EVOL_(WALES)_LIMITED - Accounts
EVOL_(WALES)_LIMITED - Accounts
The directors present the strategic report for the year ended 30 November 2018.
The company continued to provide consultancy services and manage its portfolio of company and property investments whilst seeking to support new ventures. In particular, the company has continued to support and provide consultancy services to Tiny Rebel Brewing Company Limited. The Directors are delighted with the progress of Tiny Rebel during the year. Tiny Rebel has won many awards for its brewing including the Champion Beer of Britain from the multi-million pound brewery in Rogerstone.
The group's principal subsidiary, Whitehead Building Services Limited (WBS hereafter) has celebrated its 40th anniversary with another successful year and turnover has reached £40 million for the first time. The company has targeted strategic locations in south wales and the south west to position itself for profitable future growth and now has offices in Newport, Bristol, Exeter and Cornwall. The company has worked hard to maintain and build relationships and as a result the order book is extremely healthy going forward. WBS has diversified its offering over recent years and as well as expanding the geographic range, and working outside of their core geographic area in order to support strategic clients.
WBS operate the core business in a strong economic region and are strategically positioned to be able to offer specialist services to the rail and transport sector which will be undergoing unprecedented growth in the forthcoming years. WBS is accredited to provide specialist services to the rail sector at a time when the Cardiff Metro system is being developed and the electrification of the Valley Lines takes place.
WBS has continued to enhance its reputation as one of South Wales and the South West's leading providers of Mechanical and Electrical project management, design, installation and maintenance. WBS has been recognised by Constructing Excellence Wales with its nominations and shortlisting for the SME of the year award. WBS has successfully delivered a number of high-profile projects during the last financial year including:
- Trinity St David’s University Campus
- Margam High School
- Hitachi Rail Depot Swansea
- Bayscape Apartments, Cardiff
- University Hospital of Wales Design for Life MRI Department
- Swansea University, Singleton Campus refurbishment
- Poundbury Care Home, Dorset
Key Performance Indicators
The board regards the key measures of operating effectiveness to be sales growth, margins and overheads as a proportion of activity. However, the performance of individual contracts in WBS is also regarded as a key indicator of performance. Each contract is assessed individually with a number of large contracts per year. The WBS board is satisfied with the contract performance in the year with no real issues noted. The contracts largely ran to budget and on time which means that the company hit its targets and the customers were generally delighted.
Group turnover has increased by 21.4% on the prior year, from £33.1m to £40.2m. However, the gross profit margin has decreased from 9.3% to 7.3%, to £2.9m. Operating profit has remained consistent at 2.2%.
The group's activities expose it to a number of financial risks including price risk, credit risk, cash flow risk and liquidity risk. The use of financial instruments is monitored by the board of directors; the group does not use financial instruments for speculative purposes. The group's principal financial instruments comprise bank balances, trade creditors, trade debtors and loans to the group.
Cash flow risk
The group has no interest bearing assets and few interest bearing liabilities which minimises the uncertainty of cash flows.
Credit risk
The group's principal financial assets are bank balances and cash, trade and other receivables. The group's credit risk is primarily attributable to its trade and other receivables. The group manages credit risk in respect of trade debtors by regularly monitoring credit limits and balances outstanding. The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The credit risk on liquid funds and financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
Liquidity risk
The group manages the liquidity risk by monitoring working capital and ensuring there are sufficient funds to meet payments.
Supply Chain Risk
WBS have a unique relationship with our supply chain where we work together in Partnership to ensure that our needs can be met and managed. WBS work with our supply chain to provide effective solutions to the most challenging projects and we have processes for the selection of suppliers in which we assess their suitability to be part of our chain.
Skills Shortages
Our group ethos is of employment rather than transient sub-contract or Agency labour, which provides us with protection against skills shortages in an upturn in market conditions. Our workforce is expanding year on year with a mixture of new skilled tradesmen and a throughput from our continued and valued apprentice training scheme.
CSR Policy & Environment
All Whitehead employees are encouraged to assist the group in its corporate and social responsibilities. We encourage our workers to respect the environment in which they work and to reduce waste, share transport and reduce our environmental impact wherever possible. As engineers we endeavour to incorporate green and energy efficient products in our design and in the materials that we use.
Charitable activities
The group has supported a number of local charities through sponsored events including walks, cycling and rowing. The group also encourages its employees to act as volunteers at charitable events.
Health & Wellbeing
The group encourages its employees to lead an active life and maintain good health, and also promotes a healthy work / life balance.
The group considers that its employees are its biggest asset and staff levels have increased this year. The working environment we have created means that our employees meet fresh exciting challenges and experience the satisfaction of a job well done. Ours is an environment that is flexible to change and open to innovation. At Whitehead Building Services Limited every employee contributes to value added performance. WBS has invested in Continuing Professional Development training for its staff throughout all areas of the business. WBS places great emphasis on developing young talent and has a very good record recruiting and training apprentices. WBS has over 30 apprentices training and has received recognition from the Quality Skills Alliance in 2014 and 2016. WBS also consistently figures in the top 20 B&ES Contractors in the UK.
The group continually monitors its business systems and processes and strives for continual improvement. The directors are satisfied that the the processes implemented are appropriate to the size and complexity of the company.
The group will continue to involve all staff in its continual improvement process concentrating on efficiencies and best practice.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 November 2018.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
UHY Hacker Young have expressed their willingness to continue in office as auditor and appropriate arrangements have been put in place for them to be deemed reappointed as auditor in the absence of an Annual General Meeting.
select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
In our opinion the financial statements:
give a true and fair view of the state of the group's and the parent company's affairs as at 30 November 2018 and of the group's profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £111,296 (2017 - £47,197 profit).
Evol (Wales) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .
The group consists of Evol (Wales) Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The consolidated financial statements incorporate those of Evol (Wales) Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 30 November 2018. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other administrative expenses.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
As noted in 1.4 above, revenue from contracts is recognised by reference to the stage of completion, this inevitably involves the directors making estimates about the total anticipated costs of contracts and the future costs; these estimates can have a significant effect on revenue recognition and profit.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group carries investment properties and freehold properties at fair value. Changes in the fair value of investment properties are recognised in profit or loss; changes in the value of freehold properties are recognised in other comprehensive income. The valuations have been carried out by the directors based on comparable market data provided by independent valuation specialists valuing similar assets owned by related parties. The key factors affecting the values are the anticipated yields and anticipated occupancy rates.
The Group considers whether goodwill is impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash generating units (CGUs). This requires estimation of the future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cash flows.
Management regularly reviews retention balances and makes provision for balances that it believes will not be recovered. The assessment of retention recovery requires management's best estimate based on knowledge of the underlying contracts and past history of recovery.
At the year end the company was owed £2,340,097 (2017: £2,428,759) by Tiny Rebel Brewing Company Limited ("Tiny Rebel"). Management regularly assesses the performance of Tiny Rebel and the recoverability of amounts advanced. This assessment requires management to make judgements based on their knowledge of the performance and future prospect of Tiny Rebel.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Group
Included within the above Freehold land and buildings balance is land totalling £411,699 (2017: £411,699) which is not depreciated.
Company
Included within the above Land and buildings Freehold balance is land totalling £86,699 (2017: £86,699) which is not depreciated.
The directors have reviewed the value of investment properties as at 30th November 2018 and as a result the carrying values have been decreased to the directors' best estimate of the open market value.
If investment properties were stated on an historical cost basis rather than a fair value basis the cost would be included as £1,226,222 (2017: £1,226,222).
Details of the company's subsidiaries at 30 November 2018 are as follows:
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments, denoted by 'n/a' above.
Included within trade debtors are amounts relating to retentions that are due for payment after one year of £1,319,400(2017: £1,042,012). These retentions are normal commercial arrangements for this industry.
Included within other debtors amounts falling due after more than one year is a loan to Tiny Rebel Brewing Company Ltd of £2,238,279 (2017: £2,428,759). Interest is charged on the loan at 4% per annum.
Included within trade creditors are amounts related to retentions that are due for payment after one year of £651,260 (2017: £553,733). These retentions are normal commercial arrangements for this industry.
The bank loans are secured by a bank debenture dated 03 January 2013 over the assets of the company, a legal charge dated 15 January 2013 over Lanyon House, Mission Court, Newport.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
The company has a loan of £149,678 (2017 : £340,288) from Evol (Wales) Limited SSAS, the trustees of which are directors of the company. Under the terms of the loan agreement, the loan is repayable on demand and interest is charged at 5.0%. At the year end this amount is included in other creditors amounts falling due after one year.
At the year end, the company owed a deferred contingent consideration of £116,495 (2017: £126,495) due to Mr B Faulkner, a previous director of Whitehead Building Services Limited. This amount is shown within the creditors amount falling due after one year.
During the year the company made sales of £320,250 (2017: £345 650) to Whitehead Building Services Limited and purchases of £nil (2017: £474,538). At the year end, the company owed £3,425,350 (2017: £3,474,970) to Whitehead Building Services Limited; this amount is included in amounts owed by group undertakings within one year.
The above transactions are related as Whitehead Building Services Limited is a subsidiary of Evol (Wales) Limited.
Mr I Cummings, a director, operates a current loan account with the company, which is debited with payments made by the company on behalf of the director and credited with funds introduced and undrawn directors fees. The amount due to the director at the year end was £241,163 (2017: £363,447), this amount is included in creditors due within one year.
During the year the company charged £nil (2017: £49,078) of management fees to Tiny Rebel Brewing Company Limited, a company of which, Mr B Cummings, the son of Mr I Cummings, is a director and shareholder. At the year end £2,238,279 (2017: £2,428,759) was owed by Tiny Rebel Brewing Company Limited. This amount is included within debtors amounts falling due after more than one year.
The company is ultimately controlled by Mr I Cummings.