Stephenson_Construction_( - Accounts

The directors present the strategic report for the year ended 30 September 2020.

The decrease in turnover is a result of projects being suspended or postponed due to Covid-19 following the introduction of lockdown in March 2020. Despite the enforced reduction in activity in the second half of the year, the company has remained profitable. Our strategy remains to build on the company’s reputation, working with fellow group companies, to selectively cover those areas of the country which are enjoying renewed investment in infrastructure, housing, education, student accommodation, health and commercial sectors.

The key aspects of the sustainable growth are as follows:

            Sept 20        Sept 19        Sept 18        

Turnover            £15.5m        £20.1m        £16.4m        

Gross margin        25.16%        21.04%        16.57%        

Net assets        £5.85m        £5.69m        £2.98m    

The directors have considered the impact of the COVID-19 pandemic, and the measures taken to contain it, on the company. Most of the construction projects have been affected. Those that have continued have had to adapt to new protocols in procedures to maintain operational distancing of workers.

Since the year end, the company has continued to strengthen its position further by securing contracts which will provide a path of sustainable growth for all areas of operation, working positively despite the impact of Covid-19.

Companies within the group have been successful in utilising various government support schemes in order to strengthen the day to day operations. The company has maintained its strong relationships with clients and supply chain partners in the industry and while the directors recognise the uncertain timescale for any recovery due to the impact of COVID - 19 they believe the company is well placed to restart projects and continue to win new contracts from the regular client base.

The principal risks and uncertainties continue, as is the case with many other businesses within the UK, to revolve around the economic cycles within the UK economy. With that comes opportunities, so with the group's moderate overhead structure and strong balance sheet, and with well-established connections in the industry, it is very well placed for the future.

On behalf of the board

The directors present their annual report and financial statements for the year ended 30 September 2020.

The principal activity of the company was that of construction services.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 7.

Ordinary dividends were paid amounting to £2,750,000. The directors do not recommend payment of a further dividend.

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

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

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

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

We have audited the financial statements of Stephenson Construction (North) Limited (the 'company') for the year ended 30 September 2020 which comprise the Profit And Loss Account, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 30 September 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

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

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

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

•     adequate accounting records have not been kept, 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.

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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 for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and the company’s members as a body, for our 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.

Stephenson Construction (North) Limited is a private company limited by shares incorporated in England and Wales. The registered office is Provender Mill, Mill Bay Lane, Horsham, West Sussex, RH12 1SS.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Atruet the time of approving the financial statements, the directors are confident that the company has adequate resources to successfully continue to operate for at least the next 12 months from the date of approval of the financial statements and for the foreseeable future beyond. The directors have considered the impact of the COVID-19 pandemic, and the measures taken to contain it, on the company. Most of the construction projects have been affected - some were temporarily suspended through Government Policy, others were deferred from restarting until the last half of this calendar year. Whilst the ultimate impact on margins cannot currently be quantified, the directors continue to monitor outputs closely and limit outgoings. Companies within the group have been successful in utilising various government support schemes in order to strengthen the day to day operations. The company has maintained its strong relationships in the industry and while the directors recognise the uncertain timescale for recovery due to the impact of COVID - 19 they believe the company is well placed to restart projects and continue to win new contracts from the regular client base. Consequently, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover represents net invoiced amounts from construction projects, by reference to the value of work carried out in the year excluding any VAT.

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.

Where the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as expenses in the period in which they are incurred and contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable.

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 work performed to date compared to the estimated total contract value.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company only has financial instruments classified as basic and measured at amortised cost. The company has no financial instruments that are classified as 'other' or financial instruments measured at fair value.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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.

Each live contract is regularly reviewed by the directors as part of the contract valuation process. The directors review the costs and revenues to date, the estimated stage of completion and estimated costs and revenues to completion, which enables the directors to assess the most likely profit outcome and valuation of works carried out at a point in time. The closer to completion a contract is, the more certain the outcome will be and the directors will always take a prudent view of contracts which cannot be estimated with certainty.

A general provision is made against retentions included within trade debtors. This is set at 25% of the retentions which the directors believe is a prudent estimate sufficient to cover any amounts that might prove to be irrecoverable.

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

The average monthly number of persons employed by the company during the year was: nil (2019: nil).

The company has provided security under a multilateral cross guarantee for a bank pooling facility covering a number of companies under the control of M R Stephenson. The facility allows there to be overdrawn bank accounts across the companies involved up to a total of £15,000,000, providing there are also positive bank balances across the companies that match or exceed the overdrawn accounts. There was no overdraft facility during the year. Since the year end, the facility has increased to £20,000,000.

The company has given shared security over a debt in the parent company to the total value of £7,000,000. The debt is in relation to the Coronavirus Business Interruption Loan Scheme. The interest is charged at 1.13% per annum over base rate.

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:

The company has taken the exemption, in accordance with FRS 102 - Section 33 "Related Party Disclosures", from disclosing related party transactions entered into between members of a group, provided that any subsidiary which is party to the transaction is wholly owned by such a member.

During the year the company made purchases of £2,620,484 (2019: £3,965,202) from S C Contractors Limited, a company under the control of M R Stephenson. At the year end £698,123 (2019: £346,061) was outstanding and is included within trade creditors. At the year end £nil (2019: 285,790) is included within other creditors.

During the year the company made purchases of £4,340,396 (2019: £5,091,915) from SSC Contractors Limited, a company under the control of M R Stephenson. At the year end £1,359,095 (2019: £588,761) was outstanding and is included within trade creditors.

During the year the company incurred management charges of £311,720 (2019: £403,235) from M R Stephenson Group Limited, a company under the control of M R Stephenson. Management charges of £311,720 (2019: £403,235) are included within other creditors at year end.

The immediate and ultimate parent undertaking is M R Stephenson Limited, a company incorporated in England & Wales.

The company was ultimately controlled by M R Stephenson who owned 100% of the share capital of M R Stephenson Limited throughout the year. With effect from 2 March 2021, no one person controls the company.

Group financial statements have been prepared for M R Stephenson Limited and are publicly available from Provender Mill, Mill Bay Lane, Horsham, West Sussex, RH12 1SS.