POD-TRAK_(HOLDINGS)_LIMIT - Accounts

The director presents the strategic report for the year ended 31 August 2019.

The group’s principal subsidiary, Pod-Trak is a well-established specialist contractor operating within the Infrastructure sector. Since it was founded in 2007, Pod-Trak has grown in strength within the following disciplines:

• Railway Systems

• Airport Infrastructure

• Infrastructure Projects

The group's head office is based at Perivale with further offices in Bristol, Doncaster and Manchester, enabling the group to service all regions throughout the UK.

In the year to August 2019 Pod-Trak experienced an 8% decrease in turnover which reflected the effects of delayed projects due to the wider economic and political uncertainty, together with the effect of CP6 being delayed due to Brexit. This follows on from the previous period where turnover increased by almost 6%.

Despite the above, the group fundamentals remain solid, and the directors believe that the group is well placed, to deliver profits and are confident of its future, as delayed projects are completed in the current financial year 2020. To this end and given the current unprecedented predicament in the country with Covid-19 the group is still realistic and confident to deliver another year of profit albeit with a more moderate level of turnover. The group continues to deliver larger projects successfully and safely for its clients within the sectors in which it works after obtaining the Principal Contractor License.

Commercial Risk

The group manages this risk by providing added value services to its clients, having fast response times not only in supplying products and services but also in handling all client queries and by maintaining strong relationships with clients. The group's commercial risk is reduced due to the market share of their clients as many of the group's clients are long standing market leaders in their field. The group has spread its commercial risk by not only actively seeking to widen its client base but also through continued expansion of its activities in the South of England and North of England.

Market Risk

The group operates in a specialised market and seeks to maintain a competitive advantage by offering an appropriate and relevant service range and providing a high level of customer service from professional and dedicated staff. The group keeps abreast of developments in the market through maintaining strong relationships with its clients and monitoring the wider economic environment.

Taxation risk

The group is exposed to financial risks from increases in tax rates and changes to the basis of taxation including corporation tax and VAT. Principal controls to mitigate this risk include regular monitoring of legislative proposals and the engagement of experienced executives and the use of experienced sector-specific professional advisers to mitigate the impact of changes.

Management risk

The group is reliant on its small high calibre team of operational managers, surveyors and board of directors. The Board recruits and develops high calibre employees, many of whom have been with the company for a number of years. The Board have tried to ensure that the knowledge base of the operational management team is shared as much as possible throughout the group.

Financing risk

See Financial instruments.

Economic risk

The Board have identified and evaluated risks and uncertainties and have controls in place to mitigate these. Responsibility for management of each key risk is identified and delegated. The group is exposed to the economic risks that could lower the group's revenues and operating results in the future. However, actions continue to be taken to maximise the group's performance in all aspects of the business.

The balance sheets on pages 13 and 14 of the financial statements show that the group's and company's financial position at the year end is, in terms of both net assets and liquidity, an improvement over the previous year.

The key financial and non financial performance indicators used to determine the progress and performance of the group are set out below:

     2019                   2018

Turnover                             £32,405,678            £35,250,645

Gross profit                          £4,994,015             £5,263,982

Gross margin                          15.4%             14.9%

Operating profit                          £2,534,808         £2,866,084

Operating profit as a % of sales                 7.8%              8.1%

Earnings before interest, tax, depreciation, amortisation

and pension provision (EBITDAP)                 £2,652,063             £2,967,591

EBITDAP as a % of sales                     8.2%              8.4%

Market Share

The principal subsidiary, Pod-Trak Limited is a medium-sized privately owned construction company based in the South East of England. Pod-Trak enjoys greater than national average market share. Although difficult to quantify within a given criteria it is estimated to have a significant market share.

Gross Profit Margin

The directors view that an acceptable gross profit as a % of sales should ideally be in the 14% to 16% range. The increase in the gross profit percentage has meant that the target range has been achieved this year, despite the continuing pressure on margins in a highly competitive market, in what has been a period of diversification in the company's trading activities.

Operating profit and EBITDAP % of sales

The directors view operating profit as a % of sales as a key performance indicator for the business and this is reviewed regularly. The directors view that an acceptable operating profit as a % of sales should ideally be in the 7% to 9% range. The target range has once again been achieved this year.

The EBITDAP is often regarded as a more comparable measure of the performance of the business which shows that EBITDAP percentage of sales has decreased from 8.4% to 8.2% over the course of the year. It is the intention of the group to strengthen its financial performance in the industry by concentrating on client retention and expansion in the market share, whilst at the same time closely monitoring both direct and indirect costs.

Safety Performance

The directors also view safety performance as a KPI and strive to ensure that all incidents and accidents are reduced. These statistics are regularly monitored at management meetings and the group uses Close Call reporting and trend analysis to monitor performance.

Safety, health and environmental policies

The Pod-Trak Group has a fully integrated Health and Safety policy. The group continues to strive to improve its safety, health and environmental standards and performance. These are monitored regularly throughout the year and reviewed in response to performance and changes in legislation.

Health and safety

The group recognises the significance of health and safety in the workplace to ensure its work force is free from risk, through investment in continuing improvement in the occupational health and safety field.

In recognising the significance of health and safety, the group has made significant investment in, occupational health, a behavioural culture programme, ongoing external monitoring, evaluation of environmental impact, risk reduction methods, the employment of full-time safety officers and the assistance of professionally qualified personnel.

The Pod-Trak Group also has a commitment to the CSCS scheme to such an extent that it will not employ any new staff without CSCS training and insist that their card is appropriate to the work that they do. At Pod-Trak the belief is that all accidents are preventable with proper planning, information, training and adherence to Method Statements and Works Package Plans. Regular Toolbox Talks and Task Briefs also ensure continual development and sharing of information relevant to the works carried out, offering a forum for the workforce to get involved and provide feedback important to a healthy working environment.

In addition, the monitoring of the employees' health and welfare through regular site visits on each of its projects and the continuation of an extensive training programme, ensuring competency in the workplace, continue to play a major part in protecting the group's workforce.

Environment

The group recognises the importance of its environmental responsibilities, monitors its impact on the environment and designs and implements policies to reduce any damage that might be caused by the company's activities. Initiatives designed to minimise the company's impact on the environment include safe disposal of any product waste, recycling and reducing energy consumption.

Accreditations and memberships

The principal subsidiary has been assessed and has achieved the following accreditations and is a member of the following :

- Quality Management System (ISO 9001: 2015);

- Environmental Management System (ISO 14001: 2015);

- Health & Safety Management System (BS OHSAS 18001: 2007);

- Health & Safety Management System (BS OHSAS 18001: 2007 SSIP);

- Constructionline - Gold Member;

- Network Rail Ontrack Plant Operations Scheme Approval;

- Membership of CIRAS;

- FORS Silver accredited (Perivale and Manchester);

- Member of the Rail Industry Contractors Association (RICA);

- Member of the Construction Plant-Hire Association (CPA);

- Member of the Rail Plant Association (RPA);

- Member of the Freight Transport Association (FTA);

- Verified supplier - Railway Industry Supplier Qualification Scheme (RISQS);

- Registered as an upper tier waste carrier with the Environment Agency;

- Acclaim Health & Safety Accreditation (SSIP);

- Member of the Royal Society for the Prevention of Accidents (ROSPA);

- Approved Contractor Scheme - NICEIC;

- Network Rail - Principal Contractor Licence Management Systems Accepted;

- Cyber Essentials Scheme compliant.

The Board are of the opinion that these memberships, certifications and accreditations will ensure the continued efficiency of its internal and external processes, and aid the group's commitment to working towards health, safety and environmental best practice across the business.

Employee involvement and policy

The group continues to make significant investment in its human resources both in terms of necessary increases and strengthening of its management teams, supervisory personnel and work force.

Details of the number of employees and related costs can be found in note 6 to the financial statements.

The group's employment policies respect the individual and offer career opportunities regardless of gender, race or religion. The group engages, promotes and trains staff on the basis of their capabilities, qualifications and experience without discrimination, giving all employees an equal opportunity to progress within the group.

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the group continues and that appropriate training is arranged. It is the policy of the group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees.

As mentioned above, Pod-Trak's commitment to the CSCS scheme is such that they will not employ any new staff without the appropriate CSCS training.

On behalf of the board

The director presents his annual report and financial statements for the year ended 31 August 2019.

The principal activity of the company and group continued to be that of specialist rail contractors and electrical installations.

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

The results for the year are set out on page 12.

Ordinary dividends were paid amounting to £100,000. The director does not recommend payment of a further dividend.

No preference dividends were paid. The director does not recommend payment of a final dividend.

Objectives and policies

The group's principal financial instruments comprise bank balances, trade creditors, trade debtors, hire purchase creditors, loans to and from related companies and loans to/from the director. The main purpose of these instruments is to raise funds to finance the group's operations. The group's approach to managing other risks applicable to the financial instruments concerned is shown below.

Price risk

Due to the nature of the financial instruments, the group reduces its price risk.

Cash flow and liquidity risk

In respect of bank balances the liquidity risk is managed by maintaining a balance between continuity of funding and flexibility through and agreed payment policy. Strict payment terms are negotiated with the group's customers which enables it to ensure that it is paid promptly once an application has been issued. This policy ensures that sufficient funds are available to meet amounts due to trade creditors. Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding.

In respect of loans to and from related companies, these are unsecured, interest-free with no fixed date for repayment.

The group sees R&D activity as a vital part of sustaining competitive advantage and when presented with technical challenges, will seek to develop the optimal solution.

During the year the group undertook several Research and Development (‘R&D’) projects that sought to achieve advancements in technology in carrying out various railway systems and infrastructure projects.

Covid 19

The health and wellbeing of our work force is paramount. From the beginning of the outbreak of Covid 19 Pod-Trak has monitored very closely the Government guidelines and have adjusted our business strategies to suit. We have set up a daily Video meeting with our senior management team to monitor all sites and the welfare of our staff. This year we have relocated all our IT to Cloud servers and this has enabled the business to be more resilient and allow more flexibility in the way our teams can work remotely enabling us to act quickly in situations of crisis.

We have arranged for all high risk individuals to work from home keeping them removed as far as possible from being exposed to the virus.

Given the severity of Covid 19 we arranged for our project management staff to work from home instead of being in offices or on site where possible limiting their direct contact with other people.

We saw the biggest impact to the business with some sites closing indefinitely limiting the amount of work available and had to take the decision to place some staff on Furlough due to a shortage of work including back office staff. The group is continuing to operate at approx. 40% capacity.

We continue to adhere to Government guidelines and work on sites that are opened and complete critical work for Network Rail to ensure the freight and passenger lines remain opened.

The group is resilient and is now better placed having obtained Principal Contractor Status that will allow it to focus on strengthening its financial performance in the industry by concentrating on current customer base retention, looking out for new clients by developing long term relationships, while at the same time keeping a firm grip of both direct and indirect cost in line with turnover.

The group will continue to focus on securing profitable work while the country gets back to its normal business activity and continue to increase its market share by expanding its customer base in the South, North and Southwest of England. It continues to seek to diversify the work it undertakes within its core sectors.

The directors anticipate that in 2020 the group will be focused on further developing its market share within the infrastructure sectors and mainly focusing on the Aviation and Power markets where the group has started to develop over the past few years and achieve a bigger market share within these sectors. With current climates and the uncertainty of the effects of Covid 19, these plans will formulate at a reduced pace but will increase back up when the market recovers.

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

The director is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the director is required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

We have audited the financial statements of Pod-Trak (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 August 2019 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the group's and the parent company's affairs as at 31 August 2019 and of the group's profit for the year then ended;

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

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

Basis for opinion

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

Conclusions relating to going concern

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

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

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

Other information

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

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

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

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

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

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

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

• adequate accounting records have not been kept 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.

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

In preparing the financial statements, the director is responsible for assessing the group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the group or the parent company or to cease operations, or has no realistic alternative but to do so.

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

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

Use of our report

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

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

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,690,286 (2018 - £1,690,226 profit).

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

Pod-Trak (Holdings) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Crove House, 14 Aintree Road, Perivale, UB6 7LA.

The group consists of Pod-Trak (Holdings) Limited and all of its subsidiaries.

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

The financial statements have been prepared with early application of the FRS 102 Triennial Review 2017 amendments in full.

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

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

The consolidated financial statements incorporate those of Pod-Trak (Holdings) Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.

All financial statements are made up to 31 August 2019. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

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

Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.

Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.

In the parent company financial statements, investments in associates are accounted for at cost less impairment.

At the time of approving the financial statements, the director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.

Turnover represents amounts receivable for goods and services net of VAT and trade discounts. Where relevant, turnover is recognised on the provision of the service.

Profit is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainty, by including in the profit and loss account turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs to date bear to total expected costs for that contract.

Amounts recoverable on long term contracts, which are included in debtors, are stated at the net sales value of the work done after provision for contingencies and anticipated future losses on contracts, less amounts received as progress payments on account. Excess progress payments are included in creditors as payments on account.

Any known contract losses are recognised in full at the balance sheet date.

The group sees R&D activity as a vital part of sustaining competitive advantage and when presented with technical challenges, will seek to develop the optimal solution.

During the year the group undertook several Research and Development (‘R&D’) projects that sought to achieve advancements in technology. These advancements extended the overall knowledge or capability in a field of railway systems and infrastructure projects. Given the complexity of the built environment in which Pod-Trak operates, significant R&D resources are directed to overcoming system uncertainty.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

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

Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates. In the group financial statements, associates are accounted for using the equity method.

Stock and work in progress are valued at the lower of cost and net realisable value. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads. Work in progress is reflected in the accounts on a contract by contract basis and represents the unbilled direct and indirect costs incurred as at the year end. These typically arise where mid month valuations have occurred and a time apportioned estimate of the cost of measured work has been calculated. Net realisable value represents the certified value of the measured work carried out in a particular period, invoiced subsequent to the year end.

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

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.

Where the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as expenses in the period in which they are incurred and contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable.

The “percentage of completion method” is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets depending on their nature, and provided it is probable they will be recovered.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and any bank overdrafts, where applicable.

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

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

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

In the application of the group’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Revenue recognition is a key area of judgement especially in companies operating in the construction industry. The calculation of contract turnover, gross amounts due from customers and work in progress is contingent on the accurate measurement of work done and internal valuations by key management personnel. The directors have ensured that generally accepted industry practices and methodologies are followed by all relevant personnel and that accounting and quality management systems are regularly evaluated and certified.

An analysis of the group's turnover is as follows:

All of the depreciation of tangible fixed assets held under finance leases is included in administration expenses.

Of the £44,451 (2018: £47,859) depreciation of owned tangible fixed assets, £17,892 (2018: £23,868) is included within cost of sales. The balance is included in administration expenses.

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

Their aggregate remuneration comprised:

Investment income includes the following:

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

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Plant and machinery and motor vehicles with a combined net carrying amount of £52,317 (2018: £69,753) have been pledged to secure finance lease borrowings of the company. The company is not allowed to pledge these assets as security for other borrowings or to sell them to another entity until the liability is settled.

The directors have opted to account for the company's investment in its subsidiary and associate companies at cost less impairment as set out in the above accounting policies and in accordance with the FRS 102. The reason for choosing this method is that both the subsidiary and associate have always been privately owned and its shares have never been publicly traded.

Details of the company's subsidiaries at 31 August 2019 are as follows:

1. The Registered office address is Crove House, 14 Aintree Road, Perivale, Greenford, Middlesex, UB6 7LA

Details of associates at 31 August 2019 are as follows:

During the previous year, the company acquired 2 Ordinary shares and 150,000 (Non-voting) Preference shares in A&M Electricals Limited, an unlisted company - see note 12.

The investment in associates are all stated at cost.

2. The registered office address of the associate is 17 Pennine Parade, Pennine Drive, London, NW2 1NT.

The amounts owed by undertakings in which the company has a participating interest are unsecured, interest-free and repayable on demand with no fixed repayment terms.

Included in other debtors are amounts due from related parties in the sum of £3,025,067 (2018: £3,497,116). The amounts are unsecured, interest-free and with no fixed repayment dates

The director considers that the carrying amount of trade payables approximates to their fair value.

The obligations under finance leases falling due within and after more than one year totalling £3,263 (2018: £42,419) were secured by the lessors' title to the leased assets.

The amounts owed to group undertakings are unsecured, interest-free and repayable on demand with no fixed repayment terms.

Included in other creditors are amounts due to related parties in the sum of £427,159 (2018: £1,152,019). The amounts are unsecured, interest-free and with no fixed repayment dates.

There is a Debenture dated 4 July 2013 in favour of the subsidiary company's bankers, Barclays Bank plc, to secure banking facilities. This comprises fixed and floating charges over the undertaking and all property and all fixed and current assets present and future, The Debenture contains a negative pledge.

There is a Legal Charge dated 7 September 2017, in favour of Metro Bank Plc, to secure leasehold property subject to a lease between the subsidiary company and a related company. This comprises fixed and floating charges in connection with the leasehold property present and future, The Legal Charge contains a negative pledge

Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The company has two classes of shares in issue:

- Ordinary shares which carry no right to fixed income, but which carry full voting rights; and

- Preference shares which carry neither any right to fixed income nor full voting rights.

The group has provided guarantees in respect of unpaid hire purchase liabilities of a related company. At 31 August 2019, the outstanding hire purchase liabilities in that related company, which are not included in the group's balance sheet, amounted to £667,914 (2018: £1,011,573) - see also Note 25 ' Related party transactions'.

Operating lease payments represent rentals payable by the group for office equipment, vehicles and business premises. Leases are negotiated for an average term of 3 years.

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

Key personnel, comprising the three directors of the subsidiary company, received remuneration totalling £44,286 (2018: £44,174) in the subsidiary company.

During the year the group entered into the following transactions with related parties:

Sales of goods to related parties were made at the company's usual list price. Purchases were made at market price discounted to reflect the quantity of services purchased and the relationships between the parties.

The following amounts were outstanding at the reporting end date:

The amounts owed to related parties are unsecured, interest-free, have no fixed dates of repayment and are repayable on demand.

The following amounts were outstanding at the reporting end date:

The amounts owed by related parties are unsecured, interest-free, have no fixed dates of repayment and are repayable on demand.

The amounts outstanding are unsecured and will be settled in cash.

As mentioned in Note 23, at 31st August 2019, the group has guaranteed the unpaid finance lease commitments of a related company to a maximum of £667,914 (2018: £1,011,573).

Dividends totalling £51,960 (2018 - £51,000) were paid in the year in respect of shares held by the company's sole director.

Advances or credits have been granted by the group to its directors as follows:

The maximum outstanding during the year was £557,949. The loan is unsecured and repayable on demand. Interest of £12,486 was charged at a rate of 2.5%.

The ultimate controlling party is P O'Donnell, by virtue of his majority shareholding in the called up share capital of the company.

The largest and smallest group financial statements that consolidate this company is Pod-Trak (Holdings) Limited. These group accounts are available to the public from the company's registered office address at Crove House 14 Aintree Road Perivale, UB6 7LA.

The ultimate controlling party is P O'Donnell, by virtue of his majority shareholding in the called up share capital of the company.