GEOTECHNICAL_ENGINEERING_ - Accounts

The directors present the strategic report for the year ended 31 October 2019.

During the year, the company continued with its usual business of carrying out ground investigation on construction and development sites throughout the UK. It continued to work for a broad spectrum of clients within its specialist market, combining and varying its services for each, as required. The company is perceived to operate towards the top end of the market, a reputation it has held for many years. This year, it carried out fewer, but larger contracts, and increased its turnover by circa 14%.

The company directly employs its staff and owns its equipment, believing that this assists in providing a high level of service to its clients. However, due to the nature of the contracts in which it has been involved this year, the proportion of turnover carried out by third-party sub-contractors and suppliers has increased from circa 30% to 40%, marking a significant change in the business model. As the construction industry moves hesitantly forwards in an uncertain political and economic environment, the company continues to invest in its staff and in its equipment.

The order book for the year ahead looks strong, with several larger, government backed contracts for national infrastructure.

The company’s financial gearing has reduced significantly during the year – debts have been paid off, and cash collection has improved significantly . However, there is still a lot of uncertainty in the construction industry, and the political and economic environment continues to be unpredictable. As always, the company takes very seriously all risks to the health, safety and welfare of its own staff, and of all other people with whom it works. The Directors have put in place various measures to address all these perceived risks.

However, the current economic and political environment is very uncertain. The company may need to revise its strategy and reset its business aims in the short term. The full effects of the COVID-19 pandemic are not fully understood; it is likely that they will have a negative impact on the company’s performance, with the extent of this dependent on the longevity of any restrictions. Appropriate action has been taken by the company in order to minimise these impacts on the performance of the company and the company is currently in a strong financial position. At the same time, the UK government is hinting at additional expenditure on infrastructure; the company is well placed within the industry to benefit from this. It is hoped that the continuing discussions about Brexit will not now cause further delays in investment decisions across the economy.

During the last year, the company steadily and purposefully reduced the number of staff by some 15%, from all levels. This reflects the gradual change in business model, whereby greater turnover is carried out by third-party sub-contractors and suppliers. This balance will be reviewed over the next year. Furthermore, improvements to some of its management and operating systems have led to efficiency gains. Staff training and development continues, to improve all aspects of performance, and to help with the retention of valued staff. There was targeted investment in additional and replacement equipment and vehicles, to ensure that it has modern fleets which are ‘fit for purpose’.

The company’s turnover increased last year by some 14% to £15.1M , and it made a profit of £414k, equating to 2.7%. The return to profitability is very welcome, and prior to the current restrictions associated with the COVID-19 pandemic, with the current momentum, the Directors believed that a further increase in turnover, with an improved profit %, would be achieved in the next financial year. At the date of approval of the financial statements however, the unknown longevity of the current situation and restrictions imposed are expected to have a significant impact on the trading activities of the business, thereby impacting profitability in the short term.

The company's financial instruments comprise cash at bank and in hand, loans, hire purchase and invoice financing creditors and various items such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to raise adequate finance for the company's operations.

The main risks arising from the company's financial instruments are interest rate fluctuations and liquidity risk. It is the company's policy to finance its operations through a mixture of cash, borrowings and strong credit management and to review periodically the mix of these instruments with regard to projected cash flow requirements of the company and an acceptable level of risk exposure.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 October 2019.

The principal activity of the company continued to be that of ground investigation.

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

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

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

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

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

•     select suitable accounting policies and then apply them consistently;

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

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

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report.

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

We have audited the financial statements of Geotechnical Engineering Limited (the 'company') for the year ended 31 October 2019 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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 company's affairs as at 31 October 2019 and of its 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.

Material uncertainty related to going concern

We draw your attention to Note 1.2 in the financial statements, which indicates that inherent uncertainties over the longevity of the ongoing Covid-19 pandemic and the restrictions put in place is likely to have an impact on the Company's trading activities in the short term. As stated in Note 1.2, these events or conditions, along with other matters set forth in Note 1.2, indicate that a material uncertainty exists that may cast doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other information

The directors are 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 directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

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

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

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

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

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

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

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

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

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

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: 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.

Geotechnical Engineering Limited is a private company limited by shares incorporated in England and Wales. The registered office is Centurion House, Olympus Park, Quedgeley, Gloucester, Gloucestershire, United Kingdom, GL2 4NF.

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

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

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

The company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report. The principal risks and uncertainties section provides further details of the principal risks affecting the company.

The company has to date met its day-to-day working capital requirements from its available cash balances and has made efforts to reduce its reliance on external funding. Significant progress has been made during the year with a strong cash position held at the balance sheet date, and further progress continuing post year end such that additional cash reserves were available at the date of approval of the financial statements.

Whilst the company has made significant progress in terms of their cash position and have a strong future pipeline of work in place, the outbreak of Covid-19 in the UK has lead to significant uncertainty across the UK economic climate. As a result of measures announced by the UK Government, certain trading activities have been temporarily suspended, however the company has responded by taking appropriate actions available to it from government initiatives in order to preserve cash within the business.

The directors believe that the pipeline of future work, including major national infrastructure projects puts the company in a strong position once restrictions are lifted. However, uncertainty over the longevity of the restrictions and the impact on the wider UK economy means that inherent uncertainty exists at the date of approval of the financial statements.

After making enquiries in relation to potential cash inflows and outflows based on current expectations of the length of restrictions in place, the directors confirm that they have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future and that it will continue to operate within the funds available to it.

In light of the above, and with the continued support of its shareholders and UK Government initiatives in place, the directors have adopted the going concern basis of accounting in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

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 credited or charged to profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

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. Attributable profit is calculated based on the contract's total anticipated profit at the reporting end date and that fairly reflects the proportion attributable to the work performed at the accounting date.

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 revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

Long-term work in progress is valued by reference to the stage of completion of a contract at the reporting end date, and is based on the costs incurred to date in performing the contract work, together with an appropriate addition for gross profit measured according to the stage of completion of the contract and the certainty of ultimate margin.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 company’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.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 when the company has 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.

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

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.

The company offers a bonus scheme via a phantom share scheme for employees. Employees are awarded phantom shares each month in line with the terms of their respective contracts, with the fair value of these being recognised in profit or loss in the month in which these are awarded. An accrual is held for the estimated cost to settle this liability, with employees redeeming these phantom shares at an estimated share price as at the date they request redemption or the date they cease to be employees, with amounts being paid in the following month. The phantom share price is valued at directors estimate and is based upon company performance up to the date of valuation and reassessed monthly. Redemptions are paid through the payroll and amounts are taxed via PAYE in the month in which they are paid.

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 the profit and loss account 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 leases asset are consumed.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

In the application of the company’s accounting policies, the directors are 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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful lives and residual values of the assets. The useful lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.

Rates of depreciation charged are considered on a line by line basis and disclosed within the accounting policy for depreciation.

The useful lives of items held as tooling equipment was re-assessed in the year to be more than one year. As such, these items have now been capitalised as tangible fixed assets and depreciated over their estimated useful life. In addition, a prepayment balance previously recognised in relation to these items has been released during the year. The overall impact of this change in accounting estimate has been to increase profit by £193,078.

See the tangible fixed asset note for the carrying amount for each class of assets.

The stage of completion of contracts in progress at the year-end has been estimated in line with the value of work completed to date as a proportion of the total expected value of that contract.

The expected gross margin for a contract has been used in order to determine the value of any provision for purchases or work in progress for that contract. This is based upon the difference between the expected costs to date and the value of costs received to date.

Amounts recoverable on contracts this year amounts to £2,469,510 (2018: £1,481,091) and the accrual for WIP this year amounts to £532,787 (2018: £122,340).

The turnover and loss before taxation are attributable to the sole principal activity of the company.

All turnover relates to income generated from contract revenue.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 6 (2018 - 7).

At the year end, an amount of £60,013 (2018: £66,084) was accrued in relation to amounts due to directors under a long term incentive scheme.

There are no members of key management personnel who are not directors.

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

A reduction to the UK corporation tax rate was substantively enacted as part of the Finance Act on 15th September 2016. This reduced the main rate of corporation tax to 17% from 1st April 2020.

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

All tangible fixed assets held by Geotechnical Engineering Limited are pledged as security for the bank borrowings of the company under a fixed and floating charge.

All debtor balances held by Geotechnical Engineering Limited are pledged as security for the bank borrowings of the company under a fixed and floating charge.

Included within trade debtors and applications for payments included within amounts owed by contract customers are balances of £2,230,144 (2018: £1,803,119) that are subject to invoice discounting arrangements.

Amounts owed as other borrowings includes £43,670 (2018: £727,913) of amounts owed under invoice discounting arrangements, which contain a fixed and floating charge over all assets of the company. The maximum extent of this facility is £1,300,000 with a notice period of 3 months. Interest is charged at 2.75% above base rate per annum. Other key terms include a recourse period of 90 days from the end of the month following the invoice date.

Amounts owed as other borrowings includes £55,536 (2018: £103,013) in current liabilities and £29,000 (2018: £91,440) in non-current liabilities in relation to loans which are unsecured and repayable under monthly instalments, with the final instalments expected by 6 June 2021. Interest is charged at respective contract rates ranging from 6.5% to 9.9% per annum.

Amounts owed under finance lease and hire purchase arrangements are secured on the underlying assets. Interest rates underlying all obligations under finance leases are fixed at respective contract rates ranging from 2.43% to 8.39%. Amounts are repayable by monthly instalments and are all due by 12 March 2022.

The invoice discounting agreement and other loans noted above and the sale and leaseback arrangement (detailed in note 14) are also secured by a personal guarantee provided by a director, as detailed in the related parties note.

Finance lease and hire purchase payments represent amounts 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 and agreements are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

During the year, no gain or loss (2018: £5,568 loss) was recognised in profit or loss in relation to movements in the underlying valuation of financial liabilities carried at fair value through profit or loss.

The deferred tax asset recognised primarily relates to unutilised losses carried forward. Based on the forecast profitability of the company, it is expected that certain timing differences available to the company to carry forward will be utilised in the near future to reduce current taxation. Accordingly a deferred tax asset has been recognised. All movements on the deferred tax asset have been transferred to the profit and loss account as part of the tax charge for the year (see note 8). The net deferred tax asset expected to reverse in 2020 is £Nil.

The deferred tax asset, assuming a tax rate of 17% (2018: 17%), can be analysed as follows:

Capital redemption reserve relates to amounts transferred from share capital on redemption of issued shares.

Profit and loss reserves includes all current and prior period retained profits and losses.

There were no known contingent liabilities at 31st October 2019 (2018: £Nil).

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

During the year, operating lease payments of £161,329 (2018: £160,680) were recognised as an expense in profit and loss.

Amounts contracted for but not provided in the financial statements:

During 2014, a director and shareholder made a loan to the company. Interest on this loan is charged at a rate of 5% above base rate and an amount of £66,051 (2018: £Nil) was provided during the year and is recognised within accruals.

Loans from minority shareholders are included within other creditors. Interest on these loans is charged at a rate of 5% above base rate and an amount of £13,876 (2018: £Nil) was provided during the year and is recognised within accruals.

Balances owed to other related parties at the year end include loans to minority shareholders.

All balances outstanding are unsecured and repayable on demand.

A director of the company has provided a personal guarantee covering bank borrowings subject to a maximum of £200,000. At the year-end this guarantee amounted to £43,670 (2018: £200,000). A director of the company has provided a separate guarantee to other lenders subject to a maximum of £856,171. At the year-end this guarantee amounted to £138,282 (2018: £390,824).

Mr A B Milne, a shareholder and director, is the ultimate controlling party.