The directors present the strategic report for the year ended 30 June 2021.
The first quarter of the financial year was reasonably successful. The UK had come out of the latest lock down and the workload across the group produced a revenue of more than £2m with a net profit margin of 10.5%.
The second quarter proved much tougher, for a similar revenue of £2m our profit margin shrank to 5.2%. This was due to the seasonality we experience in our workload at this time of year, alongside the weather conditions and an imminent threat of a second lockdown due to rapidly rising COVID-19 cases. However overall, the group had posted a profit of approx. £250k for the first 6 months.
During the third quarter a new company within the group HGS Southern Limited, commenced trading. We rebranded our grab hire division to target smaller builders and the DIY market which our core business had been detached from for many years. James Harris came in as 25% shareholder within HGS Southern Limited and fronted the new venture. The aim was simply for our business to take a larger and more diverse slice of the market availability. We anticipated that this would also boost our recycled materials business. However overall, it was a disappointing quarter for the group. Revenue remained consistent but margins remained low at around 4%. During this period, we had entered the second lockdown and come to the realisation that one of our key customers would go into administration while owing us £110k. Due to this we made the decision to approach our lenders to look at taking a further payment holiday as we were concerned that the workload would significantly diminish. Lloyds granted us permission of a further 3-month asset finance payment break. We did not pursue other lenders. It transpired that our fears were unfounded as the business continued to work at near full capacity. By now we had restarted at the New Monks Farm contract, but the mobilisation costs and poor weather conditions were reflected in the management information.
The final quarter saw an improvement in revenue with £3m for the quarter and net profit margins of around 8% for the group. The New Monks Farm contract was largely responsible for the upturn, as we were able to produce some strong valuations.
By the year end HGS Southern Limited had made a solid start to trading, turning over nearly £900k, which is probably double what the grab business was previously achieving for the same period. With a net profit margin of 9% the potential for this sector of the business in years to come is encouraging. The main trade within Penfold Verrall Limited and Penfold Verrall Holdings Limited were working at 5% net profit for the year. Although the result was satisfactory given the pandemic, uncertain trading conditions and bad debts, we are conscious to improve both revenue and net profit ratios in future.
The directors consider the principal risks of the group to be those outlined in the directors' report and from those generated from within the construction industry. Management monitor conditions within the industry and assess risk levels on an ongoing basis.
Health and safety is one of the key risks facing the group and this risk is mitigated through ongoing training for employees and through regular maintenance checks on plant and machinery. The group utilises hire purchase contracts and therefore interest rate risk is also key to the group. The board implement strategies to mitigate and manage risks that the group faces.
In addition to the revenue discussed above, the board uses other key financial performance indicators ("KPIs") to track and review performance. These are as follows:
2021 2020
£ £
Revenue 8,568,921 7,234,764
Gross profit 1,405,072 623,804
Profit before tax 540,197 267,138
The movement in revenue has been explained within the fair review of the business above. The board believes that the group is well placed to maintain financial performance in the next 12 months.
We primarily rely on fast and accurate management information to gain detailed knowledge of where the business is excelling or failing. This allows us to react or prepare for what is ahead. We also have detailed costings on individual lorries and their operatives which allows us to see if a certain vehicle or driver is underperforming. For contract work such as New Monks Farm, detailed costings are judged against measured valuations which again gives us performance information.
The team leaders closely monitor their staff and equipment and report accidents, mechanical failings etc through the correct channels. It is the directors' responsibility to ensure that each team leader has the correct personnel, equipment, and protocols in place to be able to affect the business positively.
As noted in the fair review of the business, the COVID-19 pandemic and associated restrictions have affected the operations of the group. The pandemic continues to provide uncertainty to the industry and the wider economy. The directors measures put in place to mitigate the impact, includes utilising government support schemes and finance repayment holidays. The directors continue to closely monitor the ongoing impact and are satisfied with the financial performance of the group post year end.
The focus for this current financial year is to build the business to a revenue of £12m with a net profit margin of at least 8%. However, the outlook of the economy is concerning. We have had to increase wages to keep drivers due to the HGV driver shortage, the cost of fuel and materials have escalated drastically and so we are constantly monitoring our prices and while trying not to offer any fixed long-term commitments. Capital purchases are also a concern as we are unable to get reasonable delivery dates on new equipment. Currently there are additional 6 to 12 month waiting times.
The New Monks farm contract is now 80% completed. We have demobilised from site until spring but expect to be completed around June 2022. We are actively looking for contract work for our plant and earthworks section to fill the void this contract will leave once completed. I believe we have grown professionally as a company and as individuals whilst navigating this contract during some of the hardest trading conditions in my 40-year career. Mark Nunn has shouldered the responsibility for this project and has my utmost respect for his commitment, attention to detail and pure determination in delivering under very trying circumstances.
The core of the business is the muck away service we provide, which is extremely prominent in Sussex. Our reputation is unquestionable, and we compete for most large contracts. We are constantly searching for future work, disposal sites and opportunities. The overall performance of the muck away business has been below par within the year but there are reasons as outlined above. We are positive that HGS Southern Limited will organically grow to meet the natural increase in demand. The recycling business is key to all the above having sustainability, this is something Adam Bish and I, are evolving and developing for the benefit of the company’s future.
We are and will remain a proactive business that can alter course cheaply and efficiently if the management information causes any concerns. The information and efficiency of our accounts team led by Christine Bowden, is second to none.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2021.
The results for the year are set out on page 9. Ordinary dividends were paid amounting to £42,340. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company and group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company and group has sufficient liquid resources to meet the operating needs of the businesses.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade receivables are monitored on an ongoing basis and a provision is made for doubtful debts where necessary.
In accordance with the company's articles, a resolution proposing that Carpenter Box be reappointed as auditor of the group will be put at a General Meeting.
The directors have undertaken a robust assessment of the company and group's future trading prospects and have concluded that the company and group remains a going concern. See note 1.3 to the accounts for further detail.
We have audited the financial statements of Penfold Verrall Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2021 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport 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' r eport .
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' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements , the directors are responsible for assessing the parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below .
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
Obtaining an understanding of the legal and regulatory framework that the company and group operates in, focusing on those laws and regulations that had a direct effect on the financial statements and operations;
Obtaining an understanding of the company and group ’s policies and procedures on fraud risks, including knowledge of any actual, suspected or alleged fraud ;
Discussing among the engagement team how and where fraud might occur in the financial statements and any potential indicators of fraud through our knowledge and understanding of the company , group and our sector-specific experience.
As a result of these procedures, we considered the opportunities and incentives that may exist within the company and group for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: health & safety, employment law, and compliance with the UK Companies Act.
In addition to the above, our procedures to respond to risks identified included the following:
Making enquiries of management, about any known or suspected instances of non-compliance with laws and regulations and fraud;
Assessment of matters recorded on the company's health & safety incident register;
Challenging assumptions and judgements made by management in their significant accounting estimates; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The group statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own income statement and related notes. The c ompany’s profit for the year was £27,042 (2020 : £1,029,086).
Penfold Verrall Holdings Limited (“the company”) is a limited company domiciled and incorporated in England and Wales . The registered office is Amelia House, Crescent Road, Worthing, West Sussex, BN11 1RL.
The group consists of Penfold Verrall Holdings Limited and its subsidiaries.
The se 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 a mounts in these financial statements are rounded to the nearest £1 .
The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash f low and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The financial statements have been prepared on a going concern basis. The directors have considered relevant information, including the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. The COVID-19 pandemic and the ensuing economic shutdown has had a significant impact on the company’s operations. In response to the COVID-19 pandemic, the directors have performed a robust analysis of forecast future cash flows taking into account the potential impact on the business of possible future scenarios arising from the impact of COVID-19. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.
Based on these assessments and having regard to the resources available to the entity, the directors have concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.
Revenue is recognised to the extent that the company obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty.
The following criteria must also be met before revenue is recognised:
Construction contract income
Revenue from contracts for the provision of construction services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Contract retentions are recognised on completion of the respective contracts when there is reasonable certainty that they are recoverable.
Haulage income
Revenue from contracts for the provision of services is recognised at the time the service is delivered, when 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.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Freehold land is stated in the statement of financial position at revalued amounts, being the fair value at the date of revaluation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date.
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 income statement .
Equity in vest ments 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.
I n the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
At each reporting period end date, the group reviews the carrying amounts of its tangible 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 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 (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.
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 statement of financial position when the group becomes party to the contractual provisions of the instrument.
Basic financial assets, which include trade and other receivables 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 m ethod unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
Basic financial liabilities, including trade and other payables , 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 receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred taxation is provided in full in respect of taxation deferred by timing differences between the treatment of certain items for taxation and accounting purposes.
The costs of short-term employee benefits are recognised as a liability and an expense .
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the discounted cash flow model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the c ompany as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
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 initially 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 statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the income statement 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 assets leased term and its useful life. If there is a reasonable certainty that ownership of the asset will be obtained by the end of the lease term, the asset is depreciated over its useful life.
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 lease d asset are consumed.
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.
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.
Key sources of estimation uncertainty
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.
Property, plant and equipment
Property, plant and equipment is depreciated over its useful life taking into account, where appropriate, residual values. Assessment of useful lives and residual values are performed annually. In assessing the residual values and the remaining life of the asset, its projected disposal value and future market conditions are taken into consideration.
Deferred tax
Deferred tax is calculated using the future expected rate of corporation tax based on when the liability is expected to be realised.
Valuation of freehold land and buildings
The company and group's freehold land are stated at their revalued amounts, being the fair value at the date of revaluation. The director's assessment for determining fair value is disclosed in note 11.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Revenue derived from construction services include a judgement of the stage of completion at the year end. This judgement is used to determine the amount of revenue and profit to recognise in relation to each contract, which is still ongoing at the end of the reporting period. The stage of completion is calculated based on the assessment of qualified quantity surveyors of the costs incurred for work performed in conjunction with expected final contract costs and overall profitability.
The provisions for losses on contracts are included for expected losses made on contracts in progress at the balance sheet date.
An analysis of the group's revenue is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Employees in the company were remunerated by way of salary from a subsidiary company.
The directors are considered to be the only key management personnel of the company and the group.
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:
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:
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 and group's freehold land are stated at their revalued amounts, being the fair value at the date of revaluation. The valuation was carried out by Crickmay Chartered Surveyors (an independent valuer) on 29 September 2020. The valuation method used conforms to International Valuation Standards and was based on recent market transactions carried out on arm's length terms . There has been no change to the valuation technique during the year and the directors are have not obtained a more recent valuation as they are not aware of any material change in value.
If the freehold land was measured using the historic cost basis rather than fair value , the carrying amounts for the group would have been £1,319,795 (2020 - £1,319,795) and for the company would have been £1,304,795 (2020 - £1,304,795).
During the year the parent company acquired 75 shares of £1 par value in HGS Southern Limited. These shares were subsequently transferred to another subsidiary, Penfold Verrall Limited.
Details of the company's subsidiaries at 30 June 2021 are as follows:
Included within other receivables is £108,716 (2020: £nil) available in respect of an invoice discounting facility at the reporting date. This facility is secured against the assets of the group.
Included within other payables is £nil (2020: £365,279) paid in advance to the group in respect of items included in trade receivables as part of an invoice finance facility at the reporting date. This facility is secured against the assets of the group .
Included within bank loans is a £50,000 (2020: £nil) bounce back loan that is 100% guaranteed by the government. The remaining bank loan balance is secured by fixed charges over the assets of the company.
The bank loans are repayable over a period of 10 years from the date of acceptance with 8 years remaining, the rate of interest payable is at the Bank of England's Base rate plus 2.1%.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Obligations under finance leases contracts are secured against the assets to which they relate.
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:
The directors have considered the deferred tax liabilities notes above and concluded that it is not possible to state the estimated liabilities which will reverse within the next 12 months. This is due to the level of reversal being dependant on events which are not yet known.
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.
During the year the company issued equity-based share options under an Enterprise Management Incentives (EMI) scheme. The options can be exercised only after the 6 April 2022 and can only be granted to eligible employees, being those who are an employee or a director of any company in the group. If the options remain unexercised after a period of ten years from the date of the grant or if the option holder ceases employment the options lapses.
During the year 8,800 (2020: nil) share options were granted. No share options were forfeited or exercised in the year and none expired. The number of share options outstanding at the reporting date were 8,800 with a weighted average exercise price of £0.01 being £88 in aggregate. No charge has been made in the financial statements on the grounds of immateriality.
Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.
Ordinary A shares had attached to them full dividend and capital distribution (including on winding up) rights but had no voting rights. During the year the company bought 15 ordinary A shares back from former shareholders for an amount of £6,000 and subsequently cancelled the shares.
The revaluation reserve represents revaluation gains on land freehold, plant and equipment net of deferred tax.
The capital redemption reserve is a non-distributable reserve where amounts are transferred following the redemption of the company's own shares.
The other reserve relates to a merger reserve recognised when Penfold Verrall Limited was acquired under the merger accounting method. This reserve reflects other reserves included on the balance sheet of Penfold Verrall Limited at the point of acquisition.
After the reporting date the group have declared and paid dividends totalling £nil (2020: £42,340).
Group and company
At the reporting date the group and company were owed £201,294 (2020: £201,294) from a connected entity.
Group
During the current year sales of £17,300 (2020: £4,154) were made to a connected entity. At the reporting date the connected entity owed £2,562 (2020: £nil) to the group. At the reporting date the group was owed £193,301 (2020: £193,301) from a connected company.
During the year purchases of £112,854 (2020: £nil), and sales of £2,022 (2020: £nil) were made with a connected entity. At the reporting date the connected entity owed the group £2,047 (2020: £nil).
Group
During the financial year the group made and advance to a director of £83,500. This balance was fully repaid by the director during the year.
Group and company
During the year dividends of £42,340 (2020: £87,683) were paid to the directors.
The parent company is Penfold Verrall Employee Trustee Limited. The parent does not produce group consolidated accounts as there is no requirement to. The registered office is Amelia House, Crescent Road, Worthing, England, BN11 1QR.
There is no ultimate controlling party.