The directors present the strategic report for the year ended 31 December 2017.
The company is the holding company of a group trading in the building contracting industry.
The principal activity of the company’s wholly owned subsidiary undertakings are that of building contracting and civil engineering.
The strategy of the business is to deliver sustainable returns through excellence in project delivery . Over the past 12 months the strategy of the business has been to focus on building a strong customer base with a target of having 80% of turnover derived from Government funded entities, this was achieved by end of March 2018.
The group enjoys a number of competitive advantages including a strong reputation for quality in its heartland trading region, where it consistently achieves a strong market share; a well established reputation for price competitiveness; a knowledgeable and enthusiastic workforce and a strong customer focus throughout the business.
Despite a competitive and challenging economic environment, the directors were satisfied with the performance of the business during the year. However subsequent to the year end the group has had to recognise significant write downs on certain completed contracts where client solvency concerns and the potential for substantial legal costs, led to the Directors taking the decision to write back carrying values by £3,100,000 leading to the loss shown in the financial statements. The group no longer contracts with clients of this nature and this write down is one-off in nature.
Trading turnover reduced in FY’17 by £26,368,000 (13.4%) to £170,441,000 driven by reduced contract activity in the UK and Africa.
The gross margin percentage earned on contracts undertaken in the year decreased slightly from 6.3% in FY’16 to 5.3% in FY’17 due to the unexpected write down of certain contracts and variations in the mix of contract work undertaken relative to FY’16.
Administrative expenses increased by £699,000 (7.6%) in FY’17 driven primarily by an increase in salary costs.
The balance sheet position remains strong.
Whilst trading conditions are expected to remain competitive throughout FY'18, the board consider the group to be well positioned to manage and take on this challenge. The group enters FY’18 with a strong order book and a strong balance sheet. The directors believe the group is well placed to take advantage of any opportunities that might arise.
The group’s key performance indicators (KPI’s) are summarised below:
KPI’s |
2017 |
2016 |
Turnover |
£170,441k |
£196,809k |
Gross Margin |
£8,998k |
£12,472k |
Operating profit/ (loss) |
(£787k) |
£3,333k |
Net current assets |
£5,022k |
£957k |
The nature of the business environment in which the group operates is inherently risky. Whilst it is not possible to eliminate all such risks and uncertainties, the group has an established risk management and internal control system in place to manage them.
A risk management committee meets regularly and identifies the risks that it considers most likely to have an impact on the business and its strategic priorities. If emerging risks are identified in between these reviews, these are incorporated immediately into the risk management process.
The following sets out the principal risks faced by the group and how they are mitigated:
Contract delivery
The group has a number of contracts in progress at any point in time. Dependent on the nature, location and duration of the work and the legal framework of the contract, there is a risk that ineffective contract management could result in reputational damage, financial impact or failure to deliver on contracts.
Contracts in progress are controlled and managed through the group’s operating structure and procedures. This includes regular monthly contract reviews of contract-to-date financial performance against budget as well as comparing end-life forecast against tender. Project risk registers are also reviewed.
People
The group depends on a flexible, diverse and well-motivated workforce. If the group does not succeed in attracting, developing and retaining skilled people, as well as understanding and embracing the diversity of those people, it will not be able to grow the business as anticipated.
The group monitors staff turnover closely. Pay and conditions are reviewed regularly against the prevailing market to ensure that we remain competitive. Succession planning and staff development are managed at all levels in the group. The group has a performance review process which is designed to assist in the career development of its staff and also to identify potential successors to roles within the group, including at board level.
Contract pricing
The work for which the group tenders can often be complex with significant associated risks. Tender assumptions may be inaccurate or the risks associated with the tender may not be fully understood. If tenders are under-priced, contract losses and potential reputational damage will result. If tenders are over-priced, order books may suffer.
Current mitigation includes the close involvement of the board in all complex tender negotiations which is designed to ensure a consistent approach with respect to the management of contract risks across the group.
Safety
The group's activities are often complex and require the continuous monitoring and management of health, safety and environmental risks. Failure to manage these risks could result in injury to employees, sub-contractors or members of the public or damage to the environment. This could also expose the group to a significant potential liability and to reputational damage.
Detailed policies and procedures exist to mitigate such risks and are subject to review and monitoring by the business and external specialists. Compliance is monitored in a number of ways including audit, leadership tours and inspections.
Reputation
The group's ability to tender and win new business and its relationship with customers, supply chain partners, employees and other stakeholders depends in large part on the good reputation that it has established and how it is perceived by others. The group's growth targets may not be achieved if its reputation is adversely affected.
The steps taken to maintain, protect and enhance the Company's reputation include effective leadership, community engagement and striving to operate a safe and sustainable business.
Treasury operations and financial instruments
The group's operations expose it to a variety of financial risks that include the effects of price risk, credit risk, liquidity risk and interest rate cash flow risk.
The group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the group by monitoring levels of debt finance and the related finance costs. The group does not use derivative financial instruments to manage interest rate costs and as such, no hedge accounting is applied.
Given the size of the group, the directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the board of directors are implemented by the company's finance department.
Liquidity risk
The group actively maintains a mixture of long term and short term debt finance that is designed to ensure that the group has sufficient funds for operations and planned expansions.
Interest rate cash flow risk
The group has both interest bearing assets and interest bearing liabilities. Interest bearing assets comprise only cash balances, which earn interest at floating rates. The company has a policy of maintaining debt at floating rates. The directors will revisit the appropriateness of this policy should the company's operations change in size or nature.
Credit risk
The group's financial assets are cash and debtors. The group's credit risk is primarily attributable to its debtors which are presented in the balance sheet net of allowances for doubtful debts. The group has implemented policies that require appropriate credit checks on potential customers before sales are made.
Price risk
The group is exposed to commodity price risk as a result of its operations. However, given the size of the group's operations, the cost of managing exposure to commodity price risk exceed any potential benefits. The directors will revisit the appropriateness of this policy should the company's operations change in size or nature.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2017.
The consolidated financial statements include the results of Dawnus Group Limited and all its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transitions, income and expenses are eliminated in full on consolidation.
Certain aspects of the Directors' report have been considered in the strategic report.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
A dividend of £157,000 was declared and paid in respect of the year (2016: £400,000).
Dividends paid amounted to £1.80 (2016: £4.60) per Ordinary A share
The group's principal financial instruments comprise a bank overdraft and a bank loan in respect of residential development. The main purpose of these instruments is to finance the company's working capital requirements.
The group's borrowings are in pounds sterling and at the year end were subject to floating rates of interest.
The group's policy is to strive for excellent working relationships with its suppliers, this encourages mutual business development over the long term. Payments are usually make directly into the suppliers bank account in line with payment terms agreed with the individual supplier.
Quality, health & safety and environmental issues continued to be a top priority in 2017. The group will maintain its focus on Health and safety and work towards zero incidents through continual improvement. There is a group-wide programme to ensure that all relevant personnel hold a recognised safety qualification. The programme includes safety performance monitoring and formalisation of site responsibilities by the introduction of a site specific Health and Safety responsibilities matrix.
The group has retained accreditation to 18001 for health and safety management, 14001 for environmental management and 9001 for quality management. Our business Mission statement incorporates a section on the environment, stating that all employees must be ecologically aware, and adopt methods and working practices that are environmentally sympathetic.
The financial risk management objectives and policies and the principal risks and uncertainties facing the group and company are detailed in the strategic report.
The financial statements have been prepared on a going concern basis which assumes that the company will continue in operational existence for the foreseeable future.
The directors have reviewed the balance sheet, the likely future cash flows of the business and have considered the facilities that are in place at the date of signing the report. T he d irectors have concluded, based on this review, that it is appropriate to prepare the financial statements on a going concern basis.
The company’s ability to continue as a going concern is dependent on the continued support of the company’s bankers and on its providers of working capital maintaining the existing level of funding on terms and conditions similar to those currently in place.
It is our policy to be an engineering-led business, employing management and key trades on a regional basis. This allows the group to control directly the quality of work undertaken and to train and develop its workforce, to ensure that we meet clients' needs and expectations and increasingly differentiate us from our competitors.
In accordance with the group's policy on equality of opportunity, all managers are charged with treating employees, equally irrespective of sex, race, colour, disability or marital status. This policy has been monitored through both the company's Quality Management system and the monitoring documentation which forms part of the recruitment and selection process. The company's engineering training scheme continues to help the group to grow, whilst at the same time ensuring seamless succession to protect long term growth.
We are committed to communicating with and involving employees in matters affecting their work, and to informing them of the performance of the business. The company has set out a statement of Values, wherein we are committed to develop individual potential and to recognise individual contribution and reward performance. we would once again like to thank all Dawnus employees for their loyalty, hard work and dedication, which have contributed so much to the continued successful growth of the group.
The auditor, MHA Broomfield Alexander, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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 December 2017 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 group's or the parent 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 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. 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.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identifie d material misstatements in the Strategic Report and the Directors' Report .
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 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 group's and 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 group or 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.
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.
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.
All operations are continuing.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company statement of comprehensive income. The profit for the financial year dealt within the financial statements of the parent company was £157,000 (2016: £400,000).
The principal activity of the company is that of a holding company. The principal activity of the trading subsidiaries of the group is that of building and civil engineering operations.
The company is a private company limited by shares and is incorporated in England and Wales. The address of its registered office is Unit 7, Dyffryn Court, Riverside Business Park, Swansea Vale, Swansea, SA7 0AP.
The group and individual financial statements of the company 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 principal accounting policies applied in the preparation of these consolidated and separate financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group and Company accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements have been disclosed.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £'000.
The consolidated financial statements incorporate those of Dawnus Group Limited and all of its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. All subsidiary undertakings have the same year end as the Company and apply common accounting policies in the preparation of their financial statements.
Any subsidiary undertakings sold or acquired during the year are included up to, or from, the dates of change of control.
Exemptions
The company has taken advantage of the 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 in the group.
The company has taken advantage of the exemption in section 408 of the Companies Act from disclosing its individual profit and loss account.
The financial statements have been prepared on a going concern basis which assumes that the company will continue in operational existence for the foreseeable future.
The directors have reviewed the balance sheet, the likely future cash flows of the business and have considered the facilities that are in place at the date of signing the report. The directors have concluded, based on this review, that it is appropriate to prepare the financial statements on a going concern basis.
The company’s ability to continue as a going concern is dependent on the continued support of the company’s bankers and on its providers of working capital maintaining the existing level of funding on terms and conditions similar to those currently in place.
Turnover for a financial year includes the value of construction work done and plant hire income. Turnover excludes trade discounts and value added tax.
Long term contract balances are assessed on a contract by contract basis and are reflected in the profit and loss account as contract activity progresses. Any expected losses on long term contact balances are recognised immediately and are written off to the profit and loss account. Where it is considered that the outcome of a long term contract can be assessed with reasonable certainty before its conclusion, the prudently calculated attributable profit is recognised in the profit and loss account as the difference between reported turnover and related costs for that contract.
On short term contracts turnover and profits are recognised when invoices are raised for certified work undertaken.
The amount by which recorded turnover is in excess of payments on account is classified as "amounts recoverable on long-term contracts" and separately disclosed within debtors. Where progress payments are in excess of recognised turnover, the excess is included in creditors as "payments received on account".
Long-term contracts
Amounts recoverable on long-term contracts, which are included in debtors, are stated at the net sales value of the work done after provisions for contingencies and anticipated future losses on contracts, less amounts received as progress payments on account. Excess progress payments are included in creditors as payments received on account.
The stage of completion is measured in relation to the length of each contract on a straight line basis.
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.
Investments in a subsidiary company are held at cost less, where appropriate, any provision for impairment.
Borrowing costs are recognised in the profit or loss in the period in which they are incurred.
T he group reviews the carrying amounts of its tangible and intangible assets when trigger events occur 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 for impairment.
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 is estimated to be less than its carrying amount, the carrying amount of the asset 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 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 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.
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.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs, unless the arrangement constitutes a financing transaction, where the transaction is measured at present value of the future receipts discounted at a market rate of interest.
Such assets are subsequently carried at amortised cost using the effective interest method.
The group operates schemes under which part of the agreed sales price for a residential property can be deferred, at which point this is linked to the value of the property. The receivable is deferred until the earlier of 10 years, remortgage, death of borrower or resale of the property.
On initial recognition the asset is recognised on the open market value and revalued when an event occurs that would crystallise a gain from the previous valuation.
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.
At the end of each reporting period financial assets measured at amortised costs are assessed for objective evidence of impairment. 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 the 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 the profit or loss.
Financial assets are derecognised when the contractual rights to the cash flows from the asset expire or are settled, or substantially all the risks and rewards of the ownership of the asset are transferred to another party, or despite having retained some significant risks and rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
Basic financial liabilities, including creditors, and bank loans 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 paymen ts 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.
Fees paid on the establishment of loan facilities are recognised at transaction costs of the loan to the extent that it is probable that some of all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility which it related.
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.
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 measured at fair value through the statement of comprehensive income.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of the forward currency contracts is calculated by reference to current forward exchange contracts with similar maturity profiles.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
Dividends and other distributions to the Group's shareholders are recognised as a liability in the financial statements in the period in which the dividends and other distributions are approved by the shareholders These amounts are recognised in the statement of changes in equity.
Taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised directly in equity.
Current or deferred taxation assets and liabilities are not discounted.
The tax currently payable is based on taxable profit for the year or prior years . 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.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It established provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at that date.
A net deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be sustainable taxable profits against which to recover carried forward tax losses and/or from which the future reversal of underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date.
The Group provides a range of benefits to employees including paid holiday arrangements and defined contribution pension plans.
Short term benefits
Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.
Defined contribution pension plans
The Group operates defined contribution pension schemes for its employees. The assets of the scheme are kept independently of the Group and in separately administered funds. The pension costs charged in he financial statements represent the contributions payable by group companies during the year.
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 the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Assets held under finance leases are depreciated over the shorter of the lease terms and the useful live of equivalent owned assets.
Government grants are recognised at the fair value of the asset receive d or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met . Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable . A grant received before the recognition criteria are satisfied is recognised as a liability.
Trading transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling when the transaction was entered into.
Assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rates ruling at the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at the period-end of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months of less and bank overdrafts. Bank overdrafts, when applicable, are shown within borrowings in current liabilities.
Related party transactions
The Group discloses transactions with related parties which are not wholly owned within the same group. Where appropriate, transactions of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to understand the effect of the transactions on the Group financial statements.
Revenue grants
Revenue grants are credited to the profit and loss account over the period to which they relate.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Tax losses within the UK are available to be utilised against future profits. The Directors have taken the decision to recognise in full the deferred tax asset relating to tax losses of the UK business.
The estimates and underlying assumptions applied to determine depreciation are reviewed on an on-going basis. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
The estimates and associated assumptions used to determine contract provisions are based on knowledge of individual contracts and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed continuously.
On review of the balance sheet, the likely future cash flows and the facilities in place, the directors have used this as the rationale for preparing the accounts on a going concern basis.
An analysis of the group's turnover by geography is as follows:
The total turnover of the group for the year has been derived from its principal activity which is considered to be a single business arrangement and relates to construction revenue.
The company did not trade during the year.
The average monthly number of persons (including directors) employed by the group during the year was:
Their aggregate remuneration comprised:
The number of directors to whom retirement benefits are accruing under a money purchase scheme is 7 (2016: 7).
Key management compensation
Key management personnel are those who have authority and responsibility for planning, directing and controlling the activities of the Group. The Board consider that only the Directors of the Group fulfil this definition. The total compensation paid to the Directors is set out above.
The tax assessed for the year is higher than the standard effective rate of corporation tax in the UK. The differences are explained below:
The carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts:
The company has no fixed assets.
Available for sale assets comprise share equity receivables. The shared equity receivables have variable repayment dates and variable repayment amounts as part of the sales transaction and are secured by a second legal charge on related property.
Details of the company's subsidiaries at 31 December 2017 are as follows:
Trade debtors are stated after provisions for impairment of £Nil (2016: £Nil).
Included within other debtors is an amount of £292,000 (2016: £292,000) owed from a key member of management. The amount is considered to be receivable upon demand and has no set repayment terms.
Bank borrowings are secured by a first legal mortgage over long leasehold office premises held by a subsidiary company and on debentures over the company's assets. In addition, the bank borrowings are secured by a cross guarantee given by other group companies.
Obligations under finance leases and hire purchase contracts are secured against the assets to which they relate.
The long term bank loan in respect of the acquisition of the leasehold interest in the office premises is repayable over 15 years by monthly instalments at 1.45% over bank base rate.
The group use finance leases and hire purchase contracts to acquire plant and machinery. These leases have terms of renewal but no purchase option and escalation clauses. Renewals are at the option of the lessee. Finance lease and hire purchase obligations are repayable in instalments as above.
Amounts paid as finance charge: £456,000 (2016: £491,000)
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.
There are 87,000 ordinary A shares of £0.001 each and 3,000 ordinary B shares of £0.001 each.
The ordinary A shares hold full rights in respect of voting and entitle the holder to fully participate in equity distributions in the event of a winding up of the company. The shares may be considered by the Directors when considering dividends.
The ordinary B shares hold full rights in respect of voting but do not entitle the holder to fully participate in the equity distributions in the event of a winding up of the Company. The shares may be considered by the Directors when considering dividends.
The Company has guaranteed the bank borrowings of fellow group companies amounting to £5,518,000 (2016: £7,345,000)
Interest free loans have been granted by the group to its directors as follows: