MODEBEST_BUILDERS_LIMITED - Accounts
MODEBEST_BUILDERS_LIMITED - Accounts
The directors present the strategic report for the year ended 31 January 2020.
The company is a well established groundworks and frame contractor trading for over 25 years. The company's head office in Northolt enables it to service its customer base in London as well as the South of England.
During the year the company sustained its market position 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 company 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 company 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. See more under Covid 19 and Brexit and Future developments in the Directors' Report.
Commercial Risk
The company 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. The company 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 company 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 company is reliant on its small high calibre team of operational managers, surveyors and board of directors. The company 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 company.
Financing risk
See Financial instruments.
Economic risk
The directors 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 company is exposed to the risks of the economic downturn that could lower the company's revenues and operating results in the future. However, actions continue to be taken to maximise the company'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 our company, 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 sheet on page 11 of the financial statements shows that the company's 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 company are set out below:
2020 2019
Turnover £147,018,521 £149,610,466
Gross profit £8,549,088 £9,089,170
Gross margin 5.8% 6.1%
Operating profit £6,043,982 £6,353,619
Operating profit as a % of sales 4.1% 4.2%
Earnings before interest, tax, depreciation, amortisation
(EBITDA) £6,085,322 £6,402,651
Balance sheet - net asset strength £9,402,668 £6,461,207
Review 2020
The company had another successful year achieving operating profits of just over £6m on turnover of just over £147m, as against profits of just under £6.4m 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 £6.46m to £9.4m.
Accident Frequency rate
The company is committed to a Target Zero safety culture in relation to RIDDOR's. The company is committed to keeping its RIDDOR accident frequency rate as close to zero as practicable. The company 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 company continues to strive to improve its safety, health and environmental standards and performance. The company 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 company 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 company 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 company’s workforce.
The company 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.
Covid-19 has brought added focus to the Health and Safety requirements of the business but the company 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 company 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 company 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 company'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 company's internal and external processes.
Human resources
The company 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 company, all workers are reviewed to access their and the company’s skill, safety and management needs now and in the future.
The company extends their sincere gratitude to all its office and site staff during these extremely worrying and testing times brought about by the 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 11.
Ordinary dividends were paid amounting to £2,500,000. The directors do not recommend payment of a final dividend.
Objectives and policies
The company's principal financial instruments comprise bank balances, trade creditors, trade debtors, work in progress and loans to its parent company and loans to and from companies under common control. The main purpose of these instruments is to raise funds for the company's operations and to finance the company's operations. The company's approach to managing other risks applicable to the financial instruments concerned is shown below.
The company 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 company's operations have been subject to the risk of interest rate fluctuations, as it primarily affects interest earning operations. In respect of loans to parent and loans to and from companies under common control, these are interest-free.
The company'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 company 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 company 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 company 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 company 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 company 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 order book for 2020, and are of the opinion that future work streams and the company's broad client base will provide a good base to continue to develop the company through to 2021 and to take advantage of some good opportunities in the coming year. The directors believe the company 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 company is well placed to react to prevailing market conditions. This is due to the wide range of skills and services that the company can offer, and also due to the market shares of its clients, who are long standing market leaders in their field.
As a result of the change of ownership on 9 March 2020, the company's immediate parent company, Modebest Group Holdings Limited, became a wholly-owned subsidiary of Modebest and Heathrow Group Holdings Limited. For more information see Notes 22 and 24.
The auditor, Goldblatts, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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.
give a true and fair view of the state of the company's affairs as at 31 January 2020 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
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 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
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.
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 member 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 member 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 member 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.
Modebest Builders Limited is a private company limited by shares incorporated in England and Wales. The registered office is Moy House, 69 Belvue Road, Northolt, Middx, UB5 5XS.
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 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.
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.
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.
Research and development
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 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 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 company's turnover is as follows:
The average monthly number of persons (including directors) employed by the company during the year was:
The company has outsourced its payroll and during the year all payroll costs, including directors' remuneration, were recharged from a related company,
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 subsequent to the year end in respect of research and development claims.
At 31 January 2020, retentions held by customers for contract work amounted to £2,483,159 (2019 - £1,394,884).
Advances received from customers for contract work amounted to £539,808 (2019 - £995,944).
The amounts owed by group undertakings are unsecured, interest-free and repayable on demand.
The amounts owed to group undertakings are unsecured, interest-free and repayable on demand.
Deferred tax assets and liabilities are offset where the 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 related company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company has one class of ordinary shares which carry no right to fixed income.
The company had provided guarantees in respect of unpaid hire purchase liabilities of several related and group companies as part of a cross-company guarantee in favour of the company's bankers. At 31 January 2020, the outstanding hire purchase liabilities in those related companies, which were not included in the company's balance sheet, amounted to £0 (2019: £698,929) - see also Note 23 'Related party transactions'. All liabilities relating to this guarantee were settled during the year.
Operating lease payments represent rentals and service charges payable by the company to two of the directors for office space occupied by the company, owned by the directors. The leases are typically negotiated over terms of one year or sometimes less than a year.
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:
On 9 March 2020, the company's immediate parent company, 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.
On 9 March 2020, there was a change of ownership of the company, resulting in a Debenture in favour of the outgoing shareholders.
During the year the company 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:
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 amounts outstanding are unsecured, interest-free, repayable on demand and will be settled in cash.
As set out in Note 20, all liabilities in connection with cross-company guarantees with its bankers were repaid during the year.
Up to 9 March 2020, the immediate and ultimate parent company of Modebest Builders Limited was Modebest Group Holdings Limited and its registered office is Moy House, 69 Belvue Road, Northolt, UB5 5XS.
On 9 March 2020, the company's ultimate parent company became Modebest and Heathrow Group Holdings Limited, who acquired 100% of the issued share capital of Modebest Group Holdings Limited, the immediate parent company. The registered office address of Modebest and Heathrow Group Holdings Limited, is 17 Pennine Parade, Pennine Drive, London NW2 1NT.
Up to 9 March 2020, the ultimate controlling parties are the families of E Scanlon and A Dravins who were equal shareholders of Modebest Group Holdings Limited, the immediate and ultimate parent company.
Following the change of ownership in March 2020, there is no ultimate controlling party, as there is no majority shareholder in the new ultimate parent company, Modebest and Heathrow Group Holdings Limited.
The smallest and largest group financial statements that consolidate this company is Modebest Group Holdings Limited. Copies of the group accounts are available to the public from the company at Moy House, 69 Belvue Road, Northolt, Middlesex, UB5 5XS.