes that the group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the board has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this Annual Report & Financial Statements.

Strategic risk

The group faces a number of strategic risks. Management has developed long term business plans to manage the impact of these risks to ensure that the group delivers a satisfactory performance in future years. The main strategic risks faced by the business are:

· Competition: In order to remain competitive management recognises the need to make appropriate capital investments;

· Profit margin: In order to improve the margins management recognise the need to reduce fixed costs where appropriate and link them to a sustainable level of turnover.

Financial risks

There has been no change during the year, or since the year end, to the type of financial risks faced by the group or the group's management of those risks. The key risks, which are discussed in more detail in note 30 to the consolidated financial statements, are:

· Credit risk;

· Liquidity risk;

· Interest rate risk;

· Currency risk.

By order of the board

Bryan Warren Newport Secretary South Wales

05 August 2016

Director's Report

The directors submit their report and accounts for the year ended 31 March 2016. The Statement of Corporate

Governance on pages 9 to 11 forms part of this report.

Principal activities

C.H. Bailey plc is the holding company of subsidiary undertakings engaged in the development and operation of properties in the commercial, retail and hospitality sectors in the Mediterranean Basin and South and East Africa and engineering in the United Kingdom. The loss on these various activities which is attributable to the shareholders amounted to £426,314 (2015: profit £5,837,901).

A review of the group's business, development and prospects can be found in the chairman's statement on pages

2 to 3 and the strategic report on pages 4 to 6.

Dividend

The directors do not propose to pay a final dividend in respect of the year ended 31 March 2016 (2015: 20 pence).

Change in fixed assets

A summary of the changes in property, plant and equipment is given in note 13 to the accounts.

A summary of the changes in investments in subsidiary undertakings is given in note 14 to the accounts.

In the directors' opinion, the market value of and leasehold land and buildings is in excess of £24,000,000.

Investment in own shares

On 10 March 2016, the company issued 23,147 ordinary shares of 10 pence to the directors in lieu of fees payable. The company retains as treasury shares 704,511 shares of 10 pence at a cost of £929,955 (2015:

727,658 shares of 10 pence at a cost of £960,509).

Directors

The board of directors on 31 March 2016 consisted of Charles Bailey, Sir William McAlpine, David Wilkinson and Christopher Fielding. The director retiring by rotation and not offering himself for re-election is Mr Christopher Fielding. No director had, in the financial year to 31 March 2016, a material interest in any contract to which the company or a subsidiary undertaking was a party.

Charles Bailey is the only executive director. The non-executive directors are Sir William McAlpine, Mr David

Wilkinson and Christopher Fielding.

The directors had the following interests in the company's issued ordinary share capital:

Substantial shareholdings

The company has been notified of the following interest in the company's issued ordinary share capital:

05 Aug 2016  31 March 2016  31 March 2015

P. S. Allen  412,169  412,169 412,169

D. Newlands  229,000  229,000 229,000

Charitable and political contributions

During the year the group made a contribution of £9,581 (2015: £25,559) to charitable funds in Tanzania. No donations of a political nature were made (2015: £Nil).

Employees

The group is an equal opportunities employer. The group also makes every reasonable effort to give disabled applicants and existing employees, who became disabled, equal opportunities for work having regard to their individual aptitudes and abilities.

Employee reporting and involvement

The group recognises the need to ensure effective communication with employees to encourage involvement in the group's performance. Policies and procedures have been developed to achieve a common awareness of factors affecting the performance of the group.

Suppliers

The group agrees payment terms with suppliers prior to placing business. The group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has supplied the goods or services in accordance with the agreed terms and conditions.

Health, safety, the environment and social policy

It is the group's policy to comply with relevant legislation in all countries in which it operates and to adopt responsible environmental and social practices. Training is provided to ensure that the group keeps abreast of changing business and regulatory requirements and technological advances.

Close company

In the opinion of the directors the company is, at the accounting date and the date of this report, a close company within the terms of the Income and Corporation Taxes Act 1988.

Auditors

In the case of each of the persons who are the directors of the company at the date when this report was approved:

· So far as each director is aware, there is no relevant audit information (that is, information needed by the company's auditors in connection with preparing their report) of which the company's auditors are unaware;

· Each director has taken all the steps that ought to be taken as a director in order to be aware of any relevant audit information and to establish that the company's auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the

Companies Act 2006.

Haasco Limited is willing to continue in office and a resolution for their re-appointment will be proposed at the annual general meeting.

 By order of the board

Bryan Warren Newport Secretary South Wales

05 August 2016

Statement of Corporate Governance

The board

At 05 August 2016, the board comprised one executive director: Charles Bailey (chairman and managing director), and three non-executives: David Wilkinson, non-executive chairman, Sir William McAlpine and Christopher Fielding.

The board of directors is responsible to shareholders for the management and control of the group. The board operates within agreed matters reserved for its approval, which cover the key areas of the group's affairs, including all aspects of strategy, material property acquisitions, disposals and group financing arrangements.

Board meetings are held periodically during the year and each board member is provided in advance of the meeting with a board pack for each meeting which contains financial and operational information. The board is responsible for agreeing the major matters affecting the running of the business, as well as monitoring and reviewing performance and operating risks.

As of 05 August 2016, the board has two subcommittees: the Audit & Risk Committee and the Remuneration Committee. Christopher Fielding is chairman of the Audit & Risk Committee, and has relevant financial experience as suggested by Provision C.3.1 of the UK Corporate Governance Code. Christopher Fielding is also chairman of the Remuneration Committee. Written Terms of Reference for each Committee have been agreed.

Audit & Risk Committee

The Audit & Risk Committee comprises Christopher Fielding (chairman), Sir William McAlpine and Bryan Warren. The committee is tasked to meet at least twice a year, in respect of the following:

Audit and the auditors

· to assess annually the qualification, expertise and resources, and independence of the external auditor, taking account of relevant Ethical Standards, and to ensure that the Auditor's key partners are rotated at appropriate intervals;

· to assess annually the effectiveness of the audit process;

· to review with management the audit fee and to ensure that the provision of non audit services does not

impair the external auditor's independence or objectivity;

· to develop and implement a policy on the supply of non audit services by the external auditor;

· to discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditor's quality control procedures and steps taken by the auditor to respond to c hanges in regulatory and other requirements;

· to make appropriate recommendations to the board, if considered necessary, regarding the continuation of the external auditor, to oversee the selection process for new auditors and, if an auditor resigns, to investigate the issues leading to this and decide whether any action is required;

· to consider the need to include the risk of withdrawal of the external auditor from the market in the

committee's risk assessment process;

· to review the external auditor's management letter and management's response;

Risk and internal controls

· to review the effectiveness of the group's internal control and risk management framework, in relation

to the core strategic objectives of the company;

· to consider the risks associated with proposed strategic acquisitions or disposals;

· to review regular risk management reports from management which enable the committee to assess the

risks involved in the company's business and how they are controlled and monitored by management;

· to monitor and review the effectiveness of the risk management and internal audit functions, to review the internal audit programme, and to seek such assurance as it may deem appropriate that the functions are adequately resourced and have appropriate standing within the group; and

· to consider management's response to any recommendations made by the external auditor or internal audit and review with internal audit and the external auditor any fraudulent or illegal acts, deficiencies in internal control or other similar issue, including reviewing the results of management's investigation and follow up of any fraudulent acts.

Annual financial statements

· to review, and challenge where necessary, the actions and judgements of management in relation to the annual financial statements, paying particular attention to:

· critical accounting policies and practices, and any changes in them;

· decisions requiring a major element of judgement;

· the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed;

· the clarity of disclosures;

· significant adjustments resulting from the audit;

· the going concern assumption;

· compliance with accounting standards and related guidance;

· compliance with other legal requirements;

· to review treasury policies from time to time;

· to review the company's procedures for handling allegations from whistleblowers;

· to review mechanisms for informing and updating the board on independence issues, to receive reports on monitoring of independence and the handling of any issues relating to non compliance;

· to review tax compliance and tax planning initiatives of the company; and

· to perform other oversight functions, as requested by the board.

Remuneration Committee

The Remuneration Committee comprises Christopher Fielding (chairman), David Wilkinson, Sir William McAlpine and Charles Bailey. The committee is tasked to meet at least twice a year, in respect of the following:

· to determine and agree with the board the framework or broad policy for the remuneration of the company's chief executive, chairman, the executive directors, the company secretary and such other members of the executive management as it is designated to consider. The remuneration of non-executive directors shall be a matter for the chairman and the executive members of the board. No director or manager shall be involved in any decisions as to their own remuneration;

· in determining such policy, take into account all factors which it deems necessary. The objective of such policy shall be to ensure that members of the executive management of the company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company;

· review the ongoing appropriateness and relevance of the remuneration;

· approve the design of, and determine targets for, any performance related pay schemes operated by the company and approve the total annual payments made under such schemes;

· review the design of all share incentive plans for approval by the board. For any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to executive directors and other senior executives and the performance targets to be used;

· determine the policy for, and scope of, pension arrangements for each executive director and other senior executives;

· ensure that contractual terms on termination, and any payments made, are fair to the individual, and the company;

· in determining such packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the Combined Code and the UK Listing Authority's Listing Rules and associated guidance;

· review and note annually the remuneration trends across the company or group;

· oversee any major changes in employee benefits structures throughout the company or group;

· agree the policy for authorising claims for expenses from the chief executive and chairman;

· ensure that all provisions regarding disclosure of remuneration, including pensions, are fulfilled;

· be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee;

· obtain reliable, current information about remuneration in other companies. The Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations.

Statement on internal control

The directors are responsible for the system of internal control and for reviewing its effectiveness. This system is designed to manage as effectively as possible the risk of failure to achieve business objectives and can only provide reasonable rather than absolute assurance against material misstatement or loss.

Statement of Directors' Responsibilities

The directors are responsible for preparing the annual report and the group and parent financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year.

As required by the AIM rules of London Stock Exchange, they are required to prepare the group financial statements in accordance with IFRSs as adopted by the European Union and applicable law, and have elected to prepare the parent company financial statements in accordance with IFRS.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

· Select suitable accounting policies and then apply them consistently;

· Make judgements and estimates that are reasonable and prudent;

· For the group and parent company financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the European Union;

· Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;

· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and

· Prepare the financial statements on the going concern basis unless it is inappropriate to presume tha t the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and 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 have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and the group and to prevent and detect fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions in which the group has undertakings.

Independent Auditor's Report

We have audited the group and individual company financial statements of C.H. Bailey plc for the year ended

31 March 2016 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and parent company balance sheets, the consolidated cashflow statement, the consolidated and parent company statements of changes in equity and the related notes 1 to 34.

The financial reporting framework that has been applied in the preparation of the group and company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU.

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 for anyone, other than the company or the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial 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 (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's

website at  www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

· The financial statements give a true and fair view of the state of the group's and of the parent

company's affairs as at 31 March 2016 and of the group's loss for the year then ended;

· The financial statements have been properly prepared in accordance with IFRSs as adopted by the

European Union; and

· The financial statements have been prepared in accordance with the requirements of the Companies

Act 2006.

Opinion on other matters prescribed by Companies Act 2006

In our opinion 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.

Matters on which we are required to report by exception

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

· Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

· The parent company 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.

Statutory Auditor Haasco Limited Newport

South Wales

05 August 2016

Mr D.R. Thomas FCA

Senior Statutory Auditor

Consolidated Income Statement

for the year ended 31 March 2016

*Earnings before interest, taxation, depreciation, profit on sale of plant and equipment and profit on sale of property.

Consolidated Statement of

Comprehensive Total Income

for the year ended 31 March 2016

Balance Sheets

as at 31 March 2016

These financial statements were approved by the board of directors on 05 August 2016 and were signed on its behalf by:

David Wilkinson

Chairman

Consolidated Cash Flow Statement

for the year ended 31 March 2016

Consolidated Statement of Changes in Equity

for the year ended 31 March 2016

.

Notes to the Accounts

1. General information

Legal status and country of incorporation

C. H. Bailey plc, company number 190106, is incorporated in England and Wales under the Companies Act

2006. The address of the registered office is given on page 38. The principal activities are set out in the

Directors' Report on pages 7 to 12.

Basis of preparation

These financial statements have been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union and with the Companies Act 2006. Therefore these financial statements comply with the AIM rules.

The financial statements are prepared using the historical cost basis of accounting except for:

· Properties held at the date of transition to IFRS which are stated at deemed cost; and

· Assets held for sales which are stated at the lower of fair value less anticipated disposal costs and carrying value.

Going concern

The directors have prepared these financial statements on the fundamental assumption that the group is a going concern and will continue to trade for at least 12 months following the date of approval of the financial statements.

Further information explaining why the directors believe the group is a going concern is given in the financial

review section of the Directors' Report.

Accounting period

The current period is for 12 months ended 31 March 2016 and the comparative period is for the 12 months ended 31 March 2015

Functional and presentational currency

The financial statements are presented in pounds sterling because that is the functional currency of the primary economic environment in which the group operates.

Initial Adoption of International Financial Reporting Standards

These are the group's eighth consolidated financial statements that have been prepared in accordance with IFRS. The group's transition date for adoption of IFRS is 1st April 2006. The group has taken advantage of the following exemptions on transition to IFRS as permitted by paragraph 13 of IFRS 1:

· The requirements of IFRS 3 - Business Combinations - have not applied to business combinations that occurred before the date of transition to IFRS;

· The carrying value of freehold and leasehold properties are based on previously adopted UK GAAP

valuations and these are now taken as deemed cost on transition to IFRS.

International Financial Reporting Standards adopted for the first time this accounting period

There were no new standards or amendments to standards adopted for the first time this year that had a material impact on the results or the group. The prior year comparatives have not been restated for any changes in accounting policies that were required due to the adoption of new standards this year.

Future adoption of International Financial Reporting Standards

A number of new standards, amendments to standards and interpretations are being considered, but have yet to be endorsed by the EU. These include the following standards:

· IFRS 9 (Amendment): Financial instruments;

· IFRS 15 (Amendment): Revenue from contracts with customers;

· IFRS 16 (Amendment): Leases.

The above standards have not been applied in the preparation of these financial statements as they are not yet effective and have not been endorsed by the EU. The company will assess the potential impact of these standards once the final version has been endorsed by the EU. Whilst work has not yet been completed on the above standards, the directors do not currently foresee any material impact on the financial statements of the group as a result of adopting these standards.

2. Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 31 March 2016. Control is achieved where the company has the power to govern the financial and operating policies of an investee so as to obtain benefits from its activities.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations and goodwill

The acquisition of subsidiaries is accounted for using the acquisition method. The assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at their acquisition date except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 which are recognised and measured at fair value less costs to sell. Any excess of the cost over the asset valuation as calculated above is recognised as goodwill.

In accordance with the options that are available under IFRS 1 on transition to IFRS, the group elected not to apply IFRS 3 retrospectively to past business combinations that occurred before the date of transition to IFRS.

Accordingly goodwill that had previously been offset against reserves under UK GAAP has not been recognised in the opening IFRS balance sheet. The interest of any minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Investments in associates and trade investments

The results of entities over which the group is not in a position to be able to exercise significant influence despite holding a significant shareholding are not accounted for as associates and therefore are not equity accounted. The companies are classified as trade investments and are carried as available for sale financial assets which are measured at cost, as the directors consider that fair value cannot be reliably measured, other than impairment losses which are recognised in the income statement. Dividend income is recognised in the income statement on a cash basis when received.

Property, plant and equipment

Property is carried at deemed cost at the date of transition to IFRS based on the previous UK GAAP valuations. Plant and equipment held at the date of transition and subsequent additions to property, plant and equipment are stated at purchase cost including directly attributable costs. The group does not have a revaluation policy. Freehold land is not depreciated. Depreciation of other property, plant and equipment is provided on a straight line basis using rates calculated to write down the cost of each asset over its estimated useful life as follows:

Property:

Freehold buildings Between 2% and 5% Leasehold buildings Period of the lease

Plant and equipment Between 10% and 25%

Annual reviews are made of estimated useful lives and material residual values.

Investment and development property

Properties are externally valued on the basis of fair value at the balance sheet date. Investment property is recorded at valuation whereas trading property is stated at the lower of cost and net realisable value. Any surplus or deficit arising is recognised in investment activities in the income statement.

The cost of properties in the course of development includes attributable interest and other associated outgoings. Interest is calculated on the development expenditure by reference to specific borrowings. Interest is not capitalised where no development activity is taking place. A property ceases to be a development property on practical completion.

Investment property disposals are recognised on completion. Profits and losses are recognised in investment activities in the income statement. The profit on disposal is determined as the difference between the net sale proceeds and the carrying amount of the asset at the commencement of the accounting period plus capital expenditure in the period.

Where investment properties are appropriated to trading stock, they are transferred at market value. If properties held for trading are appropriated to investment, they are transferred at book value.

Lessee accounting

Initial rental payments in respect of operating leases are included in current and non-current assets as appropriate and amortised to the income statement over the period of the lease. Ongoing rental payments are charged as an expense in the income statement on a straight line basis until the date of the next rent review. Finance leases are capitalised and depreciated in accordance with the accounting policy for property, plant and equipment. As permitted by IFRS 1 at the date of transition to IFRS, the carrying value of long leasehold properties are based on the previous UK GAAP valuations and this has been taken as deemed cost. Rental costs arising from operating leases are charged as an expense in the income statement on a straight line basis over the period of the lease.

Non-current assets held for sale

Non-current assets are reclassified as assets held for sale if they are immediately available for sale in their current condition and their carrying value will be recovered through a sale transaction on which is highly probable to be completed within 12 months of the initial classification. Assets held for sale are valued at the lower of carrying value at the date of initial classification and fair value less costs to sell.

Impairment of non-financial assets

Goodwill is tested annually for impairment or more frequently if there are any changes in circumstances or events that indicate that a potential impairment may exist. Goodwill impairments cannot be reversed. Property, plant and equipment are reviewed for indications of impairment when events or changes in circumstances indicate that the carrying amount may not be recovered. If there are indications then a test is performed on the asset affected to assess its recoverable amount against carrying value. An asset impaired is written down to the higher of value in use or its fair value less cost to sell.

Deferred and current taxation