MD Warranty Inspection Services Limited - Limited company accounts 22.3

REGISTERED NUMBER: 05288783 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 31 December 2021

for

MD Warranty Inspection Services Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

5

Statement of Comprehensive Income

8

Balance Sheet

9

Statement of Changes in Equity

10

Notes to the Financial Statements

11

DIRECTORS:

L G Devaney

P Homan

A M O'Reilly

S D Worrall

SECRETARY:

J A Goodman

REGISTERED OFFICE:

2 Shore Lines Building

Shore Road

Birkenhead

Merseyside

CH41 1AU

REGISTERED NUMBER:

05288783 (England and Wales)

AUDITORS:

Haines Watts

Statutory Auditor

3rd Floor Pacific Chambers

11-13 Victoria Street

Liverpool

Merseyside

L2 5QQ

The Directors present their strategic report of the company for the year ended 31 December 2021.

MD Warranty Inspection Services (the 'Company') Limited is part of the Group comprising MD Insurance Services Limited and its related and subsidiary entities, together MD Group (the 'Group'). The Group provides latent defect insurance products to the UK construction sector working with a number of national developers to meet our strategic aims and growth aspirations.

MD Warranty Inspection Services Limited has over 160 surveyors nationally and provides high quality risk management associated with the latent defect insurance product to ensure best quality build.

REVIEW OF BUSINESS

The Company reported Revenue for the year of £14,762,351, which was an increase on the prior year of £2,690,004. The growth in revenue reflected increased sales activity by the Group in 2021 after a challenging 2020 as a result of COVID-19. The Company reported an overall loss of £nil in 2021 compared to a loss of £266,838 in 2020. During 2021 the Company continued to mitigate the impact of COVID-19 and continued the response plan commenced in 2020, with mainly remote working for previously office based employees. All business critical activities were delivered effectively throughout the year.

The long term housing demand within the UK remains strong, and despite changes in UK Government leadership there remains a strong intention to build new homes. The objective of the Company also remains the same in providing an industry-leading risk management service to support our customers and insurers, whilst driving efficiencies in order to support the intended growth of the Group.

Subsequent to the year end, on 1 April 2022 the Group was acquired by HSB Engineering Insurance Limited, a wholly owned indirect subsidiary of Munchener Ruckversicherungs-Gesellschaft Aktiengellschaft (Munich Re). HSB Engineering Insurance Limited is an insurance company underwriting engineering and related property risks, which are primarily located in the United Kingdom (UK) and the Republic of Ireland (ROI). The insurance solutions and engineering services which HSB Engineering Insurance Limited offer compliment the Group's and the Company's existing business model and supports HSB Engineering Insurance Limited's growth strategy within the UK by expanding its distribution capabilities within the UK Construction Sector.

The results for the year and key performance indicators for the group were as follows:

2021

2020

Operating profit/ (loss)

31,725

(239,107)

(Loss) before tax

-

(266,838)

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors continue to monitor risks and uncertainties with the ongoing COVID-19 pandemic, the Russian invasion of Ukraine and the rising cost of living within the UK. Whilst the risk to the Company from a financial perspective is assessed as a result of these events, the impact on employee wellbeing is also paramount to any changes made. The Company has taken all steps possible to ensure the safety and wellbeing of our employees whilst working to develop processes that ensure the business has the financial resilience to prosper through events like those stated above.

Principal risks and uncertainties are identified and monitored on an ongoing basis via the Group risk register (including the Company). The Board takes a long term planning approach in order to understand the potential consequences of all decisions made both from a financial and non-financial perspective. The Board also ensure all employees are engaged with the company strategy through regular companywide updates, team meetings and periodic management workshops.

DEVELOPMENT AND PERFORMANCE

The Directors are confident that the outlook is positive and will continue to invest in our IT systems, develop key staff, diversify our product range and increase our route to market via new distribution channels with the aim to enhance the customer experience, scalability and maintain competitive edge, whilst seeking new initiatives both in existing and emerging markets. All initiatives of the Company are underpinned by the aims of improving customer service, risk management and the driving of efficiency in order to support growth.

ON BEHALF OF THE BOARD:

L G Devaney - Director

15 December 2022

The directors present their report with the financial statements of the company for the year ended 31 December 2021.

PRINCIPAL ACTIVITY

The principal activity of the company was the provision of surveying services.

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2021.

DIRECTOR

L G Devaney held office during the whole of the period from 1 January 2021 to the date of this report.

Other changes in directors holding office are as follows:

P Homan , A M O'Reilly and S D Worrall were appointed as directors after 31 December 2021 but prior to the date of this report.

MATTERS COVERED IN THE STRATEGIC REPORT

Business review and future developments, principal risks and key performance indicators are included in the Strategic Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

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

-	select suitable accounting policies and then apply them consistently;

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

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

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

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Haines Watts, will be proposed for re-appointment at the forthcoming Board Meeting.

ON BEHALF OF THE BOARD:

L G Devaney - Director

15 December 2022

Opinion

We have audited the financial statements of MD Warranty Inspection Services Limited (the 'company') for the year ended 31 December 2021 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity 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 Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2021 and of its profit for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' 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

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors 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 this gives rise to a material misstatement in the financial statements themselves. 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 Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

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

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

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

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

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, 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 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.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

We assessed the susceptibility of the company's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the company engagement team included:

- Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;

- Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;

- Reviewing financial statements disclosures and testing to supporting documentation to assess compliance with applicable law and regulations;

- Challenging assumptions and judgements made by management in its significant accounting estimates, in particular:

- Deferred and accrued income - we carried out a review and recalculation of deferred and accrued income to assess its appropriateness for inclusion within the financial statements;

- Depreciation - we carried out a review and recalculation of depreciation to assess its appropriateness for inclusion within the financial statements;

- Identifying and testing journal entries, in particularly any journal entries posted with unusual account combinations.

Despite the audit being planned and conducted in accordance with ISAs (UK) there remains an unavoidable risk that material misstatements in the financial statements may not be detected owing to inherent limitations of the audit, and that by their very nature, any such instances of fraud or irregularity likely involve collusion, forgery, intentional misrepresentations, or the override of internal controls.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Michael Forshaw FCA (Senior Statutory Auditor)

for and on behalf of Haines Watts

Statutory Auditor

3rd Floor Pacific Chambers

11-13 Victoria Street

Liverpool

Merseyside

L2 5QQ

15 December 2022

TURNOVER

14,762,351

12,072,347

Administrative expenses

14,733,931

13,415,496

28,420

(1,343,149

)

Other operating income

3,305

1,104,042

OPERATING PROFIT/(LOSS)

4

31,725

(239,107

)

Interest receivable and similar income

-

16

31,725

(239,091

)

Interest payable and similar expenses

5

31,725

27,747

LOSS BEFORE TAXATION

-

(266,838

)

Tax on loss

6

-

(44,174

)

LOSS FOR THE FINANCIAL YEAR

-

(222,664

)

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

-

(222,664

)

FIXED ASSETS

Tangible assets

8

83,999

39,370

CURRENT ASSETS

Debtors

9

11,590,074

14,324,333

Cash at bank

12,886

11,001

11,602,960

14,335,334

CREDITORS

Amounts falling due within one year

10

10,057,238

12,929,923

NET CURRENT ASSETS

1,545,722

1,405,411

TOTAL ASSETS LESS CURRENT LIABILITIES

1,629,721

1,444,781

CREDITORS

Amounts falling due after more than one year

11

1,462,593

1,277,653

NET ASSETS

167,128

167,128

CAPITAL AND RESERVES

Called up share capital

13

100

100

Retained earnings

14

167,028

167,028

SHAREHOLDERS' FUNDS

167,128

167,128

The financial statements were approved by the Board of Directors and authorised for issue on 15 December 2022 and were signed on its behalf by:

P Homan - Director

L G Devaney - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2020

100

389,692

389,792

Changes in equity

Total comprehensive income

-

(222,664

)

(222,664

)

Balance at 31 December 2020

100

167,028

167,128

Changes in equity

Balance at 31 December 2021

100

167,028

167,128

1.	STATUTORY INFORMATION

MD Warranty Inspection Services Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemption in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows.

Significant judgements and estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future event that are believed to be reasonable under the circumstances.

There is a significant judgement regarding the provision in relation to surveyor visits on developments.

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The only estimate and assumption which has a significant risk of causing a material adjustment to carrying amount of assets or liabilities within the next financial year is the Technical audit fee cost of sale provision. This is based on management's best estimate of site visits.

Turnover

Technical Audit fees (TA fees) income:

This revenue represents TA fees receivable during the year in respect of insurance policies provided by the parent company as part of an insurance package.

Other operating income

Income from government grants is presented within other operating income. Grants relating to revenue are recognised as income over the periods when the related costs are incurred. During the year the company claimed £3,305 (2020 - £1,104,042) in relation to furlough payments within the governments Coronavirus Job Retention Scheme.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings

-

25% on cost

Computer equipment

-

25% on cost

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Debtors

Short term debtors are measured at transaction price, less any impairment.

Cash and cash equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty or notice of not more than 24 hours.

Financial instruments

The company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and loans to related parties.

Debt instruments (other than those wholly repayable 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.

Financial assets that are measured at cost and amortised 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 income statement and retained earnings.

Creditors

Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

Going concern

The financial statements have been prepared on a going concern basis. The Directors have reviewed and considered relevant information, including the annual budget and future cash flows for the group in making their assessment. In particular, in response to the COVID-19 pandemic, the Directors have tested their group cash flow analysis to take into account the impact on their business of possible scenarios brought on by the impact of COVID-19, alongside the measures that they can take to mitigate the impact. Based on these assessments, given the measures that could be undertaken to mitigate the current adverse conditions, and the current resources available, the Directors have concluded that they can continue to adopt the going concern basis in preparing the annual report and accounts.

3.	EMPLOYEES AND DIRECTORS

31.12.21

31.12.20

as restated

£

£

Wages and salaries

9,747,945

9,259,575

Social security costs

1,179,791

1,003,457

Other pension costs

626,294

597,074

11,554,030

10,860,106

The average number of employees during the year was as follows:

31.12.21

31.12.20

as restated

Administration

43

42

Senior management

7

8

Surveyors

144

153

194

203

31.12.21

31.12.20

as restated

£

£

Director's remuneration

132,187

95,292

Director's pension contributions to money purchase schemes

11,303

3,658

Key management personnel

The directors are considered to be key management personnel for the current and previous year. Their employee benefits are noted above.

4.	OPERATING PROFIT/(LOSS)

The operating profit (2020 - operating loss) is stated after charging:

31.12.21

31.12.20

as restated

£

£

Depreciation - owned assets

29,174

53,152

Auditors' remuneration

10,295

3,848

5.

INTEREST PAYABLE AND SIMILAR EXPENSES

31.12.21

31.12.20

as restated

£

£

Bank interest

31,725

27,747

6.

TAXATION

Analysis of the tax credit

The tax credit on the profit for the year was as follows:

31.12.21

31.12.20

as restated

£

£

Current tax:

UK corporation tax

-

(44,174

)

Tax on loss

-

(44,174

)

Reconciliation of total tax credit included in profit and loss

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

31.12.21

31.12.20

as restated

£

£

Loss before tax

-

(266,838

)

Loss multiplied by the standard rate of corporation tax in the UK of 19% (2020 - 19%)

(87,099

)

(50,699

)

Effects of:

Expenses not deductible for tax purposes

62

39

Capital allowances in excess of depreciation

(10,489

)

-

Depreciation in excess of capital allowances

-

6,486

Group loss relief

25,758

-

Losses not utilised

71,768

-

Total tax credit

-

(44,174

)

7.	PRIOR YEAR ADJUSTMENT

In previous periods salary costs were treated as a cost of sales. In the year ended 31 December 2021 there has been a change of presentation. As a result salary costs are now treated as an administration cost.

8.	TANGIBLE FIXED ASSETS

Fixtures

and

Computer

fittings

equipment

Totals

£

£

£

COST

At 1 January 2021

-

212,543

212,543

Additions

14,205

59,598

73,803

At 31 December 2021

14,205

272,141

286,346

DEPRECIATION

At 1 January 2021

-

173,173

173,173

Charge for year

2,249

26,925

29,174

At 31 December 2021

2,249

200,098

202,347

NET BOOK VALUE

At 31 December 2021

11,956

72,043

83,999

At 31 December 2020

-

39,370

39,370

9.

DEBTORS

31.12.21

31.12.20

as restated

£

£

Amounts falling due within one year:

Trade debtors

3,878,681

7,034,790

Amounts owed by group undertakings

4,603,122

4,906,459

Tax

44,174

44,173

Prepayments and other debtors

685,414

597,729

9,211,391

12,583,151

Amounts falling due after more than one year:

Trade debtors

2,378,683

1,741,182

Aggregate amounts

11,590,074

14,324,333

A bad debt provision of £113,852 (2020 - £151,760) was recognised against trade debtors within the company.

Amounts owed by group undertakings are repayable on demand and attract no interest.

10.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

31.12.21

31.12.20

as restated

£

£

Other loans (see note 12)

523,544

-

Trade creditors

128,421

1,251,897

Amounts owed to group undertakings

2,885,249

5,733,045

Social security and other taxes

317,560

282,913

VAT

980

1,230

Other creditors

82,490

52,706

Accruals and deferred income

6,118,994

5,608,132

10,057,238

12,929,923

Amounts owed to group undertakings are repayable on demand and attract no interest.

11.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

31.12.21

31.12.20

as restated

£

£

Accruals and deferred income

1,462,593

1,277,653

12.

LOANS

An analysis of the maturity of loans is given below:

31.12.21

31.12.20

as restated

£

£

Amounts falling due within one year or on demand:

Other loans

523,544

-

13.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

31.12.21

31.12.20

value:

as restated

£

£

100

Ordinary

£1

100

100

14.

RESERVES

Retained

earnings

£

At 1 January 2021

167,028

Profit for the year

-

At 31 December 2021

167,028

Retained earnings - the accumulated profits and losses achieved by the company.

15.	PENSION COMMITMENTS

The company operates a defined contribution scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to £614,991 (2020 - £597,704).

16.	RELATED PARTY DISCLOSURES

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

17.	ULTIMATE CONTROLLING PARTY

The immediate parent undertaking of the company is MD Insurance Services Limited, a company incorporated in England and Wales.

This is the smallest group of undertakings to consolidate these financial statements at 31st December 2021. The consolidated financial statements are filed at Companies House and copies can be obtained from the company's registered office address, as shown on page 1.

At 31 December 2021 MDIS was deemed to be the ultimate parent company.

On 1st April 2022 HSB Engineering Insurance Services Limited purchased the entire share capital of MDIS and as a result Munchener Ruckversichrungs-Gesellschaft Aktiengesellschaft (Munich Re), a company incorporated in Germany became the ultimate parent company and controlling party.