The directors present the strategic report for the year ended 30 September 2022.
AHCS Strategic Management
The principal activity of the Company is that of a building contractor for high quality residential and mixed-use property throughout Southwest England, South Wales and London. The Company has been formed to act principally as the main contractor for development and investment companies in the Acorn Property Group and its associated Partners and business contacts.
The year in question continued to be dominated by the exit from COVID and the very final adjustments of the British economy to Brexit. This resulted in some continued labour and material shortage, but generally the Company’s very robust supply chain organised through its team of construction by us and good long-term connections with sub-contractors and the labour industry in general. As a result, there were delays to various projects at the beginning of the year. We are pleased to say that at the time of this report all projects in these regards have been resolved. The Company finished very few projects during the reported year.
Our management team remains focused on the construction of quality developments by ensuring we employ the appropriate professional, construction, management and aftercare staff so that the greatest service is offered to our shareholders, funders, and partners and we provide the best possible service to our customers.
The Directors have always paid due regard to the effect of their actions on the various stakeholders who have an interest in the business. Section 172 of the Companies Act now requires us to report each year on the steps taken to fulfil these obligations towards our stakeholders.
There are a great many parties who may be affected by the decisions made in the day-to-day running of the business and, as such, can be considered stakeholders. It is the responsibility of the Board of Directors to balance these interests in order to deliver the best possible outcome for all concerned.
Shareholders – Our Shareholders support the Directors’ plans as outlined in this annual report and specifically our expansion of the business in the Southwest and our aims to make us a carbon neutral entity and to promote the construction of carbon neutral homes.
Employees – The Company has focused carefully on wellbeing and careers of our staff and the environment in which they operate.
JV Partners – We currently have no JV Partners, although we do have a responsibility to Acorn Property Group’s Partners, and we report accordingly.
Funders – The Company has no external funders.
Subcontractors & Suppliers – We treat our subcontractors in the same way as our employees in terms of working conditions and inclusivity.
Local Community – Due to the nature of our business as a builder specialising in regeneration and sustainable developments, we consult very carefully with the local community when undertaking construction works. As a result, we recognise the importance of appreciating and respecting the views of the communities in which we work. Each site has its own issues that have local significance and should not be ignored. The construction process during developments of a site can be a disruptive process and therefore we consult very carefully with the local community to ensure any disruption is kept to a minimum. The quality of our construction services and aftercare services therefore are of paramount importance to the Company.
Customers – Our principal customer is the Acorn Property Group and the quality of our product and our after-care customer service is of paramount importance and the Company has invested in both staff and management systems to ensure we offer the best possible service.
Protocols – The Directors have ensured that appropriate local consultation and social and moral protocols are being followed across its business activities.
AHCS works closely with Acorn and their Acorn Green brand and therefore have always infused projects with a desire to create healthy and sustainable buildings, that exceed Building Regulations, creating homes full of light and space which are designed to adapt to peoples changing lifestyles. We have renewed our focus on this agenda with our ACORN GREEN initiative resulting in us operating the business with a commitment for carbon neutrally from December 2021 with a full audit of scope 1 & 2 emissions to be carried out by an approved third-party body. We have a reduction programme in place which over the next 2 years will provide for a 10% reduction year on year and to be constructing “Zero Carbon homes” by 2023. We have maintained a team of key people within Acorn to drive our ACORN GREEN pledges through all areas of the business, from design to construction, including how we run our offices and sites. Our aim is to be the leading bespoke low carbon builder in our operating regions and to be at the forefront of reducing carbon emissions through a combination of intelligent design and use of new technology.
To reduce carbon emissions from new homes much of the UK’s PLC housing sector relies on standardised housebuilder solutions moving towards Modern Methods of Construction.This blanket approach does not work when constructing bespoke, difficult, brownfield, smaller sites and particularly if the conversion or refurbishment of existing buildings is involved. Sites of this type have the capacity to create thousands of new homes but require a much more creative approach that brings in the best combination of technology and design thinking. This is the ACORN GREEN approach.
We have many strategies in place to achieve the ACORN GREEN targets and will expand and embed these in the core of the business to ensure we meet our stated targets. These strategies are manyfold and are constantly changing due to innovative technological changes but include:
Efficient use of land as a valuable resource
Retention of buildings where they can be re-purposed and brought up to modern standards, in order to reduce carbon emission in construction.
Use of on-site Renewable energy along with low Carbon and energy efficient technology
Fabric First including high performance windows.
Focus on lower energy construction strategies.
Embracing all electric solutions that can tap into the ever-decarbonising grid
New site procedures to ensure construction meets the design standards.
Facilitating healthy and sustainable lifestyles including cycle use and electric vehicles
Create biodiversity through selective planting of native species and reducing the use of hard surfaces.
As well as target setting, we are partnering with suppliers and businesses that share this agenda and in the last month we have partnered with Energist UK (Energy Consultants), Wanderlands (Carbon Footprint/Biodiversity Consultants), Worcester Bosch and HBS Energy for all onsite renewable and Low Carbon technology. We are also entering into many supply chain group-wide agreements with suppliers and sub-contractors who have been selected to help us deliver our sustainability agenda.
The Company maintains a senior management structure to monitor key areas of the business such as cost inflation and delays. Policies continue to be implemented to ensure standards are improved. A series of protocols and procedures are in place, and they are constantly reviewed to manage each of the key elements of the business at the regional and site level to ensure the smooth running of the business.
During the reported year construction costs continued to rise and we anticipate this will continue to do so and there have been some short-term supply chain issues. To mitigate this, our Team ensure that all our projects take into account potential material shortage and supply chain issues and remain vigilant to this risk. Our construction teams include dedicated material buyers, and we maintain operational purchase plans which take into account potential material shortages. As a result, our business has been largely unaffected by supply chain issues and only marginally affected by cost increases.
Our principal customer, Acorn Property Group, have continued with their long-term plan to reduce third party contractor risk by expanding their relationship that their direct construction activities through AHCS and as a result our construction pipeline continues to increase. The Company has continued to employ additional construction staff focusing on the pre-construction, buying and specification processes and this has had a continued positive affect on cost control, programme, quality control and has led to a considerable improvement in all aspects of Acorn’s construction management.
For the last 2 years we have been undertaking events to raise funds to support the charity Childrens Hospice Southwest. Last year we had the £50 challenge where they give us £50 and we turn that around and use it to raise as much cash as we can. We raised £1,005 from making and selling bacon rolls on our sites and from a dunk the director morning where I was placed into some home-made stocks and had sponges filled with water thrown at me. We also held a golf day at Falmouth Golf Club with 27 teams of 4 participating, the weather was in our favour and with good food and craic we ended up handing over a cheque to the Hospice for £5,707.
This year we are doing a bake off for the £50 challenge where we all bake our own cakes and bring them in to the office and sell them for £2.50 per slice. This is happening on our live sites as well.
Throughout the year we take part in many charity events from dragon boat racing to gig rowing and local cycle events.
The business environment for specialist experienced contractors remains along throughout the regions in which we operate. There was a shortage of construction staff and a huge demand for house building activities. There is a huge demand for the provision of new homes and therefore both by Acorn and by their Partners developers associated companies. As a result, we anticipate continued expansion of the business in the forthcoming year.
Business Performance
During the year under review, the sales of the company remained strong at over £20.2m and with lower cost of sales than previous year it led to a larger comparative Gross Profit, £1.9m; a 90% increase.
Net operating profit also increased, from £67k in 2021 to £100k in 2022.
The company invested heavily in staff to prepare for a large increase in activity with more projects being undertaken in the coming years. These projects have yet to impact the Turnover but the investment in staff can be evidenced by the near doubling of Administration Expenses.
The company maintains a healthy bank balance and at the year end date it was £375k in 2022 (£1.4m in 2021). This was due to the expansion, staff investment in preparation for increased activity and reduction of creditors balance from £5m in 2021 to £4.2m in 2022. Long term liabilities have also been reduced by £240k compared to 2021.
Overall, the directors are pleased with the consistent growth of the company resulting in the increase of Net Assets to £746k in 2022 compared to £687k in 2021.
The principal risks facing the company are labour shortages and material shortages and we have managed this risk through careful forward planning and establishing long term relationship with sub-contractors and suppliers.
All of the construction activities undertaken by the company are for Acorn Property Group companies and their Partners are cost plus contractors and therefore the company does not face the normal contractor risk of a fixed price with their customer and the variable price for materials or sub-contractors. As a result, we pass on to our client any increases in labour or material costs, thus eliminating the principal risk of any construction company.
The Directors analyse the other principal risks and have concluded that they are low.
The company’s principal financial assets are cash and debtors. Sales are made to fellow group companies and therefore there is not a credit risk to the company.
Key performance indicators
2022 2021
Turnover £20.2m £21.7m
Gross Profit £1.9m £1m
Gross Profit % 9.41% 4.61%
Net Profit £59k £67k
The directors monitor non-financial indicators including Environmental and Employee matters.
Employee satisfaction and retention is monitored regularly by means of probationary and annual employee reviews and through leaver’s questionnaire.
Since the year end we have continued to expand our activities and implemented new program monitoring procedures and employed external programme specialists to assist us.
The Company is committed to equal pay in employment. The Company believes its male and female employees should receive equal pay. In order to achieve this, the Company endeavours to maintain a pay system that is transparent, free from bias and based on objective criteria. During the reported year the Company has continued to promote staff internally and to provide support and training needed to help advance careers and education.
The Company gender mix is 86% male and 14% female.
The Company continues to provide access to private healthcare and an Employee Assistance Programme, and in the last year life insurance was put in place to cover all staff immediately upon joining the Company. We have taken steps to set up a Wellbeing Team with First Aid Mental Health training being rolled out in an effort to support all our staff’s mental health and wellbeing. An online training platform was introduced which gives all staff access to a variety of training options, we continue to support and encourage training and aim to promote internally whenever possible. Our aim is to provide each member of our team with as much advice and support as possible in both their professional and personal lives. At Acorn we have encouraged a people-led and skill-based working environment. We support and empower our staff with relevant training and tools they need to carry out their work in the most efficient manner. We are an equal opportunity employer and are proud of the many nationalities and cultures who are all working together under the Acorn umbrella.
Since the Balance Sheet date, the Company has continued to trade as contractors and expands its activities as soon as planning permissions have been achieved on numerous pipeline sites which the company plans to construct for Acorn in the future.
There are a number of other sites in the region that the company is tendering on and which is being purchased by Acorn.
Labour and materials costs and availability and delays associated with planning delays remain our main business risk and all these matters are constantly assessed.
Finally, as is custom, the Board would especially like to thank all the staff for their hard work and dedication during the pandemic which has been exceptional.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 September 2022.
The group has chosen in accordance with section 414c of the Companies Act 2006 to set out in the strategic report information which would otherwise be required to appear in the directors' report.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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.
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 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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
A H Construction Solutions Limited is a private company limited by shares incorporated in England and Wales. The registered office is 29 York Street, London, United Kingdom, W1H 1EZ.
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 £.
Trade and other debtors are measured at transaction price less any impairment unless the arrangement constitutes a financing transaction in which case the transaction is measured at the present value of the future receipts discounted at the prevailing market rate of interest. Loans are initially measured at fair value and are subsequently measured at amortised cost using the effective interest method less any impairment.
Trade and other creditors are measured at their transaction price unless the arrangement constitutes a financing transaction in which case the transaction is measured at present value of future payments discounted at prevailing market rate of interest. Other financial liabilities are initially measured at fair value net of their transaction costs. They are subsequently measured at amortised cost using the effective interest method.
The preparation of financial statements requires management to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 a continuing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.
The key judgements and sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below.
Valuation of amounts recoverable on contracts and payments on account - these are based upon the directors valuation of the work done on projects to date after reviewing external valuations and assessing the work required in order to complete the projects.
With the exception of the estimates described above, the directors consider that there are no other significant judgements or estimates in the preparation of these financial statements.
The average monthly number of persons employed by the company during the year was:
At the balance sheet date, the company had unpaid defined contribution pension payable of £6,377 (2021: £3,619).
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, not to disclose related party transactions with wholly owned subsidiaries within the group.
The directors regard RST Residential Investments Limited as the ultimate parent company and A.H. Construction Solutions Group Limited as the immediate parent company. The registered offices of the ultimate and immediate parent companies is 29 York Street, London, England, W1H 1EZ. The largest group of undertakings for which group accounts have been drawn up is that headed by RST Residential Investments Limited. Copies of the group accounts may be obtained from Companies House.