MODEBEST_BUILDERS_LIMITED - Accounts
MODEBEST_BUILDERS_LIMITED - Accounts
The directors present the strategic report for the year ended 31 January 2018.
The company is a well established groundworks and frame contractor trading for over 24 years. The company's head office in Northolt enables it to service its customer base in London as well as the South of England. The company also operates a construction service in Holland.
During the year the company has experienced significant expansion with turnover increasing by just over 14%. Please refer to key performance indicators for more details. The sustained growth was achieved despite challenging market conditions and increased competition. Improved efficiencies in project delivery and commercial management have both contributed to the achievements of the company coupled with the outstanding performance of its loyal and committed workforce.
The company continues to successfully tender for key contracts and continues to receive repeat orders from satisfied customers and thereby continues to maintain its established customer base.
Commercial Risk
The company manages this risk by providing added value services to its clients, having fast response times not only in supplying products and services but also in handling all client queries and by maintaining strong relationships with clients. The company's commercial risk is reduced due to the market share of their clients as many of the company's clients are long standing market leaders in their field. The company has spread its commercial risk by not only actively seeking to widen its client base but also through continued expansion of its activities in the South of England and Europe.
Taxation risk
The company is exposed to financial risks from increases in tax rates and changes to the basis of taxation including corporation tax and VAT. Principal controls to mitigate this risk include regular monitoring of legislative proposals and the engagement of experienced executives and the use of experienced sector-specific professional advisers to mitigate the impact of changes.
Management risk
The company is reliant on its small high calibre team of operational managers, surveyors and board of directors. The company recruits and develops high calibre employees, many of whom have been with the company for a number of years. The board have tried to ensure that the knowledge base of the operational management team is shared as much as possible throughout the company.
Financing risk
See Financial instruments.
Economic risk
The directors have identified and evaluated risks and uncertainties and have controls in place to mitigate these. Responsibility for management of each key risk is identified and delegated. The company is exposed to the risks of the economic downturn that could lower the company's revenues and operating results in the future. However, actions continue to be taken to maximise the company's performance in all aspects of the business.
The balance sheet on page 10 of the financial statements shows that the company's financial position at the year end is, in both net assets and liquidity terms, an improvement over the previous year.
The key financial and non financial performance indicators used to determine the progress and performance of the company are set out below:
2018 2017
Turnover £138,133,167 £121,108,219
Gross profit £9,607,722 £5,788,950
Gross margin 6.9% 4.8%
Operating profit £7,519,847 £3,762,327
Earnings before interest, tax, depreciation, amortisation
(EBITDA) £7,530,318 £3,774,646
Market Share
The company is a large privately owned construction service provider company based in the South East of England. The company enjoys greater than national average market share. Although difficult to quantify within a given criteria it is estimated to have a significant market share. Turnover has increased by just over 14% from £121.1m in 2017 to £138.1m in 2018.
Gross Profit Margin
The company's gross profit margin has improved from 4.8% in 2017 to 6.9% in 2018, and reflects the increased diversification of work undertaken and despite the prevailing highly competitive nature of the market place, and in what has been a period of significant expansion in the company's trading activities.
Operating profit and EBITDA percentage of sales.
The directors view operating profit as a percentage of sales as a key performance indicator for the business and this is reviewed regularly. The ratio has increased from just over 3% in 2017 to just under 5.4% in 2018, after allowing for internal management charges. The EBITDA is often regarded as a more comparable measure of the performance of the business which shows that EBITDA percentage of sales has also increased from 3.1% to just under 5.4% over the course of the year. It is the intention of the company to focus on strengthening its financial performance in the industry by concentrating on customer retention, while at the same time monitoring both direct and indirect costs.
Accident Frequency rate
The company is committed to a Target Zero safety culture in relation to RIDDOR's. The company is committed to keeping its RIDDOR accident frequency rate as close to zero as practicable. The company recognises that any accident or incident is one too many and it continually strives to eliminate the possibility of any dangerous occurrence by providing a trained workforce, building relationships with its customers, promoting positive engagement and delivery of its behavioural safety program 'SAFEMODE'.
Safety, health and environmental policies
The company continues to strive to improve its safety, health and environmental standards and performance. The company operates SAFEMODE, an in-house initiative that ensures that all site personnel endorse a working safely behavioural culture. SAFEMODE and other initiatives are monitored regularly throughout the year and reviewed in response to performance and changes in legislation.
The company recognises the significance of health and safety in the workplace to ensure its work force is free from risk, through investment in continuing improvement in the occupational health and safety field.
In recognising the significance of health and safety, the company made significant investment in, occupational health, a behavioural culture programme (SAFEMODE), ongoing external monitoring, evaluation of environmental impact, risk reduction methods, the employment of professionally qualified personnel and a specialist health and safety team.
The implementation of the behavioural cultural programme, (SAFEMODE), the monitoring of the employees' health and welfare through regular site visits on each of its projects and the continuation of an extensive training programme, ensuring competency in the workplace, continue to play a major part in protecting the company's workforce.
The company recognises the importance of its environmental responsibilities, monitors its impact on the environment and designs and implements policies to reduce any damage that might be caused by the company's activities. Initiatives designed to minimise the company's impact on the environment include safe disposal of any product waste, recycling and reducing energy consumption.
Accreditations and memberships
The company has achieved accreditation in Quality Management Systems (ISO 9001: 2008), Environmental Management Systems (ISO 14001:2004) and in the Occupational Health and Safety Management Systems (OHSAS 18001:2007).
In addition, the company has also achieved accreditations from, or is a member of, the following organisations:
- Achilles Building Confidence accreditation
- The Contractors Health & Safety Assessment Scheme (CHAS) - accredited contractor,
- Constructionline - members
- Exor Bronze + accreditation
- Safety Management Advisory Services Ltd (SMAS)- Worksafe Contractor membership
- Safecontractor accreditation.
- Fleet Operator Recognition Scheme (FORS) - Silver level accreditation - Fleet Operator Recognition Scheme
- Delta Membrane Systems Ltd - registered Installer.
- The Concrete Society - members.
- ASUC - Full member
- Premium member of the Builders Profile
- Membership of the Durkan Take Five Network - Safe method of Working
- Environment Agency approved Upper Tier Carrier/Broker/Dealer for waste
- Plant Operators licence for the Modebest fleet
- Construct Concrete Structures Group Ltd - Category 1 member
In the opinion of the directors this will improve the company's internal and external processes.
Modern Slavery Statement
Modebest is committed to working within its own business and supply chain to ensure that it implements a proactive approach to tackling hidden labour exploitation and reducing these practices in their wider supply chain. Their risk assessments revealed that the most significant risks, from a modern slavery perspective, arise in their material and subcontract procurement. They have therefore produced some guidance for suppliers which sets out the legal framework in this area and Modebest’s requirements. A summary of their statement that highlights the key activities they are undertaking, their responsibilities and compliance can be found at http://modebest.co.uk/pdf/Modern-Slavery-Policy.pdf.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 January 2018.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £5,000,000. The directors do not recommend payment of a final dividend.
Objectives and policies
The company's principal financial instruments comprise bank balances, trade creditors, trade debtors, loans to the company by its parent company. The main purpose of these instruments is to raise funds for the company's operations and to finance the company's operations. The company's approach to managing other risks applicable to the financial instruments concerned is shown below.
Price risk
Due to the nature of the financial instruments used by the company there is no exposure to price risk.
Cash flow and liquidity risk
In respect of bank balances the liquidity risk is managed by maintaining a balance between continuity of funding and flexibility through and agreed payment policy. Strict payment terms are negotiated with the company's customers which enables it to ensure that it is paid promptly once an application has been issued. This policy ensures that sufficient funds are available to meet amounts due to trade creditors. Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding.
In respect of loans due from related companies, these are interest-free with no fixed date for repayment.
In respect of loans due to/from the parent and related companies, these are interest-free with no fixed date for repayment which allows the company sufficient funds to meet its payments to creditors.
Over the last few years the company has engaged in a number of construction projects using processes that were regarded as being eligible for a research and development claim. The directors have confirmed that several R&D claims were submitted during the year and credits obtained during the year - see also Note 8.
The company is focussed on securing profitable work and to increasing its market share by expanding its customer base. It continues to seek to diversify the work it undertakes within its core sector to mitigate the effects of the prevailing difficult trading conditions.
The directors believe the company is well positioned to respond to the trading conditions experienced during 2017-18, and to continue to profit from opportunities in newer markets.
At the date of approval of the financial statements, the company has a healthy secured order book considering the market conditions that have prevailed, with a number of confirmed contracts from repeat customers. As a result, the directors have considered the year ahead and believe that the company is well placed to manage its business risks successfully.
The auditor, Goldblatts, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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 financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
give a true and fair view of the state of the company's affairs as at 31 January 2018 and of its profit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors' remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://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.
Modebest Builders Limited is a private company limited by shares incorporated in England and Wales. The registered office is 171-173 Gray's Inn Road, London, WC1X 8UE.
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 the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
At the time of approving the financial statements, the directors have a reasonable expectation that the company 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.
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 credited or charged to profit or loss.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Research and development
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Revenue recognition is a key area of judgement especially in companies operating in the construction industry. The calculation of contract turnover, gross amounts due from customers and work in progress is contingent on the accurate measurement of work done and internal valuations by key management personnel. The directors have ensured that generally accepted industry practices and methodologies are followed by all relevant personnel and that accounting and quality management systems are regularly evaluated and certified.
An analysis of the company's turnover is as follows:
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £3,343 (2017 - £527).
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The company has outsourced its payroll and during the year all payroll costs were recharged from a related company,
Investment income includes the following:
The adjustments in respect of prior periods represents tax refunds received subsequent to the year end in respect of research and development claims.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
At 31 January 2018, retentions held by customers for contract work amounted to £1,974,725 (2017 - £4,116,484).
Advances received from customers for contract work amounted to £5,917,945 (2017 - £0).
The amounts due to group undertakings are unsecured, interest-free and repayable on demand.
Deferred tax assets and liabilities are offset where the 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:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company has one class of ordinary shares which carry no right to fixed income.
The company has provided guarantees in respect of unpaid hire purchase liabilities of several related and group companies as part of a cross-company guarantee in favour of the company's bankers. At 31 January 2018, the outstanding hire purchase liability in those related companies, which are not included in the company's balance sheet, amounted to £2,107,000 (2017: £4,495,702) - see also Note 23 'Related party transactions'.
Operating lease payments represent rentals and service charges payable by the company to two of the directors for office space occupied by the company, owned by the directors. The leases are typically negotiated over terms of one year.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
The current year compensation comprises £12,000 (2017: £12,000) recharged from a related company - see note 6.
During the year the company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Sales of goods to related parties were made at the company's usual list price. Purchases were made at market price discounted to reflect the quantity of services purchased and the relationships between the parties.
The amounts outstanding are unsecured, interest-free, repayable on demand and will be settled in cash.
As set out in Note 21, the company has entered into a cross-company guarantee with its bankers to secure HP liabilities in the several other group and related companies which are also controlled by E Scanlon and A Dravins.
The ultimate parent company of Modebest Builders Limited is Modebest Group Holdings Limited and its registered office is 171-173 Gray's Inn Road London WC1X 8UE.
The ultimate controlling parties are the families of E Scanlon and A Dravins who are equal shareholders of Modebest Group Holdings Limited, the ultimate parent company.
The smallest and largest group financial statements that consolidate this company is Modebest Group Holdings Limited. Copies of the group accounts are available to the public from the company at Moy House, 69 Belvue Road, Northolt, Middlesex, UB5 5XS.