MODEBEST_GROUP_HOLDINGS_L - Accounts

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

During the year the group sustained its turnover after several years of strong growth. Please refer to key performance indicators for more details. This was achieved despite the uncertainty and disruption of Brexit, challenging market conditions and increased competition. Improved efficiencies in project delivery and commercial management have both contributed to the achievements of the company coupled with the outstanding performance of its loyal and committed workforce.

The group's principal subsidiary, Modebest Builders Limited, is a well established groundworks and frame contractor trading for over 25 years. The group's head office in Northolt enables it to service its customer base in London as well as the South of England. The principal subsidiary continues to successfully tender for key contracts and continues to receive repeat orders from satisfied customers and thereby continues to maintain its established customer base.

Our stakeholders

The directors have always paid due regard to the effect of their actions on various stakeholders who have an interest in the business. Section 172 of the Companies Act now requires us to report each year on the steps taken to fulfil these obligations towards our stakeholders. There are a great many parties who may be affected by the decisions made by the Board of directors in the day-to-day running of the business and, as such,can be considered stakeholders. It is the responsibility of the Board to balance these interests in order to deliver the best possible outcome for all concerned,

Shareholders

Shareholders will look for annual income in the form of dividends as well as capital appreciation from growth in the net assets of the company. Robustness in moral awareness and social responsibility are also increasingly important considerations for this company.

Subcontractors and suppliers

We treat our subcontractors in the same way as our employees in terms of working conditions as inclusivity. We also keep in close contact with our suppliers as it is of mutual benefit to be well informed.

Local community

It is important to appreciate and respect the views of the communities in which we work. Each has its own issues that have significance and should not be ignored, especially with regard to health and safety and environmental matters.

Clients

Arguably the most important stakeholder of all is the client. Without clients we would have no business, The quality of both our product and our client is therefore of paramount importance.

Market risk

The business sector in which the group operates is heavily dependent upon the level of construction projects by both private and public concerns. The prevailing economic and political climate will influence the availability of suitable contracts.

Commercial Risk

The group spreads 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. The group also 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 all communications with clients, that all help to maintain strong client relationships.

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 and surveyors and board of directors. The group recruits and develops high calibre team members. 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 directors have identified and evaluated risks and uncertainties and have controls in place to mitigate these as much as possible. Responsibility for management of each key risk is identified and delegated. The group is exposed to the risks of a downturn in the economy as well as the impact of the uncertainty surrounding Brexit that could potentially adversely affect 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.

Covid 19 - see comments under Post Reporting Date Events and Future Developments in the Directors' Report.

Going concern

The construction industry has not been immune to the consequences of Covid-19. For a period of six weeks between March 2020 and May 2020 operations were significantly reduced. Our projects are now operational and gaining momentum since the gradual easing of Covid-19 lockdown and with additional health and safety procedures and social distancing measures.

As a result of the above, our turnover and profit will be down this year, but we believe that the strength of the group, and our dedicated and experienced team, together with our strong reputation in the sector, will enable us to safely navigate the current headwinds.

Whilst the uncertainty remains, we have adapted to the challenge and the directors are confident that overriding economic factors in the construction and property sectors, such as the continuing under-supply of housing and historically low interest rates, will minimise the adverse effects of the recent restrictions in business activity. Furthermore, whilst a trade deal with the EU has not yet been finalised, the directors believe that this and Covid-19 uncertainties will be overcome and that confidence will be maintained in the UK construction sector.

The balance sheets on pages 12 and 13 of the financial statements shows that the group and company's respective financial position at the year end is, in both net assets and liquidity terms, 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:

     2020                   2019

Turnover                          £147,026,551         £149,654,308

Gross profit                          £8,620,086             £9,181,433

Gross margin                          5.9%             6.1%

Operating profit                          £5,984,444         £6,371,354

Operating profit as a % of sales                 4.1%             4.3%

Earnings before interest, tax, depreciation, amortisation

(EBITDA)                         £6,061,840         £6,428,935

Balance sheet - net asset strength              £34,395,264         £28,907,779

Review 2020

The group had another successful year achieving operating profits of just over £5.98m on turnover of just over £147m, as against profits of just under £6.37m on turnover of just over £149.6m in the previous year. We continue to invest in health and safety, training and IT and we further increased our strong and liquid balance sheet as evidenced by the increase in net assets over the course of the year from £28.9m to £34.4m.

Accident Frequency rate

The group is committed to a Target Zero safety culture in relation to RIDDOR's. The group is committed to keeping its RIDDOR accident frequency rate as close to zero as practicable. The group recognises that any accident or incident is one too many and it continually strives to eliminate the possibility of any dangerous occurrence by providing a trained workforce, building relationships with its customers, promoting positive engagement and delivery of its behavioural safety program 'SAFEMODE'.

Safety, health and environmental policies

The group continues to strive to improve its safety, health and environmental standards and performance. The group operates SAFEMODE an in-house initiative that ensures that all site personnel endorse a working safely behavioural culture. SAFEMODE and other initiatives are monitored regularly throughout the year and reviewed in response to performance and changes in legislation. 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 (SAFEMODE), ongoing external monitoring, evaluation of environmental impact risk reduction methods, the employment of professionally qualified personnel and a specialist health and safety team.

The implementation of the behavioural cultural programme, (SAFEMODE) 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.

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 group’s activities. Initiatives designed to minimise the group’s impact on the environment include safe disposal of any product waste, recycling and reducing energy consumption.

Covid-19 has brought added focus to the Health and Safety requirements of the business but the group believes it has put in place the processes and procedures that ensure the highest level of safety and wellbeing for all its staff, customers and suppliers ensuring that everyone who goes to work comes home safe and well.

Quality

The group prides itself on the quality of the work performed for its clients. All aspects of quality standards are constantly under review in order to maintain and improve standards where possible. The group's principal subsidiary is accredited by Achilles Building Confidence Accreditation Standard, has achieved Tier One Certificate of Conformity for Specialist Concrete Contractors, holds ISO45001: 2018, having successfully made the transition from BS OHSAS 18001, ISO 14001:2015 and ISO 9001 2015 for the provision of groundworks and concrete frames.

Amongst the principal subsidiary's other accreditations/memberships are SafeContractor, SMAS, CHAS, Building Confidence, CHSG, Builders Profile, Acclaim, Constructionline Gold, IFC, FORS Silver, CLOCs Champion, CPA as well as membership of the industry specific Construct and Concrete Society.

In the opinion of the directors this will improve the group's internal and external processes.

Human resources

The group pursues an active policy of monitoring staff at all levels in order to match skills and qualifications to tasks. This is supported by providing training as required, utilising their dedicated training facilities at head office. Training is an ongoing key focus of the group, all workers are reviewed to access their and the group’s skill, safety and management needs now and in the future.

The group extends their sincere gratitude to all its office and site staff during these extremely worrying and testing times brought about by the Covid 19 pandemic, wishing they stay safe and well ensuring they can continue to work with the Modebest Group family.

Modern Slavery Statement

Modebest is committed to working within its own business and supply chain to ensure that it implements a proactive approach to tackling hidden labour exploitation and reducing these practices in their wider supply chain. Their risk assessments revealed that the most significant risks, from a modern slavery perspective, arise in their material and subcontract procurement. They have therefore produced guidance for suppliers which sets out the legal framework in this area and Modebest’s requirements. A summary of their statement that highlights the key activities they are undertaking, their responsibilities and compliance can be found at http://modebest.co.uk/pdf/Modern-Slavery-Policy.pdf.

On behalf of the board

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

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

Ordinary dividends were paid amounting to £164,000. The directors do not recommend payment of a further dividend.

Objectives and policies

The group's principal financial instruments comprise bank balances, trade creditors, trade debtors, work in progress and loans to and from companies under common control. The main purpose of these instruments is to raise funds for the group's operations and to finance the group's operations. The group's approach to managing other risks applicable to the financial instruments concerned is shown below.

The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

The group's operations have been subject to the risk of interest rate fluctuations, as it primarily affects interest earning operations. In respect of loans to and from companies under common control, these are interest-free. Interest on loans to directors are charged at commercial rates.

The group's principal financial assets are trade debtors, amounts receivable on contracts, sales retentions and cash. The credit risk is mitigated by regular application for, and certification of, works completed under contractual agreements. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary

The group sees R&D activity as a vital part of sustaining competitive advantage and to this end will continue to invest by challenging traditional construction techniques wherever possible.

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 construction, specifically groundworks and reinforced concrete frames, and made appreciable improvements to existing technologies or overcame system uncertainty.

Covid-19 and Brexit

In these unprecedented and testing times brought about by Covid-19, the group is extremely proud of the way its office staff and site teams have reacted to the new environment by creating new methods of working at a safe distance enabling production to continue throughout. The group's principal subsidiary has strongly pushed for off-site fabrication where possible, and continues to invest heavily in this field, and this has helped greatly when maintaining safe social distancing on sites. A trade deal with the EU has yet to be negotiated, but some of the uncertainty surrounding Brexit has been removed, and with interest rates low and Government confirming they will support the construction industry through the inevitable recession the group is confident that the business will not be materially adversely affected.

Despite the continuing uncertainty surrounding Covid-19 and its prolonged impact, the directors are satisfied with the principal subsidiary's order book for 2020, and are of the opinion that future group work streams and the group's broad client base will provide a good base to continue to develop the group through to 2021 and to take advantage of some good opportunities in the coming year. The directors believe the group is in a good position to continue to benefit from the house building activities of its core customers who are working to achieve government targets for new homes.

Without doubt, Covid-19 has impacted on all businesses and all walks of life, and these risks will remain for some time to come. However, the directors are of the opinion that group is well placed to react to prevailing market conditions. This is due to the wide range of skills and services that the group can offer, and also due to the market shares of its clients, who are long standing market leaders in their field.

Modebest Group Holdings Limited continues to operate as a holding company, and its principal source of income being derived from its subsidiary companies. On 9 March 2020, as part of a group restructure, there was a change of ownership and directors. A new holding company, Modebest and Heathrow Group Holdings Limited, now owns the entire issued share capital of the company. For more information see notes 23 and 26.

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

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

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group 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 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. They are 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 Modebest Group Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 January 2020 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 January 2020 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 directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the 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 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 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 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 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 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 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 directors either intend to liquidate the group or the parent 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.

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 £2,333,332 (2019 - £5,119,941 profit).

Modebest Group Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Moy House, 69 Belvue Road, Northolt, Middx, UB5 5XS.

The group consists of Modebest Group 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 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 certain financial instruments at fair value. 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 Modebest Group 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 January 2020. 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.

In determining the appropriate basis of preparation of the financial statements, the directors are required to consider whether the group can continue in operational existence for the foreseeable future. In so doing, the directors have taken into account all available information for the future, which is at least, but not limited to, twelve months from the date of approval by the directors of the financial statements.

Whilst the Covid-19 pandemic has clearly had an impact on the results for the current 20/21 financial year, it has not, in the opinion of the directors, had a materially adverse effect on the fundamentals underlying the stability of the business. The directors believe that whilst the pandemic presents the group with a significant challenge, it is well placed due to the ongoing projects it has in place, the resources it has available and the influence of overriding economic factors such as the continuing under-supply of residential housing in the UK. The effects that have been experienced to date have caused delays in construction but this has been addressed and corrective action taken to recover lost time as soon as practicable.

The directors have also considered a number of factors and sensitivities including the potential impact of further Covid-19 lockdowns and Brexit, and after reviewing the company’s sales and profit forecasts and projections, have a reasonable expectation that the group has adequate resources to continue to trade as a going concern for the foreseeable future, and therefore they continue to adopt the going concern basis in preparing the company and group financial statements.

Turnover is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Turnover represents the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of VAT. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. Sales are recognised on the basis of work measured, valued and certified at the year end. The following criteria must always be met before revenue is recognised:

Rendering of services

Revenue from a contract to provide construction services is recognised in the period in which the construction services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the Company will receive the consideration due under the contract;

• the stage of completion of the contract at the end of the reporting period can be measured reliably;

• the costs incurred and the costs to complete the contract can be measured reliably.

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.

Turnover represents amounts receivable from horse racing and promotion for the purposes of promoting the Modebest name.

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.

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 profit or loss. Reversals of impairment losses are also recognised in profit or loss.

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 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.

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 and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks.

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.

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.

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 in the period are included in profit or loss.

Research and development expenditure

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.

In the application of the group’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 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. Recognition of turnover and profit on long term contracts requires management judgement regarding the anticipated final outcome of individual contracts and of the proportion of works completed at the balance sheet date. Management undertakes detailed reviews on a monthly basis in order to exercise judgement over the outcome of each contract and the associated risks and opportunities.

The value of work completed at the balance sheet date is assessed by undertaking surveys and completing internal valuations on each element of works and in progress. Regular management reviews of contract work in progress are undertaken.

The age, nature and recoverability of all debtors and amounts recoverable on long term contracts are reviewed regularly by management and provisions made where appropriate.

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. Consistent procedures and management tools are in place to ensure that estimates are applied and results determined on a consistent basis.

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

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

Their aggregate remuneration comprised:

The group continues to outsource its payroll. Apart from salaries and directors' remuneration paid by the parent company, all payroll costs during the year were recharged from a related company, See also Note 24.

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 adjustments in respect of prior periods represents tax refunds received during the year end in respect of research and development claims.

The directors have opted to account for the company's investment in subsidiaries 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 the subsidiary has always been privately owned and its shares have never been traded.

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

Registered Offices:

1.     Moy House, 69 Belvue Road, Northolt, UB5 5XS

2.    17 Pennine Parade, Pennine Drive, London NW2 1NT

The amounts owed by group undertakings are unsecured, interest-free, have no fixed date of repayment and are repayable on demand.

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

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.

The above amounts have been recharged to the group from a related company. 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 one class of ordinary shares which carry no right to fixed income.

Company and group

The company and group had provided guarantees in respect of unpaid hire purchase liabilities of several related companies as part of a cross-company guarantee arrangement in favour of the group's bankers. At 31 January 2020, the outstanding hire purchase liabilities in those related companies, which were not included in the parent company and group's balance sheet, amounted to £0 (2019: £698,929) - see also Note 24 'Related party transactions'. All liabilities in connection with these guarantees were settled in full during the year.

Operating lease payments represent rentals and service charges payable by the group to the two directors of the ultimate parent company for office space occupied by the group companies. The leases are negotiated over terms of one year, and sometimes for periods less than one year.

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:

On 9 March 2020, Modebest Group Holdings Limited, became a wholly-owned subsidiary of Modebest and Heathrow Group Holdings Limited. The registered office address of Modebest and Heathrow Group Holdings Limited, is 17 Pennine Parade, Pennine Drive, London NW2 1NT.

The change in ownership of the company resulted in two Debentures in favour of the outgoing shareholders.

In addition to the directors' remuneration disclosed in Note 7, an additional £12,000 (2019: £12,000) was recharged to a subsidiary by two related companies in respect of a director of that subsidiary who was not a director of the parent company at 31st January 2020.

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

The following amounts were outstanding at the reporting end date:

The following amounts were outstanding at the reporting end date:

The following amounts were recognised as an expense in the period in respect of bad and doubtful debts due from 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 provided and the relationships between the parties.

The amounts outstanding are unsecured, interest-free, repayable on demand and will be settled in cash.

As set out in Note 21, all liabilities in connection with the cross-company guarantee with its bankers were repaid during the year.

Dividends totalling £82,000 (2019 - £82,000) were paid in the year in respect of shares held by the company's directors.

Included in other debtors in note 16, are loans granted by the group to its directors as follows:

The maximum amounts outstanding on the loans during the year were £3,195,006 and £4,045,378 respectively. The loans are unsecured and repayable on demand, Interest totalling £159,207 has been charged at 2.5% on the above loans.

From 9 March 2020, the ultimate parent company of Modebest Group Holdings Limited is Modebest and Heathrow Group Holdings Limited and its registered office is 17 Pennine Parade, Pennine Drive, London NW2 1NT.

Up until 9 March 2020, the company was jointly controlled by the families of E Scanlon and A Dravins, by virtue of their equal 50% shareholding in the called up share capital of the company.

Following the change of ownership in March 2020, there is no ultimate controlling party as no shareholder owns more than 50% of the issued share capital of the ultimate parent company, Modebest and Heathrow Group Holdings Limited.

Up to 9 March 2020, the largest and smallest group financial statements that consolidate this company is Modebest Group Holdings Limited. These group accounts are available to the public from the company at Moy House, 69 Belvue Road, Northolt, Middlesex UB5 5XS.