HMH Civils Limited - Limited company accounts 20.1

REGISTERED NUMBER: 08801287 (England and Wales)

Strategic Report, Report of the Directors and

Audited Financial Statements for the Year Ended 31 December 2020

for

HMH Civils Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Profit and Loss Account

9

Balance Sheet

10

Statement of Changes in Equity

11

Cash Flow Statement

12

Notes to the Cash Flow Statement

13

Notes to the Financial Statements

15

DIRECTORS:

Mr J P Hughes

Mr G May

REGISTERED OFFICE:

HMH House

8 Falcon Court

Preston Farm

Stockton on Tees

TS18 3TS

REGISTERED NUMBER:

08801287 (England and Wales)

SENIOR STATUTORY AUDITOR:

Mr John Benson FCA

AUDITORS:

JBC Accountants Limited

Statutory Auditor

3B Lockheed Court

Preston Farm

Stockton on Tees

TS18 3SH

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

REVIEW OF BUSINESS

Even though HMH Civils Limited faces the many challenges that the construction industry offers, it has maintained its position of one of the leading civil engineering companies in Teesside.

It has continued to win large contracts in the North East area on a number of self-build housing developments.

Covid-19 has not had a significant impact on the company, however, there is an increased risk of supply chain disruptions and wider economic disruption that may impact customer demand and margins in the future.

Despite the above, there has been a slight increase in the level of turnover; this amounted to £40.5m in 2020 compared to £39.1m in 2019. Cost of sales have also increased by just over £1m (3.3%) leading to a slight increase in the gross profit margin from 11.16% to 11.21%. Total operating profit has increased from £1.6m to £1.9m, an increase of 20%. This is due to an increase in other operating income of £0.26m..

The above has produced an overall profitable performance in the year.

There has been a fall in cash at bank during the year; there have been cash outflows of £2m in the year. £1.2m of this is in respect of loans made to group company's.

Working capital has increased from the previous year and is still considered sufficient for existing business requirements.

Shareholders' funds have increased to £6.1m at 31.12.2020 from £3.9m at 31.12.2019.

PRINCIPAL RISKS AND UNCERTAINTIES

The company operates within the inherently volatile construction industry. Policies are designed to identify, manage and limit both existing and possible risks that the company may face and these are applied at various management levels.

Financial risk is an integral risk faced by management; in particular, credit risk, largely in respect of trade debtors.

Cash flow risks are managed through the preparation and monitoring of records, forecasts and management accounts, however, the strong cash balances held help to alleviate any potential problems.

Price risk is considered when tendering for new projects and this is reviewed on an ongoing basis. Procedures are in place for each new contract, to identify and assess potential risks.

Also when tendering for contracts, there is a risk of competition. The company hopes that this is alleviated by the strong reputation it has built within the local construction industry.

Business continuity is always a risk, however, there have been no events that would cast any doubt that the company would not be able to continue to operate in the foreseeable future.

The company is required to comply with relevant legislation, including building standards for construction and the Construction Industry Scheme. Best practice procedures have been established and third party specialists have been engaged to ensure compliance.

ON BEHALF OF THE BOARD:

Mr G May - Director

22 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 civil engineering works. It was largely involved with construction work in respect of roads and sewers and the groundworks of new housing developments.

DIVIDENDS

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

FUTURE DEVELOPMENTS

The company intends to build further on the reputation it has developed in the area and continue to grow its customer base and in turn, its level of turnover.

DIRECTORS

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

Mr J P Hughes

Mr G May

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 ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, JBC Accountants Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr G May - Director

22 September 2021

Opinion

We have audited the financial statements of HMH Civils Limited (the 'company') for the year ended 31 December 2020 which comprise the Profit and Loss Account, 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 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 three, 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:

Based on our understanding of the company, we identified that the principle risks of non-compliance with laws and regulations related to the requirements of the Health & Safety Act and we considered the extent to which non-compliance might have a material effect on the financial statements.

We also considered those laws and regulations that have a direct impact on the financial statements, such as the Companies Act 2006 and FRS 102.

We evaluated the risk of fraud through management bias and override of controls and determined that the risks related to the posting of inappropriate journal entries or manipulation of accounting estimates.

Audit procedures performed included:

The engagement partner ensuring that the engagement team had the appropriate competence, capabilities and skills to identify or recognise non-compliance;

Enquiring of management as to their knowledge of actual, suspected or alleged fraud, actual and potential litigation, claims and instances of non-compliance with laws and regulations;

Testing the existence of internal controls in place to mitigate risks of fraud;

Testing the appropriateness of journal entries, identifying unusual transactions;

Assessing whether the judgements made in making significant accounting estimates are indicative of potential bias;

Designing procedures which included but were not limited to agreeing financial statement disclosure to underlying supporting documentation.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, misrepresentations or through collusion.

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.

Mr John Benson FCA (Senior Statutory Auditor)

for and on behalf of JBC Accountants Limited

Statutory Auditor

3B Lockheed Court

Preston Farm

Stockton on Tees

TS18 3SH

27 September 2021

TURNOVER

40,502,152

39,164,787

Cost of sales

35,963,254

34,792,455

GROSS PROFIT

4,538,898

4,372,332

Administrative expenses

2,837,959

2,779,019

1,700,939

1,593,313

Other operating income

268,978

9,990

OPERATING PROFIT

1,969,917

1,603,303

Interest receivable and similar income

6,800

2,764

Interest payable and similar expenses

4

(11,650

)

(12,031

)

PROFIT BEFORE TAXATION

5

1,965,067

1,594,036

Tax on profit

6

(272,642

)

(304,127

)

PROFIT FOR THE FINANCIAL YEAR

2,237,709

1,898,163

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

2,237,709

1,898,163

FIXED ASSETS

Intangible assets

7

21,889

29,186

Tangible assets

8

950,262

920,925

Investments

9

100

-

972,251

950,111

CURRENT ASSETS

Stocks

10

610,000

310,000

Debtors

11

12,255,116

8,065,725

Cash at bank

-

173,730

12,865,116

8,549,455

CREDITORS

Amounts falling due within one year

12

7,391,694

5,344,319

NET CURRENT ASSETS

5,473,422

3,205,136

TOTAL ASSETS LESS CURRENT LIABILITIES

6,445,673

4,155,247

CREDITORS

Amounts falling due after more than one year

13

(190,627

)

(158,010

)

PROVISIONS FOR LIABILITIES

17

(131,964

)

(111,864

)

NET ASSETS

6,123,082

3,885,373

CAPITAL AND RESERVES

Called up share capital

18

300

300

Retained earnings

6,122,782

3,885,073

SHAREHOLDERS' FUNDS

6,123,082

3,885,373

The financial statements were approved by the Board of Directors and authorised for issue on 22 September 2021 and were signed on its behalf by:

Mr G May - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2019

300

1,986,910

1,987,210

Changes in equity

Total comprehensive income

-

1,898,163

1,898,163

Balance at 31 December 2019

300

3,885,073

3,885,373

Changes in equity

Total comprehensive income

-

2,237,709

2,237,709

Balance at 31 December 2020

300

6,122,782

6,123,082

Cash flows from operating activities

Cash generated from operations

1

(925,780

)

792,411

Interest paid

-

834

Interest element of hire purchase payments paid

(11,650

)

(12,865

)

Tax paid

(250,000

)

(448,555

)

Taxation refund

625,136

-

Net cash from operating activities

(562,294

)

331,825

Cash flows from investing activities

Purchase of intangible fixed assets

-

(36,483

)

Purchase of tangible fixed assets

(99,962

)

(102,042

)

Purchase of fixed asset investments

(100

)

-

Sale of tangible fixed assets

101,775

407,440

Interest received

4,067

2,764

Net cash from investing activities

5,780

271,679

Cash flows from financing activities

Loan repayments in year

-

(970,000

)

Loan to Group Company

(1,230,349

)

(1,000

)

Capital repayments in year

(211,955

)

(258,054

)

Amount introduced by directors

-

30,000

Amount withdrawn by directors

(4,481

)

(729

)

Net cash from financing activities

(1,446,785

)

(1,199,783

)

Decrease in cash and cash equivalents

(2,003,299

)

(596,279

)

Cash and cash equivalents at beginning of year

2

(1,817,314

)

(1,221,035

)

Cash and cash equivalents at end of year

2

(3,820,613

)

(1,817,314

)

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2020

2019

£

£

Profit before taxation

1,965,067

1,594,036

Depreciation charges

270,726

265,846

(Profit)/loss on disposal of fixed assets

(52,738

)

61,862

Finance costs

11,650

12,031

Finance income

(6,800

)

(2,764

)

2,187,905

1,931,011

Increase in stocks

(300,000

)

(280,000

)

Increase in trade and other debtors

(3,082,545

)

(1,079,735

)

Increase in trade and other creditors

268,860

221,135

Cash generated from operations

(925,780

)

792,411

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

-

173,730

Bank overdrafts

(3,820,613

)

(1,991,044

)

(3,820,613

)

(1,817,314

)

Year ended 31 December 2019

31/12/19

1/1/19

£

£

Cash and cash equivalents

173,730

511,000

Bank overdrafts

(1,991,044

)

(1,732,035

)

(1,817,314

)

(1,221,035

)

3.	ANALYSIS OF CHANGES IN NET DEBT

Other

non-cash

At 1/1/20

Cash flow

changes

At 31/12/20

£

£

£

£

Net cash

Cash at bank

and in hand

173,730

(173,730

)

-

Bank overdrafts

(1,991,044

)

(1,829,569

)

(3,820,613

)

(1,817,314

)

(2,003,299

)

(3,820,613

)

Debt

Finance leases

(349,971

)

211,955

-

(379,857

)

Debts falling due

within 1 year

(170,000

)

170,000

-

-

(519,971

)

381,955

-

(379,857

)

Total

(2,337,285

)

(1,621,344

)

-

(4,200,470

)

1.	STATUTORY INFORMATION

HMH Civils 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 (£).

It's place of business is Falcon Court, Stockton-on-Tees.

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.

Turnover

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

Turnover from the rendering of services is recognised by reference to the stage of completion of the contract. The company invoices on a monthly basis throughout the duration of a contract based on work carried out and recognises income at the date of the invoice.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Computer software is being amortised evenly over its estimated useful life of five years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Plant and machinery

-

15% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

25% on cost

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost.

Stocks

Stocks and work in progress have been valued at the lower of cost and estimated selling price less costs to sell.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, 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.

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.

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.

3.	EMPLOYEES AND DIRECTORS

2020

2019

£

£

Wages and salaries

2,156,683

2,336,465

Social security costs

190,499

203,790

Other pension costs

32,821

30,788

2,380,003

2,571,043

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

2020

2019

Management

2

3

Office

24

21

Site

29

42

55

66

2020

2019

£

£

Directors' remuneration

175,000

210,422

4.

INTEREST PAYABLE AND SIMILAR EXPENSES

2020

2019

£

£

Mortgage interest

-

(834

)

Hire purchase interest

11,650

12,865

11,650

12,031

5.	PROFIT BEFORE TAXATION

The profit is stated after charging/(crediting):

2020

2019

£

£

Depreciation - owned assets

133,287

133,690

Depreciation - assets on hire purchase contracts

130,142

124,859

(Profit)/loss on disposal of fixed assets

(52,738

)

61,862

Computer software amortisation

7,297

7,297

Auditors' remuneration

12,000

8,500

Accountancy and other services

7,972

6,850

6.

TAXATION

Analysis of the tax credit

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

2020

2019

£

£

Current tax:

UK corporation tax

(292,742

)

(310,000

)

Deferred tax

20,100

5,873

Tax on profit

(272,642

)

(304,127

)

Reconciliation of total tax credit included in profit and loss

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

2020

2019

£

£

Profit before tax

1,965,067

1,594,036

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2019 - 19%)

373,363

302,867

Effects of:

Expenses not deductible for tax purposes

2,382

17,649

Adjustments to tax charge in respect of previous periods

1,772

(1,197

)

Capital losses carried forward

-

7,589

Tax credit re R&D claim

(650,159

)

(631,035

)

Total tax credit

(272,642

)

(304,127

)

7.	INTANGIBLE FIXED ASSETS

Computer

software

£

COST

At 1 January 2020

and 31 December 2020

36,483

AMORTISATION

At 1 January 2020

7,297

Amortisation for year

7,297

At 31 December 2020

14,594

NET BOOK VALUE

At 31 December 2020

21,889

At 31 December 2019

29,186

8.	TANGIBLE FIXED ASSETS

Fixtures

Plant and

and

Motor

Computer

machinery

fittings

vehicles

equipment

Totals

£

£

£

£

£

COST

At 1 January 2020

603,508

48,173

1,141,695

122,122

1,915,498

Additions

145,456

4,683

174,292

17,372

341,803

Disposals

(31,807

)

-

(76,430

)

-

(108,237

)

At 31 December 2020

717,157

52,856

1,239,557

139,494

2,149,064

DEPRECIATION

At 1 January 2020

240,683

17,585

650,770

85,535

994,573

Charge for year

73,885

5,290

158,160

26,094

263,429

Eliminated on disposal

(16,089

)

-

(43,111

)

-

(59,200

)

At 31 December 2020

298,479

22,875

765,819

111,629

1,198,802

NET BOOK VALUE

At 31 December 2020

418,678

29,981

473,738

27,865

950,262

At 31 December 2019

362,825

30,588

490,925

36,587

920,925