Moortown Group Limited - Limited company accounts 23.2

REGISTERED NUMBER: 08116345 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 31 May 2023

for

Moortown Group Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

9

Income Statement

12

Other Comprehensive Income

13

Balance Sheet

14

Statement of Changes in Equity

15

Notes to the Financial Statements

16

DIRECTORS:

Mr R C Grundy

Mr J D Hawkswell

Mr G Hunt

Mr M J King

Mr A T McManus

Mr C J Milner

Mr J Milnes

Mr R Mitchell

Mr D J Moxon

REGISTERED OFFICE:

Lusteen House 24 Roydsdale Way

Euroway Industrial Estate

Bradford

West Yorkshire

BD4 6SE

REGISTERED NUMBER:

08116345 (England and Wales)

AUDITORS:

Sutton McGrath Hartley

5 Westbrook Court

Sharrowvale Road

Sheffield

South Yorkshire

S11 8YZ

BANKERS:

HSBC Bank Plc

33 Park Row

Leeds

West Yorkshire

LS1 1LD

SOLICITORS:

Lupton Fawcett

Yorkshire House

East Parade

Leeds

LS1 5BD

The directors present their strategic report for the year ended 31 May 2023.

REVIEW OF BUSINESS

The operating results for the year and the financial position at the year end were considered satisfactory by the directors.

The trading performance was in line with the budget the directors had set for the year.

The KPI's presented here are part of the much wider reporting framework focused on individual contract performance that enables the directors to understand the development, performance and position of the Company.

Turnover £67.1m (2022 - £66.6m) an increase of 0.8%

Operating profit £0.6m (2022 - £3.0m) 0.8% of turnover (2022 - 4.5% of turnover)

Decrease in cash £0.1m (2022 - increase of £1.7m)

Shareholder funds £21.6m (2022 - £25.8m)

Whilst the above are the main performance indicators, the directors regularly monitor a range of other measures in order to assess the company's performance.

Due to commercial sensitivity of individual contracts, and recognising the company's ultimately privately owned status, the directors are of the opinion that it is not appropriate to disclose further details of these indicators.

PRINCIPAL RISKS AND UNCERTAINTIES

The key business risks and uncertainties affecting the company are considered to relate to competition and market forces in the industry.

The performance of the long term contracts is subject to future costs to completion which can vary widely from initial assessment due to their unpredictable nature. For this reason, this is a major risk area for the Company, hence the stringent and prudent profit recognition policy is applied.

PROMOTING THE SUCCESS OF THE COMPANY

In accordance with section 172 of the Companies Act 2006, each of our directors acts in the way he considers, in good faith would promote the success of the company for the benefit of its members as a whole. The directors have taken into consideration, amongst other matters:

- the likely consequences of any decisions in the long-term;

- the interests of the company's employees;

- the need to foster the company's business relationships with suppliers, customers and others;

- the impact of the company's operations on the community and environment;

- the desirability of the company maintaining a reputation for high standards of business conduct;

- and the need to act fairly between members of the company.

The Board acknowledges that every decision it makes will not necessarily result in a positive outcome for all of the Company's stakeholders. By considering the Company's purpose, vision and values, together with its strategic priorities and having a process in place for decision making the Board does however, aim to make sure that its decisions are consistent.

STAKEHOLDER ENGAGEMENT

The Board believe that considering our stakeholders in key business decisions is not only the right thing to do, but is fundamental to our ability to drive value creation. The Board seeks to understand the respective interest of such stakeholder groups by direct engagement by Board members. The directors consider the following to be the Company's key stakeholders:

- Employees

The strength of our business is built on the hard work and dedication of our employees. The Board recognises that the implementation of an effective people strategy and strong culture underpin the effective delivery of the company strategy.

Employees are kept informed on performance and strategy through regular management briefings and updates from members of the Board. The directors attend key business meetings throughout the year. The company has an open door policy in which employees are able to raise any concerns, with senior management including MD.

Key focus of the Board includes employee health and well-being, personal development, pay and benefits.

- Customers

The profitability of the business is underpinned by providing effective partnerships with customers to understand their needs and requirements. In recognition of this, a core principle of the business is to be customer centric, building relationships providing a high level of service through the expert knowledge of our employees and ensuring a quality product.

The Board receives regular updates on customer opinion, behaviour and feedback. The insight received is used to inform decision making, understand customer needs and views in order to improve our offer and service for them.

- Suppliers

The Board recognises that relationships with suppliers are important to the Group's long-term success and is briefed on supplier feedback and issues on a regular basis. The Board seeks to balance the benefit of maintaining these strong relationships along with the need to obtain value for money for our investors and desired quality and service for our customers. Engagement with suppliers is primarily through our Group procurement function. Key areas of focus include innovation, product development, health and safety and sustainability.

- Communities

The Board supports the initiatives with regards to reducing the adverse impacts on the environment and engages with communities in which we operate. Key areas of focus include how we can support local causes and issues, create opportunities to recruit and develop local people and help to look after the environment. We partner with local charities at a site level to raise awareness and funds. The key issues and themes across local communities are reported back to the Board.

- Government and regulations

We engage with the government and regulators through a range of industry consultations, forums, and meetings to communicate our views to policy makers relevant to our business. Key areas of focus are compliance with laws and regulations, health and safety and product safety. The Board is updated on legal and regulatory developments and takes these into account when considering future actions.

- Investors

The Group relies on our stakeholders and providers of debt funding as essential sources of capital to further our business objectives. The company has open dialogue with all investors through regular meetings which cover a wide range of topics including financial performance, strategy, outlook and governance

ON BEHALF OF THE BOARD:

Mr A T McManus - Director

8 November 2023

The directors present their report with the financial statements of the company for the year ended 31 May 2023.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of building and civil engineering contractors.

DIVIDENDS

The results for the year are set out on page 9.

Ordinary dividends were paid amounting to £4,500,000. The directors do not recommend payment of a final dividend.

FUTURE DEVELOPMENTS

The external commercial environment is expected to remain competitive in 2023/24. However, the directors are confident that the company's future prospects are very good.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 June 2022 to the date of this report.

Mr R C Grundy

Mr J D Hawkswell

Mr G Hunt

Mr M J King

Mr A T McManus

Mr C J Milner

Mr R Mitchell

Mr D J Moxon

Other changes in directors holding office are as follows:

Mr J Milnes - appointed 1 June 2022

POLITICAL DONATIONS AND EXPENDITURE

Various donations were made during the financial year ended 31 May 2023 including £3,618 to Just Giving, £1,000 to Pulse 1 "Mission for Christmas", £4,139 for multiple sponsorships and £2,495 made to various other charities.

STREAMLINED ENERGY AND CARBON REPORTING

This Streamlined Energy and Carbon Report ("SECR") relates to activities of Moortown Group Limited for the financial year 1st June 2022 - 31st May 2023.

Moortown Group Ltd

Total Current Year

Total Prior Year

1st June 2022 - 31st May 2023

Units

2022-23

2021-22

Total Energy Consumption

MWh / yr

14,288

10,307

Fuel for site plant

9,436

7,155

Fuel for fleet transport [1]

4,659

2,966

Purchased electricity (office & depot) [2]

193

186

Total Emissions (gross annual)

t CO2e /yr

4,579

2,791

Scope 1 emissions (direct emissions)

Fuel*

4,438

2,748

Gas

100

0

Scope 2 emissions (energy indirect)

Electricity

38

39

Scope 3 emissions (other indirect)

Business Travel (category 6)

0

0

Electricity (T&D losses) (category 4)

3

4

Operations metrics (in period)

Turnover in period

£'M / yr

67.1

66.6

Av No. of direct employees

No.

91

115

Av No. of self-employed workers

No.

454

375

Intensity ratios

Total Emissions / Staff

t CO2e / FTE

8.4

5.7

Total Emissions / Turnover

t CO2e / £'M

68.2

41.9

Total Energy Consumed / Turnover

MWh / £'M

213

155

Notes to table

[1] Energy use and attributed emission for the fleet transport fuel includes the fuel used by related entities Excel Surfacing Ltd, Leeds Acro Ltd and Panther Construction Products Ltd. Fuel supplied to an un-related entity (V&A Property) is not included.

[2] Electricity supplied was non-half-hourly on a Fixed Business plan agreed directly with Eon and is classified by the supplier as "100% renewable". Electricity consumed was further offset by onsite solar pv generation. No allowance has been made for electricity sold back to grid, but indirect emission for upstream losses from the distribution and transmission of electricity have been included.

[3] Staff numbers used for KP purposes is the sum of direct employees and self-employed workers.

Qualification and reporting methodology

1. Approach: This report has been prepared by Compliance365 on behalf of Moortown Group Ltd to comply with The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. The report follows the Mar 2019 HM Government Environmental Reporting Guidelines and uses the latest Government Conversion factors for company reporting of greenhouse gas emission.

2. Description: The scope for this SECR disclosure includes the business activities of Moortown Group Ltd assessed in three categories: i) site fuel use, ii) fuel used to related staff/employee travel (private vehicle and public transport), and iii) electricity supplied to the main office.

3. Scope: A SECR assessment comprises three Scopes;

Scope 1 (Direct emission, Mandatory): Activities owned or controlled by your organisation that release emissions straight into the atmosphere. They are direct emissions. Examples of scope 1 emissions include emissions from combustion in owned or controlled boilers, furnaces, vehicles; emissions from refrigerant (F gases) in owned or controlled equipment.

Scope 2 (Energy indirect Mandatory): Emissions being released into the atmosphere associated with your consumption of purchased electricity, heat, steam and cooling. These are indirect emissions that are a consequence of Moortown Group Ltd activities, but which occur at sources you do not own or control.

Scope 3 (Other indirect, Discretionary*): Emissions that are a consequence of your business activities which occur at sources which you do not own or control and which are not classed as scope 2 emissions. Examples of scope 3 emissions are business travel by means not owned or controlled by your organisation, waste disposal, or purchased materials or fuels. Carbon dioxide produced from the combustion of biomass / biofuels should be reported separately to emissions in scopes 1, 2, and 3. Carbon dioxide produced from biomass / biofuels not as a result of the combustion of biomass / biofuels (e.g., industrial fermentation) should be reported within the scopes.

This report details how Moortown Group Ltd has complied with Scopes 1 and 2 of the methodology over the financial year June 2022 to May 2023. It also reports emissions associated with Category 4 & 6 for Scope 3.

Intensity measurement

4. Primary metrics: The chosen intensity measure represents the total gross greenhouse gas emissions (tonnes of CO2 equivalent) per average number of employees within the period.

a. Emissions per employee 8.4 t CO2e / employee (5.7)

b. Emissions per million pounds of turnover 68.2 t CO2e / £’M (41.9) and more energy (and resulting emission) from each site on average.

c. This improvement can be attributed to the reduction in emission from site plant but also to the reduced emissions from the fleet fuel use, in part attributed to wider adoption of hybrid electric vehicles office and site management staff.

5. Carbon Reduction Drive

Below details the measures Moortown Group Ltd have taken over the past 12 months to reduce their energy consumption and carbon emissions. There has been a focus on reducing their carbon footprint with the below presenting the achievements across the campuses.

Utilities

Moortown Group currently purchase from a Green Electricity Contract with REGO certificates. The Renewable Energy Guarantees of Origin (REGO) scheme provides transparency to the consumers about the proportion of electricity that suppliers source from renewable generation. In Moortown Groups case, this was stipulated to being 100%. As a result, Moortown Group can report their SECR emissions utilising both the Location and Market based approach to take advantage of their REGO electricity procurement.

Environment

Moortown is committed to the prevention of pollution, compliance with all relevant environmental legislation and regulations, and continual improvement of our management system and environmental performance. Our Environmental policy is regularly reviewed to ensure that it is compatible with the targets and objectives identified from consideration of the environmental aspects of the Company’s operations. We are committed to:

- Reducing waste and consumption of resources.

- Reducing or where possible eliminating incidents of pollution.

- Complying with applicable legal and other requirements related to our environmental aspects.

- Ensuring that environmental issues, objectives and targets are communicated and reviewed at appropriate points across the organisation.

- Actively seeking and encouraging feedback from the ‘grass roots’ level on problem areas and new initiatives.

- Providing the appropriate level of training to all our staff.

To date we have actively looked to reduce our emissions by:

- Submetering for office, workshops, EV charging and air conditioning should be considered.

- Fuel being supplied to each site should be recorded separately and reported against a site specific "carbon budget".

- Introducing Electric hybrid EV’s which have been adopted by a significant number of staff.

- Purchasing our electricity through a Green Energy Tariff with REGO certificates.

Following the calculation of this year’s carbon emissions, there has been a 147% increase against last years reported figures and a 115% saving against the original baseline. This is thought to be due to the uptake in works completed following the COVID-19 Global pandemic and the growth in the business over the past 4 years which can be seen from the increase in Full Time Employees.

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). 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, Sutton McGrath Hartley, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr A T McManus - Director

8 November 2023

Opinion

We have audited the financial statements of Moortown Group Limited (the 'company') for the year ended 31 May 2023 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including 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 May 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 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 eight, 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.

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

Our assessment of the susceptibility to material misstatement, whether by fraud or error, is made in a risk based approach.

In this approach, laws and regulations applicable to the entity, such as the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 102, the relevant tax compliance regulations within the UK, employment law, and Health and Safety law is considered, and the policies and controls the entity has in place to comply with these laws are reviewed, by discussion, reviews of correspondence and registrations monitored by external bodies. The engagement team remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Policies and controls relating to the risk of material misstatement as a result of fraud are also considered. These are assessed by obtaining an understanding of the company's operations and control environment. The policies and controls have been reviewed by discussion, review and sample testing of accounting entries, challenging assumptions and judgements, reviewing and evaluating related parties transactions, and wider background searches. Testing of income recognition and cut off, along with the recoverability of group balances is also completed.

We have ensured that the engagement team have appropriate levels of competence and experience to effectively monitor these risks and carry out work relevant to our assessment of each risk, including consideration of the industry the company operates in and its size and complexity.

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.

Other matters which we are required to address

The financial statements for the prior period were audited by the predecessor auditor, BHP LLP. The prior period audit report was unqualified and dated 13 January 2023.

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.

Jonathon Dickens ACA (Senior Statutory Auditor)

for and on behalf of Sutton McGrath Hartley

5 Westbrook Court

Sharrowvale Road

Sheffield

South Yorkshire

S11 8YZ

9 November 2023

TURNOVER

4

67,143,421

66,578,212

Cost of sales

61,043,591

57,841,039

GROSS PROFIT

6,099,830

8,737,173

Administrative expenses

6,119,932

6,248,972

(20,102

)

2,488,201

Other operating income

581,052

477,103

OPERATING PROFIT

6

560,950

2,965,304

Income from shares in group undertakings

-

3,000,000

Interest receivable and similar income

7

47,972

116,841

47,972

3,116,841

608,922

6,082,145

Gain/loss on revaluation of investments

(31,347

)

62,219

PROFIT BEFORE TAXATION

577,575

6,144,364

Tax on profit

8

258,500

796,233

PROFIT FOR THE FINANCIAL YEAR

319,075

5,348,131

PROFIT FOR THE YEAR

319,075

5,348,131

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

319,075

5,348,131

FIXED ASSETS

Intangible assets

10

7,913,189

8,588,819

Tangible assets

11

720,608

663,731

Investments

12

818,769

839,327

9,452,566

10,091,877

CURRENT ASSETS

Debtors

13

25,204,621

28,348,063

Cash at bank and in hand

5,162,596

5,253,875

30,367,217

33,601,938

CREDITORS

Amounts falling due within one year

14

18,153,124

17,826,658

NET CURRENT ASSETS

12,214,093

15,775,280

TOTAL ASSETS LESS CURRENT LIABILITIES

21,666,659

25,867,157

PROVISIONS FOR LIABILITIES

16

34,815

54,388

NET ASSETS

21,631,844

25,812,769

CAPITAL AND RESERVES

Called up share capital

17

12,185

12,185

Share premium

18

12,172,817

12,172,817

Retained earnings

18

9,446,842

13,627,767

SHAREHOLDERS' FUNDS

21,631,844

25,812,769

The financial statements were approved by the Board of Directors and authorised for issue on 8 November 2023 and were signed on its behalf by:

Mr A T McManus - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 June 2021

12,185

14,429,737

12,172,817

26,614,739

Changes in equity

Dividends

-

(6,150,101

)

-

(6,150,101

)

Total comprehensive income

-

5,348,131

-

5,348,131

Balance at 31 May 2022

12,185

13,627,767

12,172,817

25,812,769

Changes in equity

Dividends

-

(4,500,000

)

-

(4,500,000

)

Total comprehensive income

-

319,075

-

319,075

Balance at 31 May 2023

12,185

9,446,842

12,172,817

21,631,844

1.	STATUTORY INFORMATION

Moortown Group 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.

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.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

•

the requirements of paragraphs 26.18(b), 26.19 to 26.21 and 26.23.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

Turnover

Turnover represents amounts receivable for goods and services net of VAT and trade discounts.

Profit is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainly, by including in the profit and loss account turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs to date compared to total expected costs for that contract.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Intangible assets - goodwill

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.

Goodwill represents the excess of the cost of acquisition of unincorporated businesses 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. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 20 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Fixed asset investments

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

In the parent company financial statements, investments in subsidiaries, associates or 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 company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Impairment of fixed assets

At each reporting period end date, the company 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. Any goodwill included in the carrying amount of the investment is not tested separately.

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.

Construction contracts

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

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

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

The "percentage of completion method" is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets depending on their nature, and provided it is probable they will be recovered.

Cash and cash equivalents

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.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Plant and machinery

-

50% on reducing balance and 20% on reducing balance

Fixtures and fittings

-

33% on reducing balance and 15% on reducing balance

Motor vehicles

-

30% on reducing balance

Computer equipment

-

33% on reducing balance

Employee benefits

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.

Financial instruments

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with 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

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.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

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.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.

Classification of financial liabilities

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 company after deducting all of its liabilities.

Basic financial 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.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Taxation

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

Current tax

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

Deferred tax

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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Equity instruments

Equity instruments issued by the company 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 company.

Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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.