EAST_WEST_GROUP_LIMITED - Accounts

The directors present the strategic report and financial statements for East West Group Ltd for the period ended 31 March 2023, please note this covers a 9-month period.

Review of the business

East West Connect Ltd is the main trading subsidiary of East West Group Ltd, it has continued to grow since it was established over 30 years ago by John O’Hanlon. Today the group remains majority owned by the O’Hanlon family and Kathleen O’Hanlon took on the role of Chairperson in 2014. The family will maintain its active leadership through the Chairperson and will further develop the role of family members at both operational and board level to maintain continuity and provide direction to the management team as the business grows. Running of the business is under the stewardship of Marcus Allen as Managing director and the team of directors headed up by Ross Carroll.

In recent years as part of a long-term incentive strategy, key management have been given the opportunity to become A and B shareholders and these long-term incentives plans continue to be rolled out to help ensure management team is retained and built upon for the future.

The market has settled somewhat from the turmoil of the previous few years, ongoing inflation and supply chain issues continue to create a level of risk however we believe that we have established strong commercial processes to help manage this ongoing issue.  We do not see the position changing in relation to inflation, but this now is the accepted normal in the market and clients are planning on this basis to limit impact.

The figures are for the 9 months to end of March, we have moved our end of year to be aligned with our clients and general market, these figures show a continued resilient position for the present time coupled with strong financials in what has been another troubled year and even harder times to predict. But East West Connect maintains a very strong position with the nature of our works and clients including a variety of negotiated projects and potential 2 stage tenders helping to alleviate these pressures.

East West Connect maintains a very strong position with completed major infrastructure works exceeding £45M and yet a further £15M secured and still to deliver over the next 2 years, and further negotiations ongoing. Works with Takenaka at Lombard Street following earlier phases push ahead with works commencing on major plant and infrastructure replacement commenced, that should continue well into 2025-26 and several others being reviewed within the other building portfolios. We continue to expand our works within a variety of niche markets including a variety of high profile works within the Japanese business sector, numerous high profile live complex building environments including a selection of heritage Palace works and continued works within the CAT A market with successfully securing projects at 41 Lothbury with Wates Construction and 84 Moorgate with Osborne giving a further £20M of secured works over the next 12 months that are progressing well.

Our tender schedule continues to enjoy a good balance of direct to end users on infrastructure works giving greater margin and control, coupled with continuation of works for a very select number of main contractors with key potentials still with Takenaka, Tide, Waites, Walter Lilly, Osborne’s. Although we are continuing to tender works, they are focused on longer term works being our main target supplemented with a few smaller immediate works with known sources or client direct infrastructure works that are low in management and labour. This gives a further £40-£50M of real opportunities still be developed over the coming years to ensure any slippage is well covered and contingency for the years 2023-25 turnover.

Having now converted further highly prestigious projects including another long-term degasification and plant replacement project within the heart of London for the banking sector, receiving the first of several orders working direct for the client with an estimated budget of £25M over 3-4 years commencing construction later this year, this will allow us to redistribute resources from other major programmes coming to a close and maintaining high rates of labour utilisation.

We have continued to develop a multi-in-house delivery approach, complimented and cross feeding between facets of the business and creating client contract opportunities where we have already established a positive relationship. This is particularly seeing benefit in the maintenance division with high-profile long-term contract work driven out of the project delivery. We also continue to invest and grow our direct delivery capacity with a large pool of direct labour across all trades to facilitate the control and quality required in such live complex and prestige environments.

Social Housing contracts have been a significant part of the business since the 1990s and with the completion of the Catalyst and Peabody merger, coupled with recent renewal of our 5 plus 5 years frameworks providing secured packages of M&E at £80M and Fire management works tenders of £20M over 10 years, our maintenance team remains in a great place as they expand. We continue to become more integral in the considerable challenge of delivering a full package of services to the newly expanded Peabody now with over 100,000 properties, this creates a stable and growing income stream upon which to further build our capability in this market.

The maintenance division is seeing lots of new contracts and potential from cross pollination with the other sectors of the business, supported by continued works for L&Q, Galliford Try and Japanese/ Swiss embassies Market . We are confident that this will act as a catalyst securing more contracts and revenue within these markets and have already closed deals with several commercial real estate owners to spread our portfolio across both public and private income streams.

We are pleased to report another year of growth and sustainable profit for the group with a good year maintaining organic growth and profits in line with previous years. Turnover is above that projected, even with several of our major projects seeing slippage on commencement dates, across the group we have turned over £31.9M (against budget of £27.3M) which equates to more than £40M pro-rata over 12 months, this is complemented with an increased margin @ 16.4% (Budget – 10.9%)  giving GP £5.2M and net profit before Tax £2.3M (again against projected £605K).  These consolidated figures now include our sister company East West Compass (formerly Chas West) that services the reactive maintenance market for Peabody and is in the process of renegotiating a further 10-year framework and will be fully rebranded as East West Compass part of the East West Group.

The focus on margin remains but moderated to secure contracts with robust projects / clients giving longevity and payment certainty / improved cash flow, particularly during these unpredictable times. These types of contracts are often government funded directly or indirectly.

We closely monitor and manage cash flow and have not needed to resort to our bank funding facility within the year, which however remains in place on an in case of need basis, but we have continued to grow a strong bank balance to fund the growing projects requirements, and this coupled with a growth of our assets leads to ever increasing security for the larger projects.

The company's policy is to pay suppliers to the agreed terms upon which business is conducted and continue to build an extremely strong and robust supply chain. The directors regularly review the financial requirements of the company and the risks associated therewith. The company's operations are primarily financed from retained earnings and we have again increased our assets through investment within the business and property, and a board policy of profit retention, however a bank loan relating to trading premises and overdraft facility is available but presently unused.

As can be seen from our strong account operation and working capital position, we continue to be mindful of cash flow with a keen eye on building a reserve and accruals of all future payments including VAT, hence maintaining flexibility whilst maximising our available capital. Our banking accounts have been restructured to maximise our position with our increasing reserves and interest rates to ensure whilst remaining agile with our reserves.   At this stage we are likely to continue with our dividend policy of retaining 50% of the profit within the business to ensure our stability and growth, this leads to our strong balance in these times. To further our development of our staff we continue to review employment packages and provide above market employment packages to build a team for the future.

This coming year will see the investment and implementation of a full new 4PS finance system to replace the exchequer systems utilised for the last 10 years to give greater control, understanding and transparency of the company finance from cradle to grave and will use this opportunity to overhaul and invest across the business in new procurement process to enhance transparency and accountability.

Against many unstable and unpredictable market factors , including inflation, potential of recession and supply chain challenges our business has continued to grow across the board and we presently see more many opportunities, secured works and tender pipeline than ever in our history. So therefore, although we acknowledge and continue to plan for financial challenges, slippage, changing market, client mergers and supply and cost challenges we see ourselves in a strong position driven through hard work, diversity, good reputation and a constantly growing management and delivery team that is the best in the industry. Maintaining margin growth against this background will be challenging but we continue to plan effectively, adapting our processes and systems to create high levels of transparency and improve financial planning and analysis and early identification and mitigation of issues.

The key business risks and uncertainties affecting the company are related to future contracts and economic conditions, inflation and supply chain issues which have been strongly influence by the likes of COVID-19, Brexit, political uncertainty and Ukraine; we go into 2023/24 in a strong position with 90% of our income budget secured and supported by signed contracts with highly credit rated clients. A considerable level of our projects provide secured works extending well into 2025-26 underwriting a large element of the following year’s activities and allowing continued investment in staff and systems. The business has strong relationships with a growing list of key and highly rated clients, coupled with introducing some new key main contractors. Recently secured negotiated works again strengthen the position along with the renewed contracts with our social housing client and our reactive business taking this further to 2029.

East West Connect have continued the growth following full accreditation in specialist fire protection and works to complement our already extensive fire alarm and fire doors works; now building our in-house capability and direct delivery to ensure our development in our ever-changing market and with recent successful tenders have key contracts secured running for circa 5-10 years. we have continued with considerable growth, investment and development across the company has led to expansion of the Quality, Health and Safety department into a Compliance department to take the relevant standards, health and safety and quality  (ISO 9001 & 14001 and transition from OHSAS 18001 to 45001) into the next era.

We continued working closely with several key clients and consultants with the intentions to expand within the Energy and Carbon Neutral market as part of our confirmed 5 years growth plan, that is also being reviewed and updated during the next 12 months.

On behalf of the board

The directors present their annual report and financial statements for the period ended 31 March 2023.

The principal activity of the company was that of a parent holding company to the group.

The principal activities of the trading subsidiary, East West Connect Limited, continued to be that of electrical and mechanical engineers, construction and building services, alongside installation and maintenance of heating and ventilation systems.

The principal activities of the trading subsidiary, East West Compass Limited (formerly Chaswest Limited) continued to be that of the provision of maintenance services to social housing.

The results for the period are set out on page 10.

Interim dividends were paid during the year amounting to £600,000. The directors do not recommend payment of a final dividend.

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

Rickard Luckin Limited were appointed as auditor to the group and in accordance with Section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

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 group and company, and of the profit or loss of the group 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;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 auditor of the company 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 auditor of the company is aware of that information.

We have audited the financial statements of East West Group Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 March 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including 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 group's and the parent company's affairs as at 31 March 2023 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 group and parent 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 group's and parent 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 our audit:

• the information given in the strategic report and the directors' report for the financial period 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 group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

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

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

• the parent company 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 parent 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 parent 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.

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 identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our: general commercial and sector experience; through verbal and written communications with those charged with governance and other management and via inspection of the company’s regulatory and legal correspondence.

We discussed with those charged with governance and other management the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations to our team and remained alert to any indicators of non-compliance throughout the audit, we also specifically considered where and how fraud may occur within the group.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the group is subject to laws and regulations that directly affect the financial statements, including: the company’s constitution; relevant financial reporting standards; company law; tax legislation and distributable profits legislation and we assess the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly the group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on the amounts or disclosures in the financial statements, for instance through the imposition of fines and penalties, or through losses arising from litigations. We identified the following areas as those most likely to have such an affect: employment legislation; health and safety legislation; trade legislation; data protection legislation; anti-bribery and anti-corruption legislation.

ISAs (UK) limit the required procedures to identify non-compliance with these laws and regulations to the procedures, and no procedures over and above those already noted are required. These limited procedures did not identify any actual or suspected non-compliance which laws and regulations that could have a material impact on the financial statements.

In relation to fraud, we performed the following specific procedures in addition to those already noted:

• Challenging assumptions made by management in its significant accounting estimates, in particular: accounting for contracting income;

• Identifying and testing journal entries, in particular any entries posted with unusual nominal ledger account combinations, journal entries crediting cash or any revenue account and journal entries posted by senior management;

• Performing analytical procedures to identify unexpected movements in account balances which may be indicative of fraud;

• Ensuring that testing undertaken on both the performance statement, and the Balance Sheet includes a number of items selected on a random basis;

• Discussions with management;

• Reviewing board minutes.

These procedures did not identify any actual or suspected fraudulent irregularity that could have a material impact on the financial statements.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with ISAs (UK). For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the procedures that we are required to undertake would identify it. In addition, as with any audit, there remains a high risk of non-detection of irregularities, as these might involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls. We are not responsible for preventing non-compliance with laws and regulations or fraud, and cannot be expected to detect non-compliance with all laws and regulations or every incidence of fraud.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://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 an 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.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

As permitted by S408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £610,053 (2022 - £766,614 profit).

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

East West Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 1st Floor, County House, 100 New London Road, Chelmsford, Essex, CM2 0RG.

The group consists of East West Group Limited and all of its subsidiaries.

The reporting period for these financial statements has been reduced to 9 months. The period has been reduced to coincide with key clients in the industry. The comparative amounts presented in the financial statements are therefore not entirely comparable as they relate to a 12 month period.

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 £.

The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

The consolidated group financial statements consist of the financial statements of the parent company East West Group Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

All financial statements are made up to 31 March 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Revenue from contracts for the provision of services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses. Property rented to a group entity is accounted for as tangible fixed assets.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Property rented to a group entity is accounted for as tangible fixed assets.

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any 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.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents 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 group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

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

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 group’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.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 if, and only if, there is 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.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.

In the application of the group’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.

Revenue from amounts recoverable on contracts is valued by reference to the stage of contract completion, which is judged by reviewing the costs to date incurred as a percentage of the final expected contract costs. Using this percentage of completion, an adjustment is made for to recognise the appropriate revenue.

The total turnover of the group for the year has been derived from its principal activity undertaken in the United Kingdom.

The average monthly number of persons (including directors) employed by the group and company during the period was:

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2022 - 3).

The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:

Goodwill was generated during the prior year upon acquisition of East West Compass Limited (formerly Chaswest Limited), being the excess consideration paid for the net liabilities of the business at the date of acquisition.

The fair value of goodwill has been considered by the directors and impaired accordingly. More information on impairment movements in the period is given in note 13.

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

Goodwill arising upon an acquisition during the prior year, as detailed in note 12, was considered by the directors. It was determined that given the net liability position of the subsidiary, this goodwill should be impaired.

On this basis, the goodwill was impaired in full in the prior year.

Investment properties rented to another group entity have been accounted for using the cost model. The carrying value of these investment properties included within company tangible fixed assets is £863,355 (2022 - £863,355). The carrying value of these investment properties included within group tangible fixed assets is £863,355 (2022 - £863,355).

Details of the company's subsidiaries at 31 March 2023 are as follows:

Results of both subsidiaries are included within the consolidated financial statements.

Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The company has one class of shares, being the Ordinary ‘A’ shares, which carry equal rights to fixed income and one voting right per share.

During a previous year, 5,000 £1 Ordinary ‘A’ Shares were allotted for total consideration of £61,200, being the nominal value of £5,000 and the share premium of £56,200. The share premium of £56,200 remains unpaid and has been included within other debtors.

At the year end HSBC held a multilateral guarantee in respect of East West Group Limited and East West Connect Limited. This is in respect of security over group assets for the bank loans and overdrafts. At 31 March 2023 the total borrowings against this guarantee were £Nil (2022: £Nil) which were included within the creditors of the group's consolidated financial statements.

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

At the end of the prior year, there were no non-cancellable operating lease commitments to disclose.

Dividends totalling £600,000 (2022 - £750,000) were paid in the period in respect of shares held by the group's directors.

Group

At the year end the group owed the directors a total of £206,232 (2022: £237,233) and amounts unpaid by directors for share capital totalled £56,200 (2022: £56,200).

Intra-group transactions and balances are eliminated fully on consolidation.

Company

The company has taken advantage of the exemption available in FRS102 whereby it has not disclosed transactions with any wholly owned subsidiary undertaking.

The controlling party is Mrs K O'Hanlon by virtue of her shareholding in both the current and preceding year.

All profit and loss reserves are fully distributable.