| Optimum Drywall Systems Limited |
| Strategic Report |
|
| The directors present their strategic report for the Year ended 31st March 2020. |
|
| Review of the business |
| Optimum Drywall Systems Ltd fulfils the needs of its Construction Client Base through Drylining and Firestopping services. Our success is predominantly founded on the skills and loyalty of our staff, whom ensure we win repeat business by their ability to develop relationships with our client’s work force. We have celebrated a record number of long-term services this year. |
| We strive to seek out lateral opportunities within the sector to ensure longevity for the company. |
|
| During 2020 there continues to be a level of volatility within our sector, this has had an adverse effect on the cost of insurance and credit insurance across the industry. We have not experienced any difficulties with our supply chain or labour during 2020 but we are aware that Brexit will have an impact on costs for both next year. |
| We are pleased to report another year of profitability, owing to the highest recorded turnover. We have almost completed one of our largest projects to date this year and having secured another significant project at the end of the year we are confident we are in the best position we can be to face the challenges ahead. By continuing to retain profits for future investment we want to safe guard the company for the pending Brexit and COVID uncertainty. |
|
|
| Principal risks and uncertainties |
| The success of the business is dependent on its reputation to deliver a first class service to Clients. Reputational Risk is managed by promoting the business successes through social media communications whilst ensuring integrity and credibility is maintained. |
|
| IT/Security Risk is a risk we face as in all companies and individuals alike. We are minimising this risk by retaining an In - House IT Specialist and investing continuously in the most up to date security software. We have introduced an additional layer of security for remote access to further improve security. |
|
| Health and Safety for the company carries significant risks. By maintaining our exceptional H and S standards the company prioritise the protection of contractors and employees. The company invests in regular H and S training and implements a robust and unforgiving H and S culture. |
|
| Succession planning for our employee skill base has been identified as a risk in our industry and we mitigate this by providing our workforce with the necessary skills to provide the service we want to deliver. We encourage training programmes and have an established apprenticeship scheme to develop our younger workforce and have successfully recruited a number of apprentices across the business this year. |
|
| Political and Policy changes create uncertainty globally, especially at present. Our aim is to spot potential legislative changes early, monitor the risks for our business and develop contingency plans internally, consulting with third party organisations if necessary. We have been consulting internally and externally to ensure we are compliant and ready for the pending IR35 and Vat Reversal changes to affect our industry. |
|
| Development and performance |
| We have continued to grow the firestopping capabilities this year and this has significantly contributed to reported retained profit for the year. We have set out plans for a marketing campaign to further develop and promote our experience in this field. And significantly invested in the retention, recruitment and training of firestopping specialists. |
|
| During the year we have been reviewing and researching the potential for Optimum to expend laterally within the industry and engage as a Principal Contractor. We have identified the necessary steps needed to be able to fulfil this role and are excited by the potential to grow this new business venture in the future We have maintained our capabilities within the Drylining sector outside of the South West and we intend to extend our geographical base further during the next few years. |
|
| We are continually looking at sensible cost reduction opportunities across the business and our internal hire department has enabled the reduction of hire costs on all projects and we continue to invest in this initiative. |
|
| Financial key performance indicators |
| To promote confidence within the Company and with its stakeholders, liquidity and cashflow is monitored closely at all times and is considered the financial strength of the company as a whole. |
|
| In order to realise its strategic aims, the company has identified areas of strategic focus and has put in place Key Performance Indicators (KPI's) to measure and assess progress. |
|
| Turnover for the year has increased by 4.2% (£0.66m) and, despite competitive market conditions gross margins increased to 15.6% from 11.9% in 2019, reflecting increased margins from the firestopping business. |
|
| Working capital as a percentage of turnover returned to 2018 levels at 5.3% (2019: 4.8%). |
|
| The accident rate in 2020 was 2.4, compared to 0.72 in 2019. The index is calculated by the number of reportable incidents by 100,000 hours worked. |
|
| Whilst these KPI's are helpful in measuring the Company's performance, it should be stressed that they are not exhaustive and that many additional performance measures are used to monitor progress. |
|
| This report was approved by the board on 11th March 2021 and signed on its behalf. |
|
|
|
|
| Mr S. Britton |
| Director |
|
|
| Basis of 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. |
|
| Other matters |
| The financial statements for the previous period were unaudited. |
|
| 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 |
| The other information comprises the information included in the report and financial statements, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. 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 the 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. |
|
| Matters on which we are required to report by exception |
|
|
Stocks |
|
Stocks are measured at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the first in first out method. The carrying amount of stock sold is recognised as an expense in the period in which the related revenue is recognised. |
|
|
Debtors |
|
Short term debtors are measured at transaction price (which is usually the invoice price), less any impairment losses for bad and doubtful debts. Loans and other financial assets are initially recognised at transaction price including any transaction costs and subsequently measured at amortised cost determined using the effective interest method, less any impairment losses for bad and doubtful debts. |
|
|
Creditors |
|
Short term creditors are measured at transaction price (which is usually the invoice price). Loans and other financial liabilities are initially recognised at transaction price net of any transaction costs and subsequently measured at amortised cost determined using the effective interest method. |
|
|
Taxation |
|
A current tax liability is recognised for the tax payable on the taxable profit of the current and past periods. A current tax asset is recognised in respect of a tax loss that can be carried back to recover tax paid in a previous period. Deferred tax is recognised in respect of all timing differences between the recognition of income and expenses in the financial statements and their inclusion in tax assessments. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply to the reversal of the timing difference, except for revalued land and investment property where the tax rate that applies to the sale of the asset is used. Current and deferred tax assets and liabilities are not discounted. |
|
|
Provisions |
|
Provisions (ie liabilities of uncertain timing or amount) are recognised when there is an obligation at the reporting date as a result of a past event, it is probable that economic benefit will be transferred to settle the obligation and the amount of the obligation can be estimated reliably. |
|
|
Leased assets |
|
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases. The rights of use and obligations under finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charge and the reduction in the outstanding liability using the effective interest rate method. The finance charge is allocated to each period during the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leased assets are depreciated in accordance with the company's policy for tangible fixed assets. If there is no reasonable certainty that ownership will be obtained at the end of the lease term, the asset is depreciated over the lower of the lease term and its useful life. Operating lease payments are recognised as an expense on a straight line basis over the lease term. |
|
|
Pensions |
|
Contributions to defined contribution plans are expensed in the period to which they relate. Amounts not paid are shown in accruals as a liability in the Statement of financial position. |
|
|
Going Concern |
|
Management have assessed all available information about the future of its business and are satisfied that it is appropriate that these accounts have been prepared on the going concern basis. |
|
|
Financial Instruments |
|
The Company only enters into basic financial instruments transactions that result in the recognition of financial asses and liabilities like trade and other debtors and creditors, loans from banks and other third parties and loans to related parties. |
|
|
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an out-right short-term loan not at market rate the financial asset or liability is measured, initially, at the present value of the future cash flow discounted t a market rate of interest for a similar debt instrument and subsequently at amortised cost. |
|
|
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income. |
|
|
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discounted rate for measuring any impairment loss is the current effective interest rate determined under the contract. |
|
|
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the reporting date. |
|
|
Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is an 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. |
|
|
| 2 |
Analysis of turnover |
2020 |
|
2019 |
| £ |
£ |
|
|
Revenue from construction contracts |
16,604,778 |
|
15,940,893 |
|
|
|
|
|
|
|
|
|
|
By geographical market: |
|
|
UK |
16,604,778 |
|
15,940,893 |
|
|
|
|
|
|
|
|
|
|
| 3 |
Operating profit |
2020 |
|
2019 |
| £ |
£ |
|
This is stated after charging: |
|
|
Depreciation of owned fixed assets |
57,573 |
|
70,766 |
|
Operating lease rentals |
35,220 |
|
40,294 |
|
Auditors' remuneration for audit services |
5,025 |
|
4,900 |
|
|
|
|
|
|
|
|
|
|
| 4 |
Directors' emoluments |
2020 |
|
2019 |
| £ |
£ |
|
|
Emoluments |
277,279 |
|
222,576 |
|
Company contributions to defined contribution pension plans |
79,708 |
|
32,807 |
|
|
|
|
|
|
356,987 |
|
255,383 |
|
|
|
|
|
|
|
|
|
|
| 5 |
Staff costs |
2020 |
|
2019 |
| £ |
£ |
|
|
Wages and salaries |
1,088,538 |
|
762,555 |
|
Social security costs |
99,824 |
|
70,089 |
|
Other pension costs |
93,952 |
|
43,260 |
|
|
|
|
|
|
1,282,314 |
|
875,904 |
|
|
|
|
|
|
|
|
|
|
|
Average number of employees during the year |
Number |
Number |
|
|
Administration |
29 |
|
29 |
|
Manufacturing |
41 |
|
36 |
|
|
|
|
|
|
70 |
|
65 |
|
|
|
|
|
|
|
|
|
|
| 6 |
Interest payable |
2020 |
|
2019 |
| £ |
£ |
|
|
Bank loans and overdrafts |
6,241 |
|
6,472 |
|
|
|
|
|
|
|
|
|
|
| 7 |
Taxation |
2020 |
|
2019 |
| £ |
£ |
|
Analysis of charge in period |
|
Current tax: |
|
UK corporation tax on profits of the period |
144,882 |
|
114,472 |
|
|
|
|
|
|
|
|
|
|
Deferred tax: |
|
Origination and reversal of timing differences |
1,883 |
|
(8,852) |
|
|
|
|
|
|
|
|
|
|
|
Tax on profit on ordinary activities |
146,765 |
|
105,620 |
|
|
|
|
|
|
|
|
|
|
|
Factors affecting tax charge for period |
|
The differences between the tax assessed for the period and the standard rate of corporation tax are explained as follows: |
|
|
|
|
|
|
|
2020 |
|
2019 |
| £ |
£ |
|
Profit on ordinary activities before tax |
639,589 |
|
506,311 |
|
|
|
|
|
|
|
|
|
|
Standard rate of corporation tax in the UK |
19% |
|
19% |
|
| £ |
£ |
|
Profit on ordinary activities multiplied by the standard rate of corporation tax |
|
121,522 |
|
96,199 |
|
|
Effects of: |
|
Expenses not deductible for tax purposes |
24,653 |
|
8,528 |
|
Capital allowances for period in excess of depreciation |
(1,293) |
|
9,745 |
|
|
Current tax charge for period |
144,882 |
|
114,472 |
|
|
|
|
|
|
|
|
|
|
|
Factors that may affect future tax charges |
|
|
|
| 8 |
Tangible fixed assets |
|
|
Land and buildings |
|
Plant and machinery |
|
Motor Vehicles |
|
Total |
|
|
At cost |
|
At cost |
|
At cost |
| £ |
£ |
£ |
£ |
|
Cost or valuation |
|
At 1 April 2019 |
465,667 |
|
164,303 |
|
72,675 |
|
702,645 |
|
Additions |
- |
|
36,010 |
|
39,120 |
|
75,130 |
|
Disposals |
(18,580) |
|
(29,413) |
|
(11,500) |
|
(59,493) |
|
At 31 March 2020 |
447,087 |
|
170,900 |
|
100,295 |
|
718,282 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
At 1 April 2019 |
165,082 |
|
105,302 |
|
61,026 |
|
331,410 |
|
Charge for the year |
14,948 |
|
31,337 |
|
11,288 |
|
57,573 |
|
On disposals |
(13,527) |
|
(24,179) |
|
(9,823) |
|
(47,529) |
|
At 31 March 2020 |
166,503 |
|
112,460 |
|
62,491 |
|
341,454 |
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
At 31 March 2020 |
280,584 |
|
58,440 |
|
37,804 |
|
376,828 |
|
At 31 March 2019 |
300,585 |
|
59,001 |
|
11,649 |
|
371,235 |
|
|
|
|
|
|
|
|
|
|
|
| 9 |
Stocks |
2020 |
|
2019 |
| £ |
£ |
|
|
Raw materials and consumables |
12,662 |
|
12,662 |
|
|
|
|
|
|
|
|
|
|
| 10 |
Debtors |
2020 |
|
2019 |
| £ |
£ |
|
|
Other debtors |
104,216 |
|
302,121 |
|
Construction contract debtors |
2,174,165 |
|
2,684,318 |
|
|
|
|
|
|
2,278,381 |
|
2,986,439 |
|
|
|
|
|
|
|
|
|
|
| 11 |
Creditors: amounts falling due within one year |
2020 |
|
2019 |
| £ |
£ |
|
|
Bank overdrafts |
69,281 |
|
4,992 |
|
Bank loans |
7,638 |
|
7,097 |
|
Trade creditors |
1,229,298 |
|
1,947,369 |
|
Other taxes and social security costs |
294,041 |
|
216,259 |
|
Other creditors |
335,827 |
|
296,767 |
|
|
|
|
|
|
1,936,085 |
|
2,472,484 |
|
|
|
|
|
|
|
|
|
|
| 12 |
Creditors: amounts falling due after one year |
2020 |
|
2019 |
| £ |
£ |
|
|
Bank loans |
110,772 |
|
118,199 |
|
|
|
|
|
|
|
|
|
|
| 13 |
Loans |
2020 |
|
2019 |
| £ |
£ |
|
Loans not wholly repayable within five years: |
|
Loan 1 Variable rate loan maturing January 2032 |
58,545 |
|
62,250 |
|
Loan 2 Fixed rate loan maturing January 2032 at 5.45% |
59,865 |
|
63,046 |
|
|
|
|
|
|
118,410 |
|
125,296 |
|
|
|
|
|
|
|
|
|
|
Analysis of maturity of debt: |
|
Within one year or on demand |
7,638 |
|
7,194 |
|
Between one and two years |
8,009 |
|
7,573 |
|
Between two and five years |
26,320 |
|
25,030 |
|
After five years |
76,443 |
|
85,499 |
|
|
|
|
|
|
118,410 |
|
125,296 |
|
|
|
|
|
|
|
|
|
|
The bank loans and overdrafts are secured on the property and other assets of the company. |
|
|
| 14 |
Deferred taxation |
2020 |
|
2019 |
| £ |
£ |
|
|
Accelerated capital allowances |
33,839 |
|
31,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
2019 |
| £ |
£ |
|
|
At 1 April |
31,956 |
|
40,808 |
|
Charged/(credited) to the profit and loss account |
1,883 |
|
(8,852) |
|
|
At 31 March |
33,839 |
|
31,956 |
|
|
|
|
|
|
|
|
|
|
|
| 15 |
Share capital |
Nominal |
|
2020 |
|
2020 |
|
2019 |
| value |
Number |
£ |
£ |
|
Allotted, called up and fully paid: |
|
Ordinary shares |
£1 each |
|
80 |
|
80 |
|
80 |
|
B Ordinary shares |
£1 each |
|
20 |
|
20 |
|
20 |
|
|
|
|
|
|
100 |
|
100 |
|
|
|
|
|
|
|
|
|
|
| 16 |
Profit and loss account |
2020 |
|
2019 |
| £ |
£ |
|
|
At 1 April |
985,956 |
|
925,837 |
|
Profit for the financial year |
492,824 |
|
400,691 |
|
Dividends |
(365,391) |
|
(340,572) |
|
|
At 31 March |
1,113,389 |
|
985,956 |
|
|
|
|
|
|
|
|
|
|
| 17 |
Dividends |
2020 |
|
2019 |
| £ |
£ |
|
|
Dividends on ordinary shares (note 16) |
365,391 |
|
340,572 |
|
|
|
|
|
|
|
|
|
|
|
| 18 |
Other financial commitments |
|
|
Total future minimum lease payments under non-cancellable operating leases: |
|
|
|
Other |
|
Other |
|
|
2020 |
|
2019 |
| £ |
£ |
|
Falling due: |
|
within one year |
41,426 |
|
43,448 |
|
within two to five years |
19,006 |
|
10,784 |
|
|
60,432 |
|
54,232 |
|
|
|
|
|
|
| 19 |
Related party transactions |
|
Optimum Combined Services Limited |
|
Mr S Britton and Mr M S Davies are also directors and shareholders in Optimum Combined Services Limited. The company traded with Optimum Combined Services Limited during the year with arms length commercial transactions, including a management charge between the two companies for £60,000 per annum (2019: £60,000). At the balance sheet date the company owed £nil (2019: £780) to Optimum Combined Services Limited, by way of trade creditor and £nil (2019: £99,999) by way of a interest free loan, repayable on demand. As at the balance sheet date the company was owed £2,000 (2019: £nil) by Optimum Combined Services Ltd. |
|
BCD Partnership |
|
Mr and Mrs Britton and Mr and Mrs Davies are also partners of BCD Partnership. At the balance sheet date the company owed £64,466 from BCD Partnership (2019: £116,702). |
|
Mr and Mrs Britton |
|
Mr and Mrs Britton own the property at Unit 7A, East Park Trading Estate, which is leased to the company. Annual rent payments amount to £18,000 (2019: £18,000). Lettings are assessed at arms length. |
|
|
| 20 |
Controlling party |
|
|
The company is under the control of Mr S and Mrs J Britton by virtue of their majority shareholding. |
|
|
| 21 |
Presentation currency |
|
|
The financial statements are presented in Sterling. |
|
|
| 22 |
Legal form of entity and country of incorporation |
|
|
Optimum Drywall Systems Limited is a private company limited by shares and incorporated in England. |
|
|
| 23 |
Principal place of business |
|
|
The address of the company's principal place of business and registered office is: |
|
|
Unit 7A, Eastpark Trading Estate |
|
Gordon Road, |
|
Fishponds, |
|
Bristol. |
|
BS5 7DR |
