| Mechanical Services Limited |
| Strategic Report |
|
| The continued interruption to business activity occassioned by the Government's response to the Coronavirus pandemic has caused some difficulty in management of resources both in terms of labour and supplies nevertheless management have steered the company through this difficult period and traded substantially in line with the previous year. The company continues to manage it's cashflow ensuring the balance sheet remains sufficiently robust to enable the company to continue to fulfill its order book. |
|
| The director is very satisfied with the company's performance given the circumstances and is confident that the company will continue to maintain it's current level of activity and profitability. |
|
| The company relies on it's employees to deliver it's services. Development, retention and incentivising staff are therefore crucial to it's operation. Within the accounts bonuses totalling £200,000 have been provided for 104 employees demonstrating the company's commitment to the underlying principles of employee ownership following the establishment of the Employee Ownership Trust in November 2018. |
|
| The following Key Performance Indicators have been selected as most relevant to enable comparison of the company's performance year on year and with other companies operating in the sector. |
|
| gross profit 28% (2020-26%); operating profit 4.5% (2020-4%); return before tax on average capital employed 31.9% (2020-39%) |
|
| The principal risks and uncertainties facing the company are: |
|
| i) the scarcity of skilled labour and supply chain issues. |
|
| ii) the continuing uncertainty in the sector and the economy generally resulting from the ongoing impact of the Coronavirus pandemic. |
|
| iii) the financial impact of ever more burdensome employment legislation and scheduled labour on-costs combined with the uncertainty around tax legislation generally as the Government attempts to restore budget stability. |
|
| iv) uncertainties in the sector and the construction industry generally following Britain having left the European Union. |
|
| Approval of this report |
| This report was approved by the board on 15 December 2021 and signed by its order. |
|
|
|
| G A Ivory |
| Director |
|
| Mechanical Services Limited |
| Independent auditor's report |
| to the members of Mechanical Services Limited |
|
| Opinion |
| We have audited the financial statements of Mechanical Services Limited "the company" for the year ended 30 June 2021 which comprise the Income Statement, Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and Notes to the Accounts, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). |
| In our opinion the financial statements: |
| ● |
give a true and fair view of the state of the company's affairs as at 30 June 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 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 |
| In auditing the financial statements, we have concluded that the director's 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 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 director with respect to going concern are described in the relevant sections of this report. |
|
| Opinions on other matters prescribed by the Companies Act 2006 |
| Responsibilities of the director |
| As explained more fully in the Director's Report, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or have no realistic alternative but to do so. |
| Auditor's 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 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. |
| Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material missatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. |
| Audit procedures performed included: |
| - identifying industry laws and regulations applicable to the company in addition to generic laws and regulations which are also applicable including the Companies Act 2006, taxation legislation, employment law, health and safety, data protection and anti-bribery. |
| - ensuring that at the audit planning stage our personnel were fully aware of this framework and understood the impact on our audit approach, including a need to exercise professional scepticism. |
| - evaluating the company's procedures designed to ensure compliance with applicable legal and regulatory framework at all levels within the organisation, including where there is interaction with suppliers and customers. |
| - making enquiries of the company director and employees to evaluate risks of non-compliance and the potential for fraudulent activity to go undetected including as to whether there had been any instances of non-compliance having come to their attention, including as may be evidenced in incident and accident reports and disciplinary procedures. |
| - reviewing the financial records for any expenditure that might be the result of non-compliance, including legal fees. |
| - assessing the potential for fraud resulting from any form of financial impropriety by reviewing document approval processes and routine updating and maintenance of the company's financial records including the controls relating thereto. |
| - reviewing all journals processed at the end of the year to ensure they were appropriate in enabling the completion of year end Accounts, were properly supported and free from any form of management bias or override. |
| - assessing the position of construction contracts in progress at the end of the year to ensure that the estimates relating to attributable profits to date were in line with the company's costing records (which incorporate rolling forecasts and expected contract outcomes built on the detailed content of original tenders as well as the routine updating of contract activity, both of which form part of the assessment). We also considered whether there was any evidence of management bias in the process. |
| There are inherent limitations to a greater or lesser extent in the audit procedures described above. The more removed that laws and regulations are from the financial statements the less likely it is we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the director and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. |
| 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 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. |
|
|
|
| Michael L Martin FCA |
| (Senior Statutory Auditor) |
103/105 Brighton Road |
| for and on behalf of |
Coulsdon |
| Lloyd & Co |
Surrey |
| Chartered Accountants and Statutory Auditor |
CR5 2NG |
|
|
| Dated 15 December 2021 |
|
|
|
Impairment of fixed assets |
|
At each balance sheet date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. |
|
|
Work in progress |
|
Work in progress is valued at the lower of cost and net realisable value. It represents costs incurred on contracts prior to the point where an income entitlement arises. |
|
|
Debtors |
|
Short term debtors are measured at transaction price for completed work together with contract profits less losses to date reflecting the stage of completion at the year end, 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 |
|
Tax assets and liabilities are assessed applying laws that have been enacted or substantively enacted by the reporting date. |
|
|
A current tax liability is recognised for the tax payable on the taxable profit of the current and past periods. A current asset is recognised in respect of a tax loss that can be carried back to recover tax paid in a previous period. |
|
|
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. |
|
|
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 |
|
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. |
|
|
Holiday pay accrual |
|
A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the balance sheet date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement. |
|
|
Coronavirus Job Retention Scheme and other Government grants |
|
Amounts received from central Government, local Government and other Government agencies are included in Other operating income on an accruals basis. |
|
| 2 |
Critical accounting estimates and judgements |
|
|
In the application of the company's accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily available. 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. |
|
|
| 3 |
Analysis of turnover |
2021 |
|
2020 |
| £ |
£ |
|
|
Revenue from construction contracts |
22,869,228 |
|
25,479,573 |
|
|
|
|
|
|
|
|
|
|
|
| 4 |
Operating profit |
2021 |
|
2020 |
| £ |
£ |
|
This is stated after charging: |
|
|
Depreciation of owned fixed assets |
45,623 |
|
50,835 |
|
Operating lease rentals - plant and machinery |
98,013 |
|
101,053 |
|
Operating lease rentals - land and buildings |
144,250 |
|
144,250 |
|
Auditors' remuneration for audit services |
17,200 |
|
16,350 |
|
Contributions to defined contribution pension plans |
136,403 |
|
155,143 |
|
|
|
|
|
|
|
|
|
|
| 5 |
Director's emoluments |
2021 |
|
2020 |
| £ |
£ |
|
|
Emoluments |
33,570 |
|
52,000 |
|
|
|
|
|
|
|
|
|
|
|
Number of directors to whom retirement benefits accrued: |
2021 |
|
2020 |
| Number |
Number |
|
|
Defined contribution plans |
1 |
|
1 |
|
|
|
|
|
|
|
|
|
|
| 6 |
Staff costs |
2021 |
|
2020 |
| £ |
£ |
|
|
Wages and salaries |
6,434,459 |
|
7,591,573 |
|
Social security costs |
720,613 |
|
868,192 |
|
Pension costs |
136,403 |
|
155,143 |
|
|
|
|
|
|
7,291,475 |
|
8,614,908 |
|
|
|
|
|
|
|
|
|
|
Pension costs relate to auto-enrolment commitments to employee defined contribution plans. |
|
|
Average number of employees during the year |
Number |
Number |
|
|
Administration |
56 |
|
59 |
|
Construction |
68 |
|
72 |
|
|
|
|
|
|
124 |
|
131 |
|
|
|
|
|
|
|
|
|
|
| 7 |
Taxation |
2021 |
|
2020 |
| £ |
£ |
|
Analysis of charge in period |
|
Current tax: |
|
UK corporation tax on profits of the period |
165,703 |
|
206,245 |
|
Adjustments in respect of previous periods |
(484,336) |
|
(263,160) |
|
|
|
|
|
|
(318,633) |
|
(56,915) |
|
|
Deferred tax: |
|
Origination and reversal of timing differences |
(3,867) |
|
11,385 |
|
Tax on profit on ordinary activities |
(322,500) |
|
(45,530) |
|
|
|
|
|
|
|
|
|
|
Adjustments in respect of previous periods relate to Research and Development credits. |
|
|
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: |
|
|
|
|
|
|
|
2021 |
|
2020 |
| £ |
£ |
|
Profit on ordinary activities before tax |
1,056,891 |
|
1,096,832 |
|
|
|
|
|
|
|
|
|
|
Standard rate of corporation tax in the UK |
19.00% |
|
19.00% |
|
| £ |
£ |
|
Profit on ordinary activities multiplied by the standard rate of corporation tax |
|
200,809 |
|
208,398 |
|
|
Effects of: |
|
Expenses not deductible for tax purposes |
3,057 |
|
5,009 |
|
Capital allowances for period in excess of depreciation |
1,308 |
|
(7,162) |
|
Utilisation of tax losses |
(39,471) |
|
- |
|
Current tax charge for period |
165,703 |
|
206,245 |
|
|
|
|
|
|
|
|
|
|
| 8 |
Tangible fixed assets |
|
|
Land and buildings |
|
Motor vehicles |
|
Fixtures, fittings, tools and equipment |
|
Total |
| £ |
£ |
£ |
£ |
|
Cost |
|
At 1 July 2020 |
140,209 |
|
157,853 |
|
372,911 |
|
670,973 |
|
Additions |
- |
|
16,337 |
|
12,222 |
|
28,559 |
|
Disposals |
- |
|
(21,759) |
|
(79,982) |
|
(101,741) |
|
At 30 June 2021 |
140,209 |
|
152,431 |
|
305,151 |
|
597,791 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
At 1 July 2020 |
79,221 |
|
102,340 |
|
298,187 |
|
479,748 |
|
Charge for the year |
7,423 |
|
17,225 |
|
20,974 |
|
45,622 |
|
On disposals |
- |
|
(18,810) |
|
(76,934) |
|
(95,744) |
|
At 30 June 2021 |
86,644 |
|
100,755 |
|
242,227 |
|
429,626 |
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
At 30 June 2021 |
53,565 |
|
51,676 |
|
62,924 |
|
168,165 |
|
At 30 June 2020 |
60,988 |
|
55,513 |
|
74,724 |
|
191,225 |
|
|
|
|
|
|
|
|
|
|
|
| 9 |
Stocks |
2021 |
|
2020 |
| £ |
£ |
|
|
Work in progress |
12,875 |
|
17,737 |
|
|
|
|
|
|
|
|
|
|
| 10 |
Debtors |
2021 |
|
2020 |
| £ |
£ |
|
|
Construction contract debtors |
2,267,585 |
|
1,863,381 |
|
Corporation tax recoverable |
|
|
|
|
- |
|
263,160 |
|
Other debtors |
5,050 |
|
5,969 |
|
Prepayments and accrued income |
39,742 |
|
55,003 |
|
|
|
|
|
|
2,312,377 |
|
2,187,513 |
|
|
|
|
|
|
|
|
|
|
| 11 |
Creditors: amounts falling due within one year |
2021 |
|
2020 |
| £ |
£ |
|
|
Construction contract creditors |
2,274,401 |
|
2,292,776 |
|
Corporation tax |
165,703 |
|
206,245 |
|
Other taxes and social security costs |
93,457 |
|
1,353,008 |
|
Other creditors |
580,027 |
|
721,245 |
|
|
|
|
|
|
3,113,588 |
|
4,573,274 |
|
|
|
|
|
|
|
|
|
|
| 12 |
Deferred taxation |
2021 |
|
2020 |
| £ |
£ |
|
|
Accelerated capital allowances |
19,614 |
|
23,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
| £ |
£ |
|
|
At 1 July |
23,481 |
|
12,096 |
|
(Credited)/charged to the profit and loss account |
(3,867) |
|
11,385 |
|
At 30 June |
19,614 |
|
23,481 |
|
|
|
|
|
|
|
|
|
|
|
| 13 |
Share capital |
2021 |
|
2020 |
|
2021 |
|
2020 |
| Number |
Number |
£ |
£ |
|
Allotted, called up and fully paid: |
|
Ordinary shares of £1 each |
50,000 |
|
50,000 |
|
50,000 |
|
50,000 |
|
A Ordinary shares of £1 each |
8,802 |
|
8,802 |
|
88 |
|
88 |
|
|
|
|
|
|
50,088 |
|
50,088 |
|
|
|
|
|
|
|
|
|
|
| 14 |
Share premium |
2021 |
|
2020 |
| £ |
£ |
|
|
At 1 July |
110,905 |
|
110,905 |
|
At 30 June |
110,905 |
|
110,905 |
|
|
|
|
|
|
|
|
|
|
| 15 |
Profit and loss reserves |
2021 |
|
2020 |
| £ |
£ |
|
|
At 1 July |
2,777,592 |
|
2,060,230 |
|
Total comprehensive income for the financial year |
1,379,391 |
|
1,142,362 |
|
Contributions to Employee Ownership Trust |
(637,500) |
|
(425,000) |
|
At 30 June |
3,519,483 |
|
2,777,592 |
|
|
|
|
|
|
|
|
|
|
| 16 |
Other financial commitments |
|
|
Total future minimum lease payments under non-cancellable operating leases: |
|
|
|
Land and buildings |
|
Land and buildings |
Other |
Other |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
| £ |
£ |
£ |
£ |
|
Falling due: |
|
within one year |
144,250 |
|
144,250 |
|
79,563 |
|
83,220 |
|
within two to five years |
247,000 |
|
357,000 |
|
103,088 |
|
86,376 |
|
in over five years |
51,375 |
|
85,625 |
|
- |
|
- |
|
|
442,625 |
|
586,875 |
|
182,651 |
|
169,596 |
|
|
|
|
|
|
|
|
|
|
| 17 |
Transactions with director |
2021 |
|
2020 |
| £ |
£ |
|
G A Ivory (including family interest) |
|
market rent for use of trading premises by the company |
|
110,000 |
|
110,000 |
|
|
|
|
|
|
|
|
|
|
| 18 |
Controlling party |
|
|
The company is under the control of Mechanical Services EOT Limited, the trustee for the Mechanical Services Employee Ownership Trust. |
|
|
| 19 |
Charges |
|
|
A floating charge over the company's assets and undertakings exists in favour of G A Ivory as Security Trustee for the beneficiaries in respect of the Employee Ownership Trust arrangements. |
|
|
| 20 |
Presentation currency |
|
|
The financial statements are presented in Sterling. |
|
|
| 21 |
Legal form of entity and country of incorporation |
|
|
Mechanical Services Limited is a private limited company incorporated in England and Wales. It's registered number is 01894014. |
|
|
| 22 |
Principal place of business |
|
|
The address of the company's principal place of business and registered office is: |
|
|
Merlin House |
|
606 Purley Way |
|
Croydon |
|
Surrey |
|
CRO 4RF |
