REG - Hercules Site Svcs - Final Results
28/03/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220328:nRSb1452Ga&default-theme=true
RNS Number : 1452G Hercules Site Services PLC 28 March 2022
28 March 2022
Hercules Site Services plc
("Hercules" or "the Company")
Final Results
Hercules Site Services plc (AIM: HERC), a leading technology enabled labour
supply company for the UK infrastructure sector, is pleased to announce its
audited results for the year ended 30 September 2021.
Financial Highlights
· Revenue increased by 42% year-on-year to £32.7m (2020: £23.0m)
and was up from £30.7m in 2019
· Adjusted EBITDA* increased by 70% to £2.4m (2020: £1.4m)
· Pre-tax profit was £515,000 for the year (2020: £1.0m),
including exceptional non-recurring items such as IPO costs
· Pre-tax profit before exceptional non-recurring items was £1.4m
(2020: £1.0m)
· Adoption of a progressive dividend policy with a proposed
inaugural dividend of 1.7p per share for the year ended 30 September 2021
*Adjusted EBITDA excludes exceptional non-recurring items of £890k relating
to IPO costs and a bad debt expense
Operational Highlights
· Appointed as a labour supply partner to the Balfour Beatty Vinci
joint venture on HS2 (Phase 1, northern section), which is expected to
underpin significant revenue growth over the next six years
· Suction Excavator Services business successfully established,
with demand outstripping supply, leading to the order of eleven more suction
excavators due for delivery in 2022
· Won the award for Best Health, Safety and Wellbeing Initiative at
the British Construction Industry Awards 2021
Post Period End Highlights
· Successful IPO on the AIM Market of the London Stock Exchange
with a £4m raise (before expenses)
· Growth achieved within the rail labour supply sector, with a
framework agreed with Volker Fitzpatrick to supply safety critical rail
workers
· Approved supplier to the M Group with new projects underway for
Dyer & Butler and Milestone
· Appointed labour supply partner to Vinci for the Southampton to
London pipeline, and to Skanska on the M42 Junction 6 improvement scheme
· Growth throughout the water utilities sector due to the
significant ramp up of the current Asset Management Programme cycle
· Appointed to deliver increased labour requirements throughout the
HS2 supply chain including labour supply to Blackwell Earthmoving on the
central section of Phase 1
Hercules CEO Brusk Korkmaz said: "We are delighted to present these results,
our first since our successful listing in February 2022, and to propose our
inaugural dividend to investors. Our results for the period show a strong and
rapid bounce-back from 2020, where our year-on-year growth track record
experienced an interruption due to the impact of covid on the construction and
infrastructure sectors. They also show that we have delivered solid growth on
the prior, non-covid year of 2019, thanks to our reputation in the industry
for our ability to quickly meet our blue-chip clients' labour needs through
our use of proprietary digital technology. The construction and infrastructure
sectors are now as buoyant as ever and set to benefit from more than £650
billion projected public and private investment spend over the next ten
years.
"The current financial year has kicked off to a fantastic start, with trading
in line with our expectations and exciting growth initiatives already
underway. The award of a contract to provide labour to HS2 is expected to
step-change our growth over the next six years and we have been placing
workers on site over recent months. We are also ramping up our award-winning
Suction Excavator Services business following a successful 2021, where demand
outstripped supply. We are also having positive conversations in respect to
monetising our digital technology and wellbeing services, demonstrating the
positive reception we are experiencing for the aspects of our business which
set us apart from our peers. We thank our new investors for their support in
our recent IPO and look forward to communicating our progress towards our
stated goals in the coming months."
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which has been incorporated into UK law by the European
Union (Withdrawal) Act 2018.
Enquiries
Hercules Site Services plc c/o SEC Newgate
Brusk Korkmaz (CEO)
Paul Wheatcroft (CFO)
SP Angel (Nominated Adviser and Broker) +44 (0) 20 3470 0470
Matthew Johnson / Adam Cowl / Harry Davies-Ball (Corporate Finance)
Grant Barker / Rob Rees (Sales and Broking)
SEC Newgate (Financial PR) +44 (0) 20 3757 6882
Elisabeth Cowell / Ian Silvera / Max Richardson Hercules@secnewgate.co.uk
About Hercules Site Services plc
Hercules is a leading tech enabled labour supply company for the UK
infrastructure sector. Founded in 2008, Hercules has an established track
record of profitability and fast-growth and has built a blue-chip customer
base which includes Balfour Beatty, Costain, Kier, Skanska, Dyer & Butler
and Volker Fitzpatrick. The Company has been appointed to provide labour for a
range of high-profile infrastructure projects, such as HS2, due to its agile,
innovative, digital first approach and complete service offering. It is
well-placed to benefit from any government increase in infrastructure spending
and its experienced management team has identified multiple opportunities for
growth.
HAIRMAN'S REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2021
I am delighted to present my first Chairman's report for Hercules Site
Services plc ("Hercules" or "the Company") since joining the Board at the time
of the Company's IPO on AIM on 4 February 2022. Hercules is a leading, dynamic
provider of labour and construction services to blue-chip clients in the UK
infrastructure sector. We believe that the Company is well positioned to
benefit from the UK Government's commitment to spending on infrastructure as
it supplies labour for these projects and can also provide civil engineering
services and specialist plant hire, which comprises a fleet of suction
excavators, an innovative method of safe excavation. Our "one stop shop"
service enables us to cross sell between divisions and our experienced
management team is adept at delivering projects efficiently for clients.
In its labour supply business, the Company's proprietary digital technology is
used to accelerate the recruitment and onboarding process for workers, which
not only enables the Company to quickly meet the client's labour needs but
also enables the Company to focus on sourcing this labour locally which often
is a stipulation in government-funded projects. This local focus has built
Hercules' reputation across the UK. We believe more traditional suppliers of
labour struggle to do this without a local presence and are also facing
difficulties replenishing their labour pool following shifts in the labour
force caused by the COVID-19 pandemic and Britain's exit from the European
Union, among other things. In contrast, Hercules has a low staff turnover
which we attribute to the Company's culture, focus on innovation and on
developing its people, many of whom have progressed through the business to
senior management positions.
Hercules is also developing its digital solutions to provide clients with data
analysis tools to help improve their ability to understand their own labour
supply needs and make long-term planning decisions. It is innovation such as
this that has led to the Company winning multiple awards and being recognised
by both its blue chip-clients and third parties, such as Highways England, in
areas such as its innovative business practices, digital connectivity and
excellent client delivery.
The UK construction sector is set to benefit from nearly £650 billion of
projected public and private investment spend on infrastructure projects over
the next ten years. Ongoing and upcoming major infrastructure projects include
HS2, the Lower Thames Crossing, Water Infrastructure Asset Management Plan 6
(AMP6) and 7 (AMP7) and Highways England's Smart Motorways and Regional
Development programme, among others.
The Company's innovative approach has been attractive to clients and enabled
the Company to establish framework agreements with large blue-chip companies,
such as Balfour Beatty Highways, Costain, Kier, Skanska, Dyer & Butler and
Volker Fitzpatrick, who we believe value the quality and reliability of the
services such innovation provides. These framework agreements provide a basis
for Hercules to collaborate with clients on multiple projects and also means
the Company has increased visibility on its clients' pipeline of projects, as
well as promoting the cross selling of its services.
In August 2021, the Company was selected as one of six labour supply partners
for the Balfour Beatty Vinci joint venture constructing the northern section
of HS2 from London to Birmingham (Phase One). We believe the Company's use of
digital technology in the recruitment and on-boarding of workers was a key
factor in securing this business which is expected to underpin significant
revenue over at least the next six years.
On 4 February 2022, Hercules was admitted to the AIM market of the London
Stock Exchange, beginning a new chapter in its development. Following the
Company's admission to AIM, the Board has adopted a progressive dividend
policy and is pleased to propose a dividend of 1.7 pence per share for the
year ended 30 September 2021. Hercules Real Estate Limited, the Company's 71%
shareholder, has waived its entitlement to this payment. The dividend will be
paid on 1 June 2022 to shareholders on the register at close of business on 29
April 2022. The shares will go ex-dividend on 28 April 2022.
The fundamental market drivers for our business look positive and we believe
an exciting few years now lie ahead as we seek to grow the business both
organically and via selective acquisitions. The Company's recent appointment
as a labour supply partner to the Balfour Beatty Vinci joint venture on HS2 is
testament to the team's hard work and should lead to a significant increase in
our revenue. The Company has already started to provide labour for this
important project.
We are pleased to report a strong start to the new financial year, with
current trading in line with management expectations.
Henry Pitman, Non-Executive Chairman
Date: 25 March 2022
CHIEF EXECUTIVE OFFICER'S REVIEW FOR THE YEAR ENDED 30 SEPTEMBER 2021
The year ended 30 September 2021 was an excellent year for Hercules, achieving
the highest turnover since I founded the Company in 2008. The second half of
the financial year ended 30 September 2020 was adversely impacted by the
COVID-19 pandemic, but recovery was strong from Autumn 2020 onwards, and
continued throughout the financial year.
Post period end, on 4 February 2022, we successfully listed Hercules on the
AIM market, raising £4 million (before expenses) for the Company. The
proceeds will be used to fund the expansion of the suction excavator fleet,
HS2 transport investment and provide working capital for the HS2 project.
Construction Services comprises the Company's labour supply and civil projects
divisions. The Company's core business is supplying skilled and qualified
labour to blue-chip construction companies to deliver key infrastructure,
civil engineering, utilities, groundworks, highway and railway projects £650
billion is planned to be spent in the infrastructure sector in the next ten
years and Hercules is well placed in the market to benefit from this
expenditure. Our dedicated operations and resource teams, personnel management
system and innovative mobile recruitment and onboarding apps ensure that we
can supply the right person to the right location on time to fulfil client
requirements.
In the last 12 months, on average, the Company has been supplying between 400
and 500 personnel to projects each day. These projects range from only a
handful of staff through to 140 operatives deployed on the M4 project with
Balfour Beatty Highways. The Company's major focus for labour supply is
transport projects such as road and rail projects. Currently the Company is
supplying labour to major road projects such as the M4 and M3 Smart Motorway
projects and key regional projects such as the A30 upgrade in Cornwall, A2
Ebbsfleet Project in Kent and A63 Project in Hull, in addition to numerous
smaller projects under the Highways England Regional Development Programme. On
the rail side, the Company is working with Hochtief on Crossrail projects in
West Drayton, Hayes and Harlington and Southall. On utilities projects, the
Company is supplying labour to water companies including Thames Water,
Southern Water and Anglian Water.
In August 2021, the Company was selected as a partner for the Balfour Beatty
Vinci joint venture to supply labour in the West-Midlands area around
Birmingham on the Northern Section of HS2. Hercules is one of the six
companies making up the labour desk, which it is anticipated will collectively
provide at least 4,000 workers during the life of the project.
We have begun recruitment for this project and individuals have been selected
to run the Company's part of the labour desk with other members of staff
assigned to HS2 project-specific roles. We will need to significantly expand
our labour force for the project and plan to use our recruitment and
onboarding apps in achieving this. We expect to source further workers through
our relationships with the Department of Work and Pensions and local job
centres. We will also seek to attract further ex-military personnel and
anticipate recruiting from overseas to fill certain roles (if necessary) and
are in discussions with the Home Office regarding its Immigration Sponsorship
Management process. We are committed to upskilling and cross skilling our
workforce and finding local jobs for local people through our apps.
In relation to civil projects, we partner with some of the UK's top
contractors to provide end to end project delivery. The Company is recognised
for its work in the water industry and has expanded into all areas of the
civil engineering sector. We are currently working with TGE at Avonmouth on a
new gas storage facility, which is expected to be worth approximately £2
million in revenue to Hercules, the Irish Archaeological Consultancy on
various sites on the HS2 Central Section and with Galliford Try and Black
& Veatch on various AMP7 projects.
Suction Excavator Services
Despite the difficult conditions in the sector caused by the COVID-19 pandemic
in 2020, Hercules started investing in a fleet of state-of-the-art suction
excavators, a more efficient and safer way of removing debris for digging
teams. We were operating nine suction excavators at the end of September 2021,
and have a further eleven scheduled to be delivered from January 2022 onwards.
Demand is outstripping supply for suction excavator services and I am very
pleased this new business division has been such a success.
Brusk Korkmaz, Chief Executive Officer
Date: 25 March 2022
CHIEF FINANCIAL OFFICER'S REVIEW FOR THE YEAR ENDED 30 SEPTEMBER 2021
Introduction
The ongoing challenges of the COVID-19 pandemic in 2020-21 have had a
significant impact on the UK construction industry. Additional health and
safety concerns and supply chain difficulties generated by the pandemic
contributed to a marked downturn in productivity within the construction
industry in 2020. However, the industry has shown strong signs of recovery
across all sectors with infrastructure proving particularly resilient. By
January 2021, infrastructure was the only sector where the level of work had
recovered above February 2020 pre-pandemic levels, growing by 8 per cent. The
Directors anticipate continued growth alongside significant investment in
infrastructure as outlined by the UK Government.
Financial Performance
In 2021, revenue increased to £32,754,468 (2020: £22,950,757) representing
an increase of approximately 42% in revenues year-on-year.
Year ended 30 September
2021 2020
£ £
Construction Services 30,586,172 22,937,327
Suction Excavator Services 2,168,296 13,430
32,754,468 22,950,757
The Company received £164,631 of grants from the Construction Industry
Training Board, (2020: £142,675), as well as £52,565 in Coronavirus Job
retention Scheme grants (2020: £249,049).
Administrative costs rose to £6,118,558 (2020: £3,701,746) - an increase of
more than 60% compared to the prior year. Excluding depreciation, revaluation
and R&D (see Note 8) they rose to £5,326,797 (2020: £3,368,725). This
was a combination of new activity (the suction excavator business started
September 2020 and the management and administration infrastructure was built
in the following year), and a planned management expansion in readiness for
commencing the HS2 contract.
The Company delivered:
Pre tax profit of £515,517 (2020: £1,010,420)
Pre tax profit before exceptional non-recurring items (see below) of
£1,413,506 (2020: £1,010,420)
EBITDA (see below) of £2,437,739 (2020: £1,409,006).
Year ended
Year ended
30
September
30 September
2021
2020
£
£
Profit from
operations
786,106
996,654
Depreciation
724,843
383,364
Research & Development
17,505
54,555
(Profit)/Loss on sales of assets
11,297
(25,567)
Exceptional items (see below)
897,988
-
EBITDA
2,437,739
1,409,006
Exceptional items related to:
Cost relating to AIM admission
£297,058
NMCN Bad debt
£600,930
Total
£897,988
NMCN plc (North Midland Construction), a client of the Company, went into
administration at the end of September 2021, and while we may recover some of
the funds, this is uncertain, and we have therefore fully provided for the
debt. Hercules has never previously had to make a provision for a bad debt in
its 14 year history.
Statement of Financial Position
As at 30
September 2021, the Company's net assets were £3,436,950 (2020: £6,787,344) of which £1,465,292
(2020: £2,015,552) were cash and cash equivalents.
Current assets at 30 September 2021 were £10,113,832 (2020: £10,989,500).
Net current assets as 30 September 2021 were £1,366,772 (2020: £5,155,872).
The change in assets in 2021 over 2020 was due to the approval in March 2021
of an interim dividend of £3,294,192. This was an in-specie dividend that
cleared the debt owed to the company by the parent company, leaving a credit
balance of £470,453. A contra settlement was agreed with the parent company
eliminating this credit balance and the Director current account.
Company loans & borrowings were £3,139,463 as at 30 September 2021
(2020:£344,639). This is the balance on a working capital facility with
Investec that was introduced in May 2021 - originally capped at £4m, which
was increased to £10m in November 2021 in the light of winning the HS2
contract.
There was a bank loan outstanding at the end of 2020, but this was repaid by
September 2021. The borrowings at the end of September 2021 relate to the
Investec working capital facility (see note 20).
At 30 September 2020, the Company anticipated that it would be making a
Research and Development tax claim that would lead to an increased level of
tax losses being available. The relevant claim has not yet been submitted and
the Directors do not consider there was sufficient certainty at 30 September
2021 to be able to continue to recognise the corresponding deferred tax asset.
As a result the deferred tax charge in the year ended 30 September 2021
includes an amount of £465,503 relating to the reversal of the previously
recognised asset.
The financial position of the Company was further improved following admission
to the AIM market of the London Stock Exchange on 4 February 2022 with a net
fundraise of circa £2.7m.
Seven more suction excavators were added to the fleet during the year (the
first two arrived in September 2020), all are financed with conventional asset
funding from several different providers. Eleven more suction excavators are
due to be delivered in the year ending 30 September 2022, all to be similarly
funded.
Paul Wheatcroft, CFO
Date: 25 March 2022
STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
30 September 2021 30 September 2020
Continuing operations Note £ £
Revenue 6 32,754,468 22,950,757
Cost of sales (26,066,999) (18,647,906)
Gross profit 6,687,469 4,302,851
Other operating income 7 217,195 395,549
Administrative expenses (6,118,558) (3,701,746)
Profit from operations 8 786,106 996,654
Fair value (losses)/gains 16 (38,116) 79,331
Finance income 27 15,278
Finance costs 12 (232,500) (80,843)
Profit before tax expense 515,517 1,010,420
Tax (charge)/credit on profit 13 (571,720) 198,244
Net (loss)/profit for the year
(56,203) 1,208,664
Total comprehensive (loss)/ income for the year
(56,203) 1,208,664
Earnings per share
Basic 4 (2.66) 604,332
There is no difference between basic and diluted earnings per share
STATEMENT OF FINANCIAL POSITION
30 September 2021 30 September 2020 1
October 2019
Note £ £ £
Non-current assets
Property, plant and equipment 15 9,236,223 6,613,726 2,514,193
Deferred tax assets 14 - 124,133 -
9,236,223 6,737,859 2,514,193
Current assets
Inventories 1,973 5,597 -
Trade and other receivables 17 8,292,227 8,604,583 7,079,497
Current tax receivable 82,890 54,202 558,753
Assets at fair value through profit or loss 16 271,450 309,566 230,235
Cash and cash equivalents 1,465,292 2,015,552 979,372
Total current assets 10,113,832 10,989,500 8,847,857
TOTAL ASSETS 19,350,055 17,727,359 11,362,050
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital 24 50,000 2 2
Retained earnings 3,386,950 6,787,342 5,578,678
Total equity 3,436,950 6,787,344 5,578,680
Non-current liabilities
Deferred tax liabilities 14 447,587 - 62,805
Lease liabilities 21 6,718,458 5,106,387 1,373,190
Total non-current liabilities 7,166,045 5,106,387 1,435,995
Current liabilities
Trade and other payables 18 4,520,533 4,753,287 4,031,311
Provisions 19 259,537 143,312 83,805
Loans and borrowings 20 3,139,463 344,639 60,006
Lease liabilities 21 827,527 592,390 172,253
Total current liabilities 8,747,060 5,833,628 4,347,375
TOTAL LIABILITIES 15,913,105 10,940,015 5,783,370
19,350,055 17,727,359 11,362,050
TOTAL EQUITY AND LIABILITIES
Brusk Korkmaz, CEO
Date: 25 March 2022
STATEMENT OF CHANGES IN EQUITY
Share capital Retained earnings Total equity
£ £ £
Balance at 1 October 2019 as previously stated 2 5,671,658 5,671,660
Prior year adjustment - (67,691) (67,691)
IFRS transition adjustments - (25,289) (25,289)
Balance at 1 October 2019 as restated 2 5,578,678 5,578,680
Profit for the year as restated - 1,208,664 1,208,664
Balance at 30 September 2020 2 6,787,342 6,787,344
Loss for the year - (56,203) (56,203)
Bonus issue of shares 49,998 (49,998) -
Dividends paid - (3,294,191) (3,294,191)
Balance at 30 September 2021 50,000 3,386,950 3,436,950
Retained earnings represent the accumulated profits and losses of the company,
less distributions and similar items, since its incorporation.
STATEMENT OF CASH FLOWS Year ended 30 September
2021 2020
Note £ £
Cash flows from operating activities:
(Loss)/profit after taxation (56,203) 1,208,664
Taxation charge/(credit) 13 571,720 (198,244)
Finance income (27) (15,278)
Finance costs 12 232,500 80,843
Fair value movements loss/(gain) 16 38,116 (79,331)
Depreciation of property plant and equipment 15 724,844 381,796
Loss/(Profit) on disposal of property, plant and equipment 11,297 (25,567)
Decrease/(increase) in inventories 3,625 (5,597)
(Increase)/decrease in trade and other receivables (2,981,835) 634,654
(Decrease)/increase in trade and other payables and provisions (116,529) 952,813
Cash generated from operations (1,572,492) 2,934,757
Tax (paid)/received (28,688) 515,856
(1,601,180) 3,450,613
Net cash (used in)/generated from operating activities
Cash flows from investing activities:
Purchase of tangible assets 15 (358,146) (233,727)
Proceeds from disposal of tangible assets 20,001 26,411
Interest received 27 15,278
(192,038)
Net cash used in investing activities (338,118)
Cash flows from financing activities:
Payment of lease liabilities 21 (1,282,403) (339,926)
Interest paid (123,383) (7,360)
Bank loan advances 2,794,824 284,633
Payments on behalf of parent company - (2,159,742)
(2,222,395)
Net cash from financing activities 1,389,038
Net increase / (decrease) in cash and cash equivalents
(550,260) 1,036,180
Cash and cash equivalents at start of year 2,015,552 979,372
Cash and cash equivalents at end of year 1,465,292 2,015,552
NOTES TO THE FINANCIAL STATEMENTS
Net debt
At 30 September 2020 Cash flow Non-cash movement At 30 September 2021
Cash and cash equivalents
Cash 2,015,552 (550,260) - 1,465,292
Debt
Bank loans (344,639) (2,794,824) - (3,139,463)
Lease liabilities (5,698,778) 1,282,403 (3,129,610) (7,545,985)
(6,043,417) (1,512,421) (3,129,610) (10,685,448)
Net debt (4,027,865) (2,062,681) (3,129,610) (9,220,156)
Non-cash movements represent new liabilities recognised under IFRS 16 in
respect of leases.
1 General Information
The Company is a public company limited by share
capital incorporated and domiciled in England and Wales. The principal activity of the Company is
that of general construction and civil engineering.
The address of its registered office and principal place of business is:
Hercules Court
Lakeside Business Park
South Cerney
Cirencester
GL7 5XL
The immediate and ultimate parent undertaking of the Company is Hercules Real
Estate Limited, the financial statements of which can be obtained from the
above address.
The financial information set out in this preliminary announcement does not
constitute statutory accounts for the purposes of the Companies Act 2006.
The statement of financial position at 30 September 2021, the income
statement, statement of changes in equity, statement of cash flows and
associated notes for the year ended 30 September 2021 have been extracted from
the Group's 2021 financial statements upon which the auditor opinion is
unqualified.
2 Summary of significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of the financial
statements are set out below. These policies including IFRS 9, IFRS 15 and
IFRS 16 have been consistently applied to all the years presented, unless
otherwise stated.
Basis of preparation
The financial statements have been prepared on the following basis:
· The financial information for the Company for the years ended 30
September 2020 and 30 September 2021;
· Using the historical cost convention except for, where disclosed in
the accounting policies, certain items shown at fair value.
The financial statements
are presented in Pounds Sterling, being the functional currency of the
Company.
For all periods up to and including the year ended 30 September 2020, Hercules
Site Services Plc previously prepared its statutory financial statements in
accordance with Financial Reporting Standard 102 ("UK GAAP"). These
financial statements are the first that Hercules Site Services Plc has
prepared in accordance with IFRS and the date of transition was 1 October
2019. In preparing these financial statements, the Company's opening statement
of financial position was prepared as at 1 October 2019. The principles and
requirements for first time adoption of IFRS are set out in IFRS 1. IFRS 1
allows certain exceptions and exemptions in the application of particular
standards to prior years in order to assist companies with the transition
process.
The preparation of the financial
statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Company's accounting policies. These are disclosed in note 3.
Changes in accounting policy and disclosures
(a) New and amended accounting standards
None of the standards, interpretations and amendments, with the
exception of IFRS
16, effective for the first time from 1 October 2017
have had a material effect on the financial statements.
(b) Future standards
At the date of authorisation of the financial statements, the Company has not
early adopted the following amendments to Standards and Interpretations that
have been issued but are not yet effective:
- Amendments to IAS 1 : Classification of Liabilities as Current
or Non-Current (1 January 2023)
- Amendments to IFRS 3 : Reference to the Conceptual Framework (1
January 2022)
- Amendments to IAS 16 : Proceeds before Intended Use (1 January
2022)
- Amendments to IAS 37 : Onerous Contracts - Cost of Fulfilling a
Contract (1 January 2022)
- Annual Improvements to IFRS Standards 2018-2020 (1 January 2022)
- Amendments to IFRS 17 (1 January 2023)
- Interest Rate Benchmark Reform - Phase 2 (1 January 2021)
- Amendments to IAS 1 and IFRS Practice Statement 2 : Disclosure
of Accounting Policies (1 January 2023)
- Amendments to IAS 8 : Definition of Accounting Estimates (1
January 2023)
- Amendment to IFRS 16 : Covid-19 Related Rent Concessions beyond
30 June 2021 (1 April 2021)
- Amendments to IAS 12 : Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (1 January 2023)
These Standards and amendments are effective from accounting periods beginning
on or after the dates shown above. The directors do not expect any material
impact as a result of adopting the standards and amendments listed above in
the financial year they become effective.
Going concern
The directors have prepared forecast information which takes into account the
current COVID-19 outbreak and its potential impact on the business.
The financial information has been prepared assuming the Company will continue
as a going concern. Under the going concern assumption, an entity is
ordinarily viewed as continuing in business for the foreseeable future. In
assessing whether the going concern assumption is appropriate, management has
considered the Company's existing working capital and management are of the
opinion that the Company has adequate resources to undertake its planned
programme of activities for a period of at least 12 months from the date of
approval of these financial statements.
Further information can be found in the Strategic Report and Directors'
Report.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the executive
directors that make strategic decisions. The Company operates from one
location but, in the Directors' opinion, has two reportable segments :
Construction services and the hire of suction excavators.
Revenue
Revenue arises from the provision of construction and civil engineering
services under fixed price contracts, as well as the hire of suction
excavators under hire contracts. Contract duration can vary and can range from
the supply of labour only to the provision of fully managed construction and
engineering projects.
To determine whether to recognise revenue, the Company follows the 5-step
process as set out within IFRS 15:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied
Contracts with customers take the form of signed agreements from customers.
The key judgements and policies in respect of revenue from the Company's
various activities are described further below.
Day works
This represents the provision of labour to customers. The amount of revenue is
based on agreed contractual hourly rates with customers. The customer
simultaneously receives and consumes the benefits provided by the Company's
performance under these contracts and the performance obligation (being the
provision of labour) is therefore satisfied over time. In the majority of
cases, the Company invoices customers monthly in arrears for the hours of
labour supplied during that month. Amounts invoiced but unpaid at the balance
sheet date are included within trade receivables.
In some cases, the monthly invoice will not correspond with a calendar month,
and the Company is therefore required to include an amount in receivables for
revenue relating to periods for which labour has been provided but not yet
invoiced.
Price works
This represents work performed under contracts with customers to undertake
construction and/or civil engineering works. These contracts contain a number
of individually identified services. However, the directors consider that the
services being provided are highly interdependent and interrelated and
therefore should not be considered to be separate performance obligations
under IFRS 15. Furthermore, the services provided by the Company either
enhance an asset that the customer controls and/or do not create an asset with
alternative use to the Company and there is an enforceable right to payment
for performance completed to date. The Company therefore considers the
delivery under these contracts to be a single performance obligation that is
satisfied over time.
Under these contracts, the Company produces a monthly 'application' to the
customer detailing the work performed to date and requesting payment
accordingly. Within a period of one to two months (in the majority of cases)
the customer will confirm agreement to the 'application' and remit the
necessary funds to the Company. Historically, the Company's experience is that
instances of customers materially disagreeing with the 'application' are rare
and that this is therefore a reliable method by which to recognise revenue
earned.
At the balance sheet date, the Company includes a balance in receivables for
the amount of revenue receivable on contracts based on the work performed. The
Company used the output method for all projects still in operation at the end
of March 2021 (until those projects are completed), but all new projects since
then use the input method, based on costs incurred to date, to estimate the
amount of revenue earned and includes an amount in contract assets within
receivables. The input method is based on costs incurred at the balance sheet
date compared to expected costs to be incurred throughout the life of the
contract.
Suction excavators
Revenue from the hire of suction excavators is recognised in line with the
income received over time under the relevant hire contract.
Other operating income - Government grants
Government grants relate to amounts receivable under the Construction Industry
Training Board scheme. Grants are recognised in the income statement on a
systematic basis over the periods in which the entity recognises the related
expenditure for which the grant is intended to compensate.
Taxation
The tax expense or credit for the period comprises current and deferred tax.
Tax is recognised in the income statement, except that a change attributable
to an item of income or expense recognised as other comprehensive income is
also recognised directly in other comprehensive income.
The current tax charge or credit is calculated on the basis of tax rates and
laws that have been enacted or substantively enacted by the reporting date in
the United Kingdom, where the Company operates and generates taxable income.
Deferred tax is recognised on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial
statements and on unused tax losses or tax credits available to the Company.
Deferred tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date and that are expected to apply in
the period when the liability is settled or the asset realised.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. The carrying amounts of deferred tax assets are
reviewed at each reporting date and a valuation allowance is set up against
deferred tax assets so that the net carrying amount equals the
highest amount that is more likely than not to be recovered based on current
or future taxable profit.
Deferred tax assets and liabilities are only offset against each other when
there is a legally enforceable right to set off current taxation assets
against current taxation liabilities and the deferred tax assets and
liabilities relate to income taxes levied by the same tax authority on either
(a) the same taxable entity, or (b) different taxable entities which intend to
settle these on a net basis, or to realise the assets and settle the
liabilities simultaneously. In the Company's accounts all taxes are levied
by H M Revenue and Customs. Management review the offset of deferred tax
assets and liabilities to ensure such an offset is appropriate.
Research and Development tax claims
Where the Company has made Research and Development tax claims under the Small
and Medium Enterprise scheme and tax losses have been surrendered for a
repayable tax credit, a current tax credit is reflected in the income
statement based on the best estimate of the submission to be made in relation
to that financial year.
Property, Plant and Equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent
accumulated depreciation and subsequent accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable
incremental costs incurred in its acquisition and installation.
Depreciation
Depreciation is charged so as to write off the cost of assets over their
estimated useful lives, as follows:
Asset
class
Depreciation method and rate
Plant and machinery 10%
reducing balance
Fixtures, fittings and equipment 20% reducing balance
Right-of-use assets
Straight line over the term of the lease or the asset's useful life if
shorter
Impairment
For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately independent cash inflows (CGU). Those intangible
assets including goodwill are tested for impairment at least annually. All
other individual assets or CGUs are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment charge is recognised for the amount by which the asset's or CGUs
carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of fair value, reflecting market conditions less costs to sell, and
value in use. All assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist.
Financial instruments
The Company classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the underlying contractual
arrangement. Financial instruments are recognised on the date when the Company
becomes a party to the contractual provisions of the instrument. Financial
instruments are initially recognised at fair value. Financial instruments
cease to be recognised at the date when the Company ceases to be party to the
contractual provisions of the instrument.
Financial assets are included on the balance sheet as trade and other
receivables or cash and cash equivalents. Financial liabilities include
borrowings, trade payables and accruals.
(a) Trade receivables
Trade receivables are amounts due from customers for services performed in the
ordinary course of business. They are recognised initially at the amount of
consideration that is unconditional. The Company holds the trade receivables
with the objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest
method, less provision for impairment. A provision for impairment of trade
receivables is established based on the expected credit loss. The Group
applies the IFRS 9 simplified approach to measure expected credit losses that
uses a lifetime expected loss allowance for all trade receivables, which are
grouped based on shared credit risk characteristics and the days past due. The
amount of the provision is recognised in the balance sheet within trade
receivables. Movements in the provision are recognised in the profit and loss
account in administrative expenses. Any change in their value through
impairment or reversal of impairment is recognised in the income statement.
(b) Borrowings
All borrowings are initially recorded at fair value. Borrowings
are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction
costs, and the amount due on redemption being recognised as a charge to the income statement over the
period of the relevant borrowing.
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting date.
(c) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Accounts payable are classified as current liabilities if the company does not
have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least
twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve
months after the reporting date, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and all are repayable
within one year and hence are included at the undiscounted amount of cash
expected to be paid.
(d) Contract assets
A contract asset is recognised within receivables where the Company has earned
the right to revenue through performance under contracts. Contract assets are
also potentially subject to credit losses and are therefore subject to a
provision for expected credit losses in the same way as trade receivables as
described above.
Assets at fair value through profit or loss
The Company owns a number of gold bars which are held for the purposes of
their potential appreciation in value. These are therefore accounted for as an
asset at fair value through profit or loss. This is considered a Level 1 fair
value asset as the value is determined by reference to readily available
market information, with the movement in fair value in each accounting period
being accounted for through the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid
investments that have a maturity date of 3 months or less, are readily
convertible to a known amount of cash and are subject to an insignificant risk
of change in value.
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that
the Company will be required to settle that obligation and a reliable estimate can
be made of the amount of the obligation.
Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation
at the reporting date and are discounted to present value where the effect is material.
Leases
The Company as lessee
Short term leases or leases of low value are recognised as an expense on a
straight-line basis over the term of the lease.
The Company recognises right-of-use assets under lease agreements in which it
is the lessee. The underlying assets comprise property, plant and machinery
and motor vehicles, and are used in the normal course of business. The
right-of-use assets comprise the initial measurement of the corresponding
lease liability payments made at or before the commencement day as well as any
initial direct costs and an estimate of costs to be incurred in dismantling
the asset. Lease incentives are deducted from the cost of the right-of-use
asset. The corresponding lease liability is included in the statement of
financial position as a lease liability.
The right-of-use asset is depreciated on a straight-line basis over shorter of
the asset's useful life and the lease term and if necessary impaired in
accordance with applicable standards. The lease liability shall initially be
measured at the present value of the lease payments that are not paid at that
date, discounted using the rate implicit in the lease or, where this cannot be
determined, the Company's incremental borrowing rate. The lease liability is
subsequently measured by increasing the carrying amount to reflect interest on
the lease liability (application of the effective interest method) and by
reducing the carrying amount to reflect the lease payments made. No lease
modification or reassessment changes have been made during the reporting
period from changes in any lease terms or rent charges.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or
other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment
is deferred and the time value of money is material, the initial measurement is on a present value basis.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the Company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
Contributions to defined contribution plans are recognised as employee benefit
expense when they are due. If contribution payments exceed the contribution
due for service, the excess is recognised as a prepayment.
3 Critical accounting judgements and key sources of
estimation uncertainty
In the application of the Company's accounting policies, management is required to make judgements, estimates
and assumptions about the carrying value 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 an ongoing basis.
Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of revision and future periods if the revision affects both current and future periods.
The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the
Financial statements are described below.
Key judgements
Lease discount rate
IFRS 16 requires the carrying value lease liabilities and the corresponding
right of use assets to be calculated using the net present value of future
lease payments. This calculation inherently requires a discount rate to be
applied, which requires judgement. The Directors have used the Company's
incremental borrowing rate for property leases where the rate implicit in the
lease cannot be determined. The incremental borrowing rate applied is based on
the interest rate applied to the bank loan disclosed in note 21.
Revenue recognition
The nature of the Company's revenue streams requires judgement to be applied
regarding the level of work performed at the balance sheet date. Further
information is disclosed in note 2 under 'Revenue'.
Key sources of estimation uncertainty
Provision
As disclosed in note 19, a provision is included in this Financial statements
relating to the potential underpayment of National Insurance Contributions
under the Construction Industry Scheme. There is a level of uncertainty in the
quantum and timing of future payments related to this liability. Further
information is included in note 19.
Property, plant and equipment
Property, plant and equipment is depreciated over the economic useful lives of
the assets. Useful lives are based on management's estimates of the period
that the assets will generate revenue, which are reviewed annually for
continued appropriateness. The useful economic lives applied are set out in
the accounting policies in note 2.
4 Earnings per share
Year ended 30 September
2021 2020
Basic £ £
Earnings used in calculation of earnings per share:
Total (losses)/profits attributable to equity holders (56,203) 1,208,664
Weighted average number of shares in issue 21,097 2
Shares in issue
Ordinary shares in issue 50,000 2
(Loss)/earnings per share
On total profits attributable to equity holders (2.66) 604,332
There are no potentially dilutive shares and therefore there is no difference
between basic and diluted earnings per share.
5 Segmental reporting
During the year, the Company began earning revenues from a new activity, being
the hire of suction excavators. The Company began leasing a number of
excavators in September 2020 in preparation for the commencement of this
activity, and further assets were leased in the year ended 30 September 2021.
In total, at 30 September 2021 suction excavators accounted for £3,339,920 of
right-of-use assets, and £2,896,058 of lease liabilities.
The Company's management has identified this activity as a separate operating
segment from the core activities described in its financial statements for the
year ended 30 September 2020, which were treated as a single operating
segment. The segments are monitored by the Company's chief operating decision
maker and strategic decisions are made based on the segments' operating
results.
No segment information is provided for the year ended 30 September 2020 as,
during that year, there was considered to be only one operating segment.
Segment information for the year ended 30 September 2021 is as follows:
Construction services Suction excavator Services Total
£ £ £
Revenue (all from external customers) 30,586,172 2,168,296 32,754,468
Cost of sales (25,279,912) (787,087) (26,066,999)
Gross profit 5,306,260 1,381,209 6,687,469
Administrative expenses (1,099,327) (422,711) (1,522,038)
Other operating income 217,195 - 217,195
Operating profit from segments 4,424,128 958,498 5,382,626
Administrative expenses not attributable to segments (4,596,520)
Profit from operations 786,106
6 Revenue
The total turnover of the Company has been derived from its principal activity
wholly undertaken in the United Kingdom, being the provision of service
through supply of labour and the operation of construction and engineering
contracts. During the year the Company commenced a further activity, being the
hire of suction excavators.
The Company's revenue from each activity is shown below and is all derived in
the United Kingdom.
Year ended 30 September
2021 2020
£ £
Day works 22,890,070 17,031,656
Price works 7,696,102 5,905,671
Total from construction services 30,586,172 22,937,327
Suction excavator services 2,168,296 13,430
32,754,468 22,950,757
Other than suction excavator hire, the Company derives its income from two
main activities, both of which are linked to the principal activity of the
delivery of construction and civil engineering services, being the provision
of labour and services provided under construction and/or civil engineering
contracts. These are referred to internally as 'day works' and 'price works'
respectively.
Significant customers
In the year ended 30 September 2021 one customer represented 25% of revenue
(2020 : 16%), and another customer represented 23% of revenue (2020 : 14%). No
other customers represented more than 10% of revenue in either year.
Contracts with customers
The Company has contract assets relating to revenue earned from the supply of
labour and construction services. Due to the nature of this revenue, balances
defined as contract assets will vary and depend on the number, timing and
nature of the contracts in progress at the balance sheet date. The relevant
balances are shown as contract assets in note 17. The increase in contract
assets compared to the prior year represents the increased level of activity
at the year end.
Revenue from contract assets
Revenue in the year relating to previously recognised contract assets was
£2,168,062 (2020 : £3,211,505)
Contract balances
The nature of the Company's revenue recognition is such that the only contract
balances arising relate to accrued income, which is shown as a contract asset.
The balance at 30 September 2021 was £3,362,862 (2020 : £2,168,062).
Significant changes in contract assets
The Company has many contracts for services and underway at any point in time,
and these are a mix of large and small contracts, generally with monthly
invoicing. The level of contract assets therefore fluctuates depending on the
mix of contracts and the stage of contract completion at the balance sheet
date by reference to costs incurred to date.
7 Other operating income
Other operating income arises mainly from the receipt of government grants.
Since this is not considered to be part of the main revenue generating
activities, the Company presents this income separately from revenue.
Year ended 30 September
2021 2020
£ £
Construction Industry Training Board grants 164,631 142,675
Coronavirus Job Retention Scheme grants 52,564 249,049
Intercompany recharges receivable - 3,825
217,195 395,549
There are no unfulfilled conditions or other contingencies attaching to these
grants. The Company did not benefit directly from any other forms of
government assistance.
8 Profit from operations
Operating profit is stated in the income statement after
charging/(crediting):
Year
ended 30 September
2021 2020
£ £
Depreciation - owned assets 126,280 120,528
Deprecation - right-of-use assets 598,564 261,268
Loss/(profit) on disposal of fixed assets 11,297 (25,567)
Research and development costs 17,505 54,555
9 Auditors' remuneration
Year
ended 30 September
2021 2020
£ £
For audit of the financial statements 74,000 19,500
Non-audit services :
Review of interim financial information 15,000 -
Taxation compliance - 3,550
Other services relating to taxation - 6,450
All other services - 2,075
15,000 12,075
Other non-audit services above include assistance with the process of the
Company's admission to the Alternative Investment Market. No non-audit
services have been provided since the listing was completed.
10 Staff costs
The aggregate employee benefit expenses were as follows:
Year ended 30 September
2021 2020
£ £
Wages and salaries 7,183,515 8,433,618
Social security costs 787,729 822,668
Defined contribution pension costs 178,891 177,167
8,150,135 9,433,453
The average monthly number of employees during the year was as follows:
Year ended 30 September
2021 2020
Site based operatives 99 138
Administrative and Managerial 54 43
153 181
11 Directors' remuneration
Key management of the Company are the members of the board of directors. Key
management personnel remuneration includes the following expenses:
Year ended 30 September
2021 2020
£ £
Salaries 515,734 376,512
Benefits 19,540 15,689
Pension contributions 95,951 89,403
631,225 481,604
During the year retirement benefits were accruing to 3 directors (2020: 3) in
respect of defined contribution pension schemes.
Amounts paid to the highest paid director were as follows:
Year ended 30 September
2021 2020
£ £
Salary and benefits 151,091 136,419
Pension contributions 40,000 40,000
191,091 176,419
12 Finance costs
Year ended 30 September
2021 2020
£ £
Lease finance costs 215,278 75,509
Interest on loans measured at amortised cost 3,676 5,334
Other interest 13,546 -
232,500 80,843
13 Income taxes
Year ended 30 September
2021 2020
£ £
Current tax:
UK corporation tax - -
Adjustments to prior periods - (11,306)
Total current tax charge - (11,306)
Deferred tax:
Origination and reversal of timing differences (1,584) (233,418)
Adjustments in respect of prior periods 465,503 27,218
Effect of tax rate change on opening balance 107,801 19,262
571,720 (186,938)
Tax on profit on ordinary activities 571,720 (198,244)
Tax on loss on ordinary activities for the year is lower than the standard
rate of corporate tax in the UK of 19%, (2020: 19%).
The differences are reconciled below:
Year ended 30 September
Continuing operations 2021 2020
£ £
Profit on ordinary activities before taxation 515,517 1,010,420
Tax at the UK rate of 19% (2020: 19%) 97,948 191,980
Effect of:
Expenses not deductible for tax purposes 68,819 4,251
Effect of IFRS 16 adjustments - 3,726
Fixed asset temporary differences (163,193) -
Adjustments in respect of prior periods 465,503 15,912
Remeasurement of deferred tax for change in tax rates 107,801 19,262
R&D tax credit estimate - (433,375)
Other differences affecting tax charge (5,158) -
Total tax charge/(credit) 571,720 (198,244)
At 30 September 2020, the Company anticipated that it would be making a
Research and Development tax claim that would lead to an increased level of
tax losses being available. The relevant claim has not yet been submitted and
the directors do not consider there was sufficient certainty at 30 September
2021 to be able to continue to recognise the corresponding deferred tax asset.
As a result the deferred tax charge in the year ended 30 September 2021
includes an amount of £465,503 relating to the reversal of the previously
recognised asset.
14 Deferred tax
Deferred tax balances are analysed as follows:
Deferred tax balances before offset 30 September 2021 30 September 2020 1
October 2019
£ £ £
Deferred tax liability (1,093,676) (344,302) (64,080)
Deferred tax asset 646,089 468,435 1,275
Total deferred tax (liability)asset (447,587) 124,133 (62,805)
Deferred tax balances after offset 30 September 2021 30 September 2020 1
October 2019
£ £ £
Deferred tax asset - 124,133 -
Deferred tax liability (447,587) - (62,805)
Total deferred tax (liability)/asset (447,587) 124,133 (62,805)
The amounts reflect the differences between the carrying and tax amounts of
the following balance sheet headings as at each year end.
Credits/(charges) during each year are as follows:
Tax losses Short term temporary differences Fixed asset temporary differences Total
£ £ £ £
At 1 October 2019 - asset/(liability) - 1,275 (64,080) (62,805)
Tax credit/(charge) in respect of current year 465,503 1,657 (280,222) 186,938
At 30 September 2020 - asset/(liability) 465,503 2,932 (344,302) 124,133
Tax credit/(charge) in respect of current year 180,443 (2,789) (749,374) (571,720)
At 30 September 2021 - asset/(liability) 645,946 (143) (1,093,676) (447,873)
Deferred tax has been calculated at 19% for the year ended 30 September 2020
on the basis that it was at that point assumed that the underlying temporary
differences would unwind at this rate.
In May 2021 an increase in the main corporation tax rate to 25% was enacted,
to be applied from 1 April 2023 onwards.
15 Property, Plant and Equipment
Plant and machinery Fixtures & office equipment Right-of-use assets Total
£ £ £ £
Cost
At 1 October 2019 1,018,914 335,370 1,909,245 3,263,529
Additions 90,373 57,689 5,534,302 5,682,364
Surrender of lease (37,547) - (1,332,549) (1,370,096)
At 30 September 2020 1,071,740 393,059 6,110,998 7,575,797
Additions 325,007 33,139 3,020,493 3,378,639
Disposals (49,245) - - (49,245)
At 30 September 2021 1,347,502 426,198 9,131,491 10,905,191
Depreciation
At 1 October 2019 218,760 196,792 333,784 749,336
Charge for the year 85,354 35,174 261,268 381,796
Disposals (8,046) - (161,015) (169,061)
At 30 September 2020 296,068 231,966 434,037 962,071
Charge 92,648 33,632 598,564 724,844
Disposals (17,947) - - (17,947)
At 30 September 2021 370,769 265,598 1,032,601 1,668,968
Net book value
At 30 September 2021 976,733 160,600 8,098,890 9,236,223
At 30 September 2020 775,672 161,093 5,676,961 6,613,726
At 30 September 2019 800,154 138,578 1,575,461 2,514,193
Certain right-of-use assets are pledged as security on the lease agreements to
which they relate.
16 Assets at fair value through profit or loss
2021
£
At 1 October 2019 230,235
Change in fair value 79,331
At 30 September 2020 309,566
Change in fair value (38,116)
At 30 September 2021 271,450
The asset above comprises 6kg of gold bars held by the Company. Whilst gold
bars are not strictly speaking a financial asset, given their nature as an
investment with high liquidity and readily ascertainable value, the directors
have developed an accounting policy in accordance with the guidance in IAS 8
to treat them as a financial asset at fair value through profit or loss. The
gold is physically held by a director on behalf of the Company. The director
has confirmed that ownership resides with the Company.
The fair value of the gold bars is based on 'Level 1' inputs as the fair value
is readily available from market sources.
17 Trade and other receivables
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Amounts falling due within one year: £ £ £
Trade receivables - gross 4,882,502 2,681,225 2,808,589
Provision for impairment (749,683) - -
Trade receivables - net 4,132,819 2,681,225 2,808,589
Amounts owed by Hercules Real Estate Limited - 2,827,619 667,877
Amounts owed by director - 466,102 321,666
Other receivables 343,742 155,216 25,750
Contract assets 3,362,862 2,168,062 3,211,505
Prepayments 452,804 306,359 44,110
8,292,227 8,604,583 7,079,497
Trade and other receivables are all current and any fair value difference is
not material. Trade and other receivables are assessed for impairment based
upon the expected credit losses model. In order to manage credit risk, the
Directors set limits for customers based on a combination of payment history
and third party credit references. Credit limits are reviewed on a regular
basis in conjunction with debt ageing and collection history
Trade receivables are regularly reviewed for bad and doubtful debts. The
Company's policy is to include a provision for impairment based on estimated
credit losses. This includes an assessment where relevant of forward-looking
information on macroeconomic factors that may affect the ability of customers
to settle receivables. Trade receivables are written off where is no
reasonable expectation or recovery, for example where the customer has entered
insolvency proceedings or where a customer has failed to make contractual
payments for an extended period.
During the year ended 30 September 2021 the Company recorded a charge to the
income statement of £600,930 (2020 : £Nil) in respect of credit losses. This
charge was in respect of a single customer and was considered by the Directors
to be an exceptional event. It was therefore excluded when considering the
provision required under the expected credit loss model.
The maturity analysis of trade receivables is shown below:
< 1 month 1-2 months 2-3 months > 3 months Total
£ £ £ £ £
30 September 2021 2,616,935 1,318,166 528,436 418,965 4,882,502
30 September 2020 1,516,933 662,170 291,191 210,931 2,681,225
Included in other receivables in 2021 was an amount owed by the director of
£Nil (2020 : £466,102). Interest was charged on this loan at the HMRC
Official Rate.
There are no formal terms applied to the amounts owed by the Company's parent
undertaking, i.e. Hercules Real Estate Limited, the amounts owed by related
parties or the amount owed by director. The balances in relation to the parent
undertaking and the amount owed by the director at 30 September 2021 were
cleared via a dividend after the year end as disclosed in note 26.
18 Trade and other payables
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Amounts falling due within one year: £ £ £
Trade payables 1,307,541 752,810 980,920
Social security and other taxes 1,503,300 2,643,632 1,428,766
Other payables 1,423,852 1,229,611 373,668
Accrued expenses 285,840 127,234 1,247,957
4,520,533 4,753,287 4,031,311
Trade payables are all current and any fair value difference is not material.
19 Provisions
2021 2020 2019
As restated As restated
£ £ £
At 1 October 143,312 83,805 58,585
Additional provision for year 116,225 59,507 25,220
At 30 September 259,537 143,312 83,805
The Directors have identified a potential underpayment of National Insurance
contributions in respect of payments made to subcontractors. Following
extensive professional consultation and advice, the Directors considered the
roles for all subcontractors provided by the Company. Whilst the Directors
consider that many of the roles were outside the scope of the Agency
legislation, there were several that were potentially considered within the
scope of the rules.
The Company has recently commenced the process of voluntary disclosure to HM
Revenue & Customs in this regard. The provision of £259,357 (2020 :
£143,312), based on those roles that the Directors deemed were inside the
scope of the Agency legislation, was recognised as at 30 September 2021,
although the timing of any resulting payment and the quantum thereof,
currently remains uncertain. The directors have not provided for a penalty
which may be between 0% and 30% of any liability arising from the disclosure,
on the basis that they are making a voluntary disclosure to HM Revenue &
Customs. The Directors have used their best estimate based on the advice
provided and their analysis of the potential underpayments.
The provision stated above is subject to uncertainty in both amount and timing
of cash flows due to the fact that the Company has only recently commenced the
process of voluntary disclosure to HM Revenue & Customs. It is possible
that, following the voluntary disclosure exercise, HM Revenue & Customs
may challenge that more of the roles should be caught by the Agency rules and
therefore the final liability may be higher. The amounts stated above are, in
the Directors opinion, reflective of the best estimate and are confident of
having a robust position to defend their judgements to which the Company is
exposed.
20 Loans and borrowings
As at As at As at
30 September 2021 30 September 2020 1
October 2019
£ £ £
Included within current liabilities
Bank loans 3,139,463 344,639 60,006
The bank loan is secured by guarantees from the Company's parent undertaking,
Hercules Real Estate Limited, and by a personal guarantee from a director. The
loan is a revolving facility with a rolling 12 month notice period, is secured
on trade receivables and attracts interest at a rate of 2.25% over base rate.
21 Leases
The Company leases properties and certain items of plant and machinery. With
the exception of short-term leases and leases of low value underlying assets,
each lease is reflected on the balance sheet as a right-of-use asset (Note 15)
and a lease liability.
The Company had recognised two property leases in 2021 (2020 - three), sixteen
vehicle leases (2020 - eighteen) and seven plant and machinery leases (2020 -
three).
All future cashflows are included. The leases are subject to rent reviews
every five years. The nature of the rent reviews is such that annual rentals
are adjusted to prevailing market rates, unless that would lead to a
reduction. In accordance with IFRS 16, any future increases in annual rentals
arising from rent reviews are not included in the calculation of the lease
liabilities. Any future increases in annual rentals will result in prospective
adjustments to the lease liabilities at the point of the rent review.
Amounts recognised in the Statement of Financial Position relating to leases,
categorised by underlying type of asset, are:
Leasehold property Plant and machinery Motor vehicles Total
£ £ £
£
Net book value
At 1 October 2019 1,199,295 258,658 117,507 1,575,460
Additions 4,573,223 856,650 104,429 5,534,302
Surrender of lease (1,171,533) - - (1,171,533)
Depreciation charge for the year (140,976) (36,240) (84,052) (261,268)
At 30 September 2020 4,460,009 1,079,068 137,884 5,676,961
New leases recognised in the year - 2,920,076 100,417 3,020,493
Depreciation charge for the year (228,662) (286,083) (83,819) (598,564)
At 30 September 2021 4,231,347 3,713,061 154,482 8,098,890
Maturity analysis
As at As at As at
30 September 2021 30 September 2020 1
October 2019
£ £ £
Due within one year 1,042,939 685,721 206,315
Due within two to five years 3,377,289 1,876,626 529,229
Due after five years 4,581,294 4,350,443 1,067,976
Future finance charges (1,455,537) (1,214,014) (258,078)
7,545,985 5,698,776 1,545,443
Amounts recognised in the Statement of Comprehensive Income
The statement of comprehensive income shows the following amounts relating to
leases:
2021 2020
£ £
Depreciation charge of right of use asset 312,481 261,268
Interest expenses (within finance costs) 215,278 75,509
527,759 336,777
Amounts recognised in the Statement of Cash Flows
The statement of cash flows shows the following amounts relating to leases:
2021 2020
£ £
Cash outflows 1,282,403 339,926
Low value leases and short-term leases
The Company has no leases for which the low value or short-term exemptions of
IFRS 16 has been applied.
Reclassification of existing leased assets
On transition to IFRS 16, assets under existing leases that were accounted for
as finance leases under UK GAAP have been reclassified as right-of-use assets.
The amounts reclassified are shown below
Plant and machinery 2021 2020 2019
£ £
Cost 2,920,076 1,144,050 287,400
Accumulated depreciation (286,083) (64,980) (28,740)
Net book value 2,633,993 1,079,070 258,660
22 Financial instruments
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Financial assets held at amortised cost: £ £ £
Trade receivables 4,132,819 2,698,688 2,808,589
Amounts owed by Hercules Real Estate Limited - 2,840,209 667,877
Amounts owed by directors - 508,714 321,666
Other receivables 343,742 259,757 25,750
Cash and cash equivalents 1,465,292 2,015,552 979,372
5,941,853 8,322,920 4,803,254
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Assets held at fair value through profit or loss: £ £
Gold bars 271,450 309,566 230,235
As at As at As at
30 September 2021 30 September 2021 1
October 2019
Financial liabilities held at amortised cost: £ £ £
Bank borrowings 3,139,463 344,639 60,006
Trade payables 1,307,541 770,274 980,920
Other payables 1,423,852 630,399 373,668
Accrued expenses 285,840 708,982 1,247,957
Lease liabilities 7,545,985 5,698,777 1,545,443
13,702,681 8,153,071 4,207,994
23 Financial Risk management
The Company uses various financial instruments. These primarily include bank
borrowings, cash and various items, such as trade receivables and trade
payables that arise directly from its operations. The main purpose of these
financial instruments is to finance the Company's operations.
The existence of these financial instruments exposes the Company to a number
of financial risks, which are described in more detail below.
a) Market risk
Market risk encompasses three types of risk, being currency risk, interest
rate risk and price risk. The Company is exposed to price risk on the value of
its gold bars. These were purchased by the Company some years ago as a
long-term investment with the expectation of future capital appreciation and
are not actively managed. A fluctuation in the value of 10% would have given
rise to a further increase or decrease in the value of bars of £30,957.
Exposure to interest rate risk is considered further below. There is no
exposure to currency risk as the Company operates entirely with the United
Kingdom and all transactions are denominated in Pounds Sterling.
b) Liquidity risk
The Company seeks to manage financial risk by ensuring sufficient liquidity is
available to meet foreseeable needs by closely managing its cash balance. The
Company has significant levels of cash reserves available and continues to
generate profit before taxation (the loss after taxation in the year was due
to a large deferred tax charge on the reversal of a previously recognised
asset). In this context, liquidity risk is therefore considered to be low.
The Company's borrowing facilities are continually monitored against forecast
requirements and timely action is taken to put in place, renew or replace
credit lines. The Company acquires items of property, plant and equipment on
lease agreements where appropriate to assist in managing liquidity risk by
avoiding the depletion of cash on large capital purchases. The Company also
manages its liquidity needs by carefully monitoring cash outflows due on a
day-to-day basis.
The Company's financial liabilities comprise bank borrowings, trade payables,
other payables, accruals, amounts due to related parties and lease
liabilities. The maturity of lease liabilities is disclosed in note 21 above.
All other financial liabilities are expected to be settled within 12 months of
the balance sheet date.
c) Interest rate risk
Interest rate risk is limited to interest paid on the Company's variable rate
bank borrowings and interest received on cash deposits. Due to the relatively
low level of borrowings and the low rates of interest on cash deposits, the
impact of any changes in interest rate is not considered significant.
d) Credit risk
The Company's principal financial assets are cash and trade receivables.
Credit risk is also attached to contract assets that represent accrued income.
The credit risk associated with cash is limited, as the counterparties have
high credit ratings assigned by international credit-rating agencies. The
credit risk associated with trade receivables is minimal as invoices are based
on contractual agreements with long-standing customers. Credit losses
historically incurred by the Company have consequently been immaterial, other
than a single bad debt incurred in the year ended 30 September 2021 of
approximately £600,000 that the directors consider to be exceptional. This
arose due to the unexpected business failure of a major customer.
Notwithstanding the lack of historical credit losses, the Company maintains a
provision against receivables. However, this is not necessarily linked to
credit risk and the ageing of receivables is not the most relevant indicator
to determine the potential impairment of a receivable. The nature of the
Company's operations is such that misunderstandings or minor disagreements may
arise during the course of contracts, which may sometimes require an
adjustment to be made to achieve settlement.
The Company's provision is broadly on the basis of any receivables that remain
outstanding after 6 months. The Company had no material individual receivables
past due or impaired at 30 September 2020 or 30 September 2021, other than the
exceptional amount referred to above.
Further details regarding expected credit losses can be found in note 17.
Capital management
The Company's capital comprises total equity and net debt. The Company's
capital management objectives are:
- To ensure its ability to trade as a going concern; and
- To provide an adequate return to shareholders.
The Company monitors capital based on the carrying amount of equity and net
debt. Adjustments are made as necessary based on the Directors' assessment of
the needs of the business and external factors such as the Company's industry
and the wider economy. The Company has traded profitably and therefore
generally levels of debt have been low. More recently a revolving credit
facility has been utilised to assist with working capital, and debt has also
been increased by the leasing of a number of capital items, particularly
suction excavators which are expected to be a significant future source of
income and profitability.
Therefore, whilst the Company was more highly geared at 30 September 2021 than
in previous years, this is in line with the Directors' strategy to grow the
business. The Company has also raised further equity after the balance sheet
date following its successful flotation on the Alternative Investment Market.
The Directors are able to maintain and adjust the capital stricture by
adjusting dividends, issuing new shares or selling assets to reduce debt.
A summary of the Company's gearing is shown below.
30 September 2021 30 September 2020 1
October 2019
£ £
Total equity 3,436,950 6,787,344 5,578,678
Net debt 9,711,300 4,027,865 626,077
Total capital 13,148,250 10,815,209 6,204,755
Gearing ratio (net debt / capital) 74% 74% 10%
24 Share capital
Issued capital
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Authorised Number Number Number
Ordinary shares of £1 each 50,000 1,000 1,000
As at As at As at
30 September 2021 30 September 2020 1
October 2019
Allotted, called up and fully paid £ £ £
Ordinary shares of £1 each 50,000 2 2
Share rights
The ordinary shares have attached to them full voting, dividend and capital
distribution rights (including on winding up). They do not confer any right of
redemption.
Share issues
On 29 April 2021 the company issued 49,998 shares for consideration of £1 per
share.
25 Defined contribution pension scheme
The Company operates a defined contribution pension scheme. The pension cost
charge for the year represented contributions payable by the Company to the
scheme and amounted to £178,891 (2020 - £177,167). Contributions totalling
£1,336 (2020 - £9,432) were payable to the scheme at the end of the year and
are included in other payables.
26 Related party transactions
Ultimate controlling party
During the historical financial period, the Company was controlled by B K
Korkmaz and Mrs N Korkmaz by virtue of their shareholding in the parent
undertaking, Hercules Real Estate Limited.
Key management personnel compensation
Key management personnel remuneration has been set out in note 11 to the
Financial statements
Transactions with parent entity
The following transactions occurred with the Company's ultimate controlling
party, Hercules Real Estate Limited:
2021 2020
£ £
Rental payments 313,562 195,896
Provision of building services (income) (257,831) -
Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in
relation to transactions with related parties:
As at As at
30 September 2021 30 September 2020
Current receivables £ £
Hercules Real Estate Limited - 2,840,209
Director - 508,714
- 3,348,923
During the year ended 30 September 2021, the Company repaid the amounts shown
above via the declaration of a dividend to its parent company.
During the year ended 30 September 2020, the Company provided additional funds
to Hercules Real Estate Limited resulting in the increase in the receivables
balance noted above. The key element of this funding was £1,110,000 for the
purchase of the Sunhill site, part of which was subsequently leased back to
the Company.
27 Capital commitments
At 30 September 2021, the Company had orders committed on the lease purchase
of suction excavators to a value of £4,785,000.
28 Post Balance Sheet Events
The Company was admitted to trading on the Alternative Investment Market of
the London Stock Exchange on 4 February 2022. This resulted in the raising of
net equity capital of approximately £2.7 million in the process.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UVAKRUOUOUARRecent news on Hercules Site Services
See all newsRCS - Hercules Site Svcs - New Civils Support Framework Agreement
AnnouncementREG - Hercules Site Svcs - Result of AGM
AnnouncementREG - Hercules Site Svcs - AGM Statement
AnnouncementREG - Hercules Site Svcs - Business Development Director Grant of Options
AnnouncementREG - Hercules Site Svcs - Posting of Annual Report and Notice of AGM
Announcement