Oakmont Construction Limited - Limited company accounts 20.1

REGISTERED NUMBER: 05030153 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements

for the Year Ended 31 December 2020

for

OAKMONT CONSTRUCTION LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Statement of Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Cash Flow Statement

13

Notes to the Cash Flow Statement

14

Notes to the Financial Statements

15

Directors:

A D Kimpton

D McDonnell

P G Mays

L C Kimpton

S J Hardwick

Secretary:

L C Kimpton

Registered office:

26 Stort Mill

River Way

Harlow

Essex

CM20 2SN

Registered number:

05030153 (England and Wales)

Auditors:

Haines Watts Essex LLP

Chartered Accountants

Statutory Auditors

Coopers House

65a Wingletye Lane

Hornchurch

Essex

RM11 3AT

The directors present their strategic report for the year ended 31 December 2020.

Review of business

The principal activity of the Company during the year was as a main contractor for a selection of blue chip and institutional fund customers delivering new-build, refurbishment and fit-out across London and the southeast in the commercial office, industrial & logistics, retail, education and leisure sectors. In addition, the company successfully completed its first project within the rapidly expanding data centre sector and is actively targeting new projects in this

area.

The COVID-19 pandemic significantly affected the business during the year. The initial impact was the requirement to close sites in order to assess and comply with UK Government restrictions. Once sites were able to reopen, the pace of construction activity was reduced due to the need to provide a 'COVID safe' working environment, leading to additional, irrecoverable project costs. The greatest impact, however, was caused by uncertainty about the economic outlook, resulting in clients deciding to defer projects. This led to a material, unplanned drop in the Company's turnover. We were able to protect employees' jobs by utilising our own reserves and accessing the Job Retention Support Scheme. These factors have, however, resulted in a substantial trading loss during the year.

The other significant event during the year was the sale of Company's entire issued share capital to an Employee Ownership Trust, with the result that the Company is now, in effect, owned collectively by its employees. This transaction was originally conceived during the previous year as the outcome from a review of the founding shareholder's succession plans. That review concluded the Company's culture and values would be best protected by employee ownership. Completion of the sale was deferred from the planned date in March until the summer to enable the impact of COVID-19 to be assessed and appropriate protections to be put in place. These included the retention in the business of more than £1m of additional cash working capital to deal with potential business challenges caused by the pandemic.

The outlook for the business moving into to 2021 is very positive. The Company has its strongest ever pipeline of secured new work and is forecasting a record level of turnover. We continue to attract high-quality clients and will continue to maintain our focus on: 'Right Client, Right Job, Right Price' as the cornerstone of our approach towards developing the business.

Whilst there can be no doubt that challenges remain, the on-going success of the business will be determined by the continued development of our employees, delivery process, quality control systems, risk management and the management of our supply-chain all of which should have our core values of respect, integrity, teamwork and excellence at the forefront.

Principal risks and uncertainties

The company continue to employ strong financial reporting controls and checks which ensure effective cashflow and financial monitoring on a weekly, monthly and annual basis.

UK economy

The principal risk to the company continues to be that clients and suppliers may have their investment appetite or working capital facilities restricted by changes in the UK economy and which would then affect the Company's ability to win profitable new contracts. This risk is mitigated by the breadth of the Company's client base and the range of sectors in which the business operates.

Supply Chain and materials

We have seen pressure on the price and availability of certain materials and some reduction in the availability of labour. There is a risk these will increase the costs of delivering fixed price contracts, where the risk of supply cain cost fluctuations rest with the Company.

COVID-19

The company has, like all businesses, been significantly affected by the Covid-19 outbreak. Decisive measures were swiftly undertaken, including closure of sites to protect our team, clients and other stakeholders. We continue to closely monitor the crisis, however, having formed contingency plans early and holding significant cash in the business, the company is well placed to see out the crisis and progress strongly as the economy recovers.

Liquidity

The nature of the Company's business activities and the payment structure in traditional building contracts means the Company is unavoidably exposed to client solvency risks. The processes in place for selecting prospective new clients and suppliers along with good cash monitoring and collection ensures that the exposure to credit risk is minimized.

Health and safety

Maintenance of a safe working environment is of paramount importance to the company and the health and safety process and procedures are continually monitored and improved to ensure our excellent safety record is maintained.

Key performance indicators

The directors feel that the best Key Performance Indicators by which to monitor and assess the performance of the company are turnover, gross profit margin and overhead control, as well as Client satisfaction and retention.

Turnover fell in the period, finishing 55.1% lower against 2019 due to the Covid-19 pandemic and Brexit uncertainty delaying projects. Overhead was reduced by 18.7%, following an in-depth review by the directors at the beginning of the Covid-19 crisis and continues to be closely monitored. Gross profit margin slipped to 4.6% for the year, reflecting additional costs to keep sites open and operating safely under Covid restrictions and price and supply pressures on materials. Management considers that the investment in excellent service delivery will strengthen client relationships and result in sustainable, profitable growth in the medium term.

The directors also actively review the monthly management accounts, forecasts and cash levels as key indicators to monitor the performance of the company.

Future developments

Although the commercial new-build, refurbishment and fit-out market remains competitive and uncertain following the Covid-19 outbreak, by actively managing risk across all areas of the business and high levels of repeat clients who work across the balanced portfolio of the business sectors, the company remain well placed to meet the day to day running needs.

The directors consider the company to be well placed to take advantage of future business opportunities, highlighted by the strength of its secured projects for FY21 already exceeding £33.5m.

On behalf of the board:

A D Kimpton - Director

17 September 2021

The directors present their report with the financial statements of the company for the year ended 31 December 2020.

Principal activity

The principal activity of the company in the year under review was that of construction.

Dividends

No dividends will be distributed for the year ended 31 December 2020.

Directors

The directors shown below have held office during the whole of the period from 1 January 2020 to the date of this report.

A D Kimpton

D McDonnell

P G Mays

S J Hardwick

Other changes in directors holding office are as follows:

L C Kimpton - appointed 22 June 2020

L S Irving ceased to be a director after 31 December 2020 but prior to the date of this report.

Employee ownership trust

On 22 June 2020, the shares held by the previous shareholders were sold to the newly formed Oakmont Construction Employee Ownership Trust (The EOT). Contributions to the EOT are recognised as a movement on Reserves/Shareholders' Funds and not as an expense within the Income Statement/Profit and Loss Account.

Costs incurred as a result of the changes in legal structure and ownership are reported as exceptional costs in the Income Statement for the current year.

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), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 Essex LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

On behalf of the board:

A D Kimpton - Director

17 September 2021

Opinion

We have audited the financial statements of Oakmont Construction Limited (the 'company') for the year ended 31 December 2020 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, 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 2020 and of its loss 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.

However, not all future events or conditions can be predicted. The COVID-19 viral pandemic is one of the most significant economic events for the UK with unprecedented levels of uncertainty of outcomes. It is therefore difficult to evaluate all of the potential implications on the company's trade, customers, suppliers and wider economy. The Directors' view on the impact of COVID-19 is disclosed within the accounting policies.

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 five, 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.

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

We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates, and considered the risk of acts by the company that were contrary to applicable laws and regulations, including fraud. We discussed with the Directors the policies and procedures in place regarding compliance with laws and regulations. We discussed amongst the audit team the identified laws and regulations, and remained alert to any indications of non-compliance.

During the audit we focussed on laws and regulations which could reasonably be expected to give rise to a material misstatement in the financial statements, including, but not limited to, the Companies Act 2006, UK tax legislation, The Building Regulations 2010, Environmental Protection Act 1990 and Health and Safety laws. Our tests included agreeing the financial statement disclosures to underlying supporting documentation and enquiries with management.

Our procedures in relation to fraud included but were not limited to: inquires of management whether they have any knowledge of any actual, suspected or alleged fraud, and discussions amongst the audit team regarding risk of fraud such as opportunities for fraudulent manipulation of financial statements. We determined that the principal risks related to posting manual journal entries to manipulate financial performance and management bias through judgements in accounting estimates. We also addressed the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

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.

Ian Gorsuch (Senior Statutory Auditor)

for and on behalf of Haines Watts Essex LLP

Chartered Accountants

Statutory Auditors

Coopers House

65a Wingletye Lane

Hornchurch

Essex

RM11 3AT

21 September 2021

Turnover

18,001,223

40,079,429

Cost of sales

(17,172,442

)

(35,373,773

)

Gross profit

828,781

4,705,656

Administrative expenses

(2,270,929

)

(2,782,995

)

(1,442,148

)

1,922,661

Other operating income

53,811

-

Operating (loss)/profit

6

(1,388,337

)

1,922,661

Change in ownership costs

7

(77,100

)

-

(1,465,437

)

1,922,661

Interest payable and similar expenses

8

(2,113

)

(2,154

)

(Loss)/profit before taxation

(1,467,550

)

1,920,507

Tax on (loss)/profit

9

278,656

760,248

(Loss)/profit for the financial year

(1,188,894

)

2,680,755

Other comprehensive income

-

-

Total comprehensive income for the year

(1,188,894

)

2,680,755

Fixed assets

Tangible assets

10

150,859

184,501

Current assets

Debtors

11

3,648,354

5,120,846

Cash at bank and in hand

2,449,083

4,339,240

6,097,437

9,460,086

Creditors

Amounts falling due within one year

12

4,692,756

5,463,672

Net current assets

1,404,681

3,996,414

Total assets less current liabilities

1,555,540

4,180,915

Creditors

Amounts falling due after more than one year

13

-

(1,533

)

Provisions for liabilities

15

(7,293

)

(15,491

)

Net assets

1,548,247

4,163,891

Capital and reserves

Called up share capital

16

93

100

Capital redemption reserve

17

27

20

Retained earnings

17

1,548,127

4,163,771

Shareholders' funds

1,548,247

4,163,891

The financial statements were approved by the Board of Directors and authorised for issue on 17 September 2021 and were signed on its behalf by:

A D Kimpton - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 January 2019

100

1,483,016

20

1,483,136

Changes in equity

Total comprehensive income

-

2,680,755

-

2,680,755

Balance at 31 December 2019

100

4,163,771

20

4,163,891

Changes in equity

Issue of share capital

(7

)

-

-

(7

)

Total comprehensive income

-

(1,188,894

)

-

(1,188,894

)

Contributions to Oakmont

Construction Limited Employee

Ownership Trust

-

(1,426,750

)

-

(1,426,750

)

Capital reduction

-

-

7

7

Balance at 31 December 2020

93

1,548,127

27

1,548,247

Cash flows from operating activities

Cash generated from operations

1

(1,300,768

)

275,268

Interest element of hire purchase payments paid

(2,113

)

(2,154

)

Tax paid

797,650

(60,311

)

Net cash from operating activities

(505,231

)

212,803

Cash flows from investing activities

Purchase of tangible fixed assets

(13,458

)

(24,676

)

Net cash from investing activities

(13,458

)

(24,676

)

Cash flows from financing activities

Capital repayments in year

(10,525

)

(17,397

)

Amount introduced by directors

73,807

73,807

Amount withdrawn by directors

(8,000

)

-

Contributions Employee ownership trust

(1,426,750

)

-

Net cash from financing activities

(1,371,468

)

56,410

(Decrease)/increase in cash and cash equivalents

(1,890,157

)

244,537

Cash and cash equivalents at beginning of year

2

4,339,240

4,094,703

Cash and cash equivalents at end of year

2

2,449,083

4,339,240

1.	Reconciliation of (loss)/profit before taxation to cash generated from operations

2020

2019

£

£

(Loss)/profit before taxation

(1,467,550

)

1,920,507

Depreciation charges

47,100

51,146

Finance costs

2,113

2,154

(1,418,337

)

1,973,807

Decrease in trade and other debtors

879,493

5,540,715

Decrease in trade and other creditors

(761,924

)

(7,239,254

)

Cash generated from operations

(1,300,768

)

275,268

2.	Cash and cash equivalents

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 December 2020

31.12.20

1.1.20

£

£

Cash and cash equivalents

2,449,083

4,339,240

Year ended 31 December 2019

31.12.19

1.1.19

£

£

Cash and cash equivalents

4,339,240

4,094,703

3.	Analysis of changes in net funds

At 1.1.20

Cash flow

At 31.12.20

£

£

£

Net cash

Cash at bank and in hand

4,339,240

(1,890,157

)

2,449,083

4,339,240

(1,890,157

)

2,449,083

Debt

Finance leases

(10,525

)

10,525

-

(10,525

)

10,525

-

Total

4,328,715

(1,879,632

)

2,449,083

1.	Statutory information

Oakmont Construction 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.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	Statement of compliance

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.

3.	Accounting policies

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention.

The financial statements have been prepared on a going concern basis under the historical cost convention.

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates. The key judgements, estimates and assumptions are outlined in the company's principal accounting policies which are set out below. These policies have been consistently applied to all years presented.

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 in making their assessment. In particular, in response to the COVID-19 pandemic, the Directors have tested their 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 have taken to mitigate the impact. Based on these assessments, given the measures 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

Key source of estimation, uncertainty and judgement

The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgement that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.

There is estimation uncertainty in calculating depreciation, as monthly calculations are based on the estimated useful life of assets. Whilst every attempt is made to ensure that the depreciation policy is as accurate as possible, there remains a risk that the policy does not match the useful life of the assets.

There is estimation uncertainty in calculating deferred tax. A full review of deferred tax is carried out by management at the end of each financial year. Whilst every attempt is made to ensure that the deferred tax is accurate as possible, there remains a risk that the provisions do not match the actual tax liability when asset is disposed of.

There is estimation uncertainty in calculating bad debt provisions. A full line by line review of trade debtors is carried out at the end of each month. Whilst every attempt is made to ensure that the bad debt provisions are as accurate as possible, there remains a risk that the provisions do not match the level of debts which ultimately prove to be uncollectable.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

The policies adopted for the recognition of turnover are as follows:

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs and turnover are recognised by reference to the stage of completion at the balance sheet date. Stage of completion is measured by reference to progress against an agreed contract programme.

Where the outcome cannot be measured reliably, contract costs are recognised as an expense in the period in which they are incurred and contract turnover is recognised to the extent of costs incurred that it is probable will be recoverable.

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

Unbilled revenue is included as amounts recoverable on contracts within debtors.

Interest receivable

Interest income is recognised using the effective interest method.

Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows:

Improvements to property

10% straight line

Plant & machinery

20% straight line

Motor vehicles

25% on reducing balance

Office equipment

20% straight line

Government grants

The accruals models has been adopted in recognising grant income relating to the Coronavirus Job Retention Scheme (CJRS). Grant income has been recognised in the same period in which the expense has been incurred and included in other operating income.

Financial instruments

Financial assets and financial liabilities are recognised in the balance sheet when the company becomes a party to the contractual provisions of the instrument.

Trade and other debtors and creditors are classified as basic financial instruments and measured at initial recognition at transaction price. Debtors and creditors are subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the company will not be able to collect all amounts due.

Cash and cash equivalents are classified as basic financial instruments and comprise cash in hand and at bank and bank overdrafts.

Financial liabilities and equity instruments issued by the company are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

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. The company is a beneficiary of Research and Development (R&D) tax relief from the UK Government in the form of reductions in its annual tax liability, as well as repayable tax credits. Current tax assets or reductions in the current tax liabilities for R&D claims are only recognised when the amount can be reliably determined and the probability of HM Revenue accepting the claim is considered high.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

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.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to profit or loss over the relevant period. The capital element of the future payments is treated as a liability.

Operating leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand, and any short term deposits with an original maturity date of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consists of the above, net of any outstanding bank overdrafts.

Short-term debtors and creditors

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in other administrative expenses.

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.

4.	Employees and directors

31.12.20

31.12.19

£

£

Wages and salaries

2,583,938

2,826,224

Social security costs

297,2281

359,441

Other pension costs

138,093

202,879

3,019,259

3,388,544

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

31.12.20

31.12.19

Management and administration

37

38

5.	Directors' emoluments

31.12.20

31.12.19

£

£

Directors' remuneration

605,422

663,012

Directors' pension costs

40,653

45,733

Highest paid director

182,343

190,149

Number of directors to whom benefits accrued under money purchase pension schemes

4

4

6.	Operating (loss)/profit

The operating loss (2019 - operating profit) is stated after charging:

2020

2019

£

£

Depreciation - owned assets

42,665

45,232

Depreciation - assets on hire purchase contracts

4,435

5,914

Auditors' remuneration

13,500

12,000

Auditors' remuneration for non-audit services

57,287

47,038

7.	Exceptional items

2020

2019

£

£

Change in ownership costs

(77,100

)

-

Exceptional items relate to costs incurred as a result of the changes in legal structure and ownership during the year.

8.

Interest payable and similar expenses

2020

2019

£

£

Hire purchase

2,113

2,154