Company Registration No. 12650411 (England and Wales)
WATSON CONSTRUCTION (HOLDINGS) LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
PM+M Solutions for Business LLP
Chartered Accountants
New Century House
Greenbank Technology Park
Challenge Way
Blackburn
Lancashire
BB1 5QB
WATSON CONSTRUCTION (HOLDINGS) LTD
COMPANY INFORMATION
Directors
Mr RT Watson
Mr MR Watson
Company number
12650411
Registered office
Spark Studio
208-210 Clowes Street
Salford
Manchester
M7 2ZS
Auditor
PM+M Solutions for Business LLP
New Century House
Greenbank Technology Park
Challenge Way
Blackburn
Lancashire
BB1 5QB
WATSON CONSTRUCTION (HOLDINGS) LTD
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 8
Group statement of comprehensive income
9
Group balance sheet
10
Company balance sheet
11
Group statement of changes in equity
12
Company statement of changes in equity
13
Group statement of cash flows
14
Notes to the financial statements
15 - 31
WATSON CONSTRUCTION (HOLDINGS) LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The directors present the strategic report for the year ended 31 December 2022.

Fair review of the business

The group continues to operate as a new build contractor and developer, we work across the Greater Manchester and wider Northwest region creating new homes and communities predominantly for the affordable housing market.

Principal risks and uncertainties

The affordable housing sector remains, as always, highly competitive and following two years of instability caused by the Covid-19 pandemic, the industry continued to face severe inflationary pressures during 2022. The inflationary pressures in the construction sector have been greater than in many other sectors with construction particularly affected by the energy crisis created through the Russian invasion of Ukraine. Inflation pressures have affected both supply and labour availability, in particular on those fixed price build contracts agreed in 2020 and 2021.

Whilst the business has successfully navigated the financial challenges presented by older developments agreed prior to and during the Covid-19 pandemic, with many of these being completed during the year, difficulties have been encountered on one ongoing development. The desire from our clients for fixed price contracts, which do not permit adjustments to reflect inflationary pressures, can result in a squeezing of margin, and turn profit making contracts into loss making ones. The business has just one such contract and this contract has been recognised as onerous during the year, which has led to the full anticipated loss being recognised in these accounts. The business reviews upcoming schemes on a project by project basis and now includes inflation price adjustment clauses where the risk deems this necessary.

Despite the challenges caused by this contract, it is pleasing to see the business continue to deliver profitable developments in a challenging market. This allows us to continue to deliver our growth plans and further contribute to remedying the affordable housing crisis in the region. During the year we handed over 279 affordable homes, a record number for the business, and we finished the year with 466 homes under construction.

We continue to secure developments predominantly through land and build packages, but have also secured a number of projects through competitive tender. Looking into 2023 and beyond the business is in a strong position, a large pipeline of work has allowed further developments to commence in 2023 and further opportunities to be secured. During late 2022 our planning appeal against the refusal of a major development for 255 homes and a canal restoration in Little Lever, we were successful in this appeal and planning consent was granted in early 2023. This project is one of a number of developments set to start on site during 2023. The secured projects means the business has in excess of 1,000 affordable homes waiting to start on site.

Social Value

Despite the financial challenges facing the industry we believe it is right to continue to support our charitable partners and the valuable works they undertake. We have continued to support the Mustard Tree during the year, a Manchester based charity which operates with the aim of reducing and tackling the causes of poverty and homelessness across the city. Since beginning to support the charity in 2017 we have provided donations of over £150,000.

In addition to this we work closely with our development and charity partners to provide pathways into construction through work placements and apprenticeships. We believe that only apprenticeships can address the long term skills shortage facing all roles within the construction industry and our people teams work hard to provide apprenticeship programmes of the highest quality. Our commitment to apprentices saw new roles being created during 2022 and support provided to our supply chain to enable them to provide apprentices across our development sites. Our growing pipeline of work provides opportunity to further expand our social value offering in this area.

WATSON CONSTRUCTION (HOLDINGS) LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Key performance indicators

We monitor the performance of the group on a range of Key Performance Indicators throughout the financial year:

2022
2021
Movement in turnover
7.4%
21.2%
Gross Profit %
5.7%
13.7%
New build homes delivered
279
190
New build homes under construction
466
419

On behalf of the board

Mr RT Watson
Director
30 September 2023
WATSON CONSTRUCTION (HOLDINGS) LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2022.

Principal activities

The principal activity of the company during the period was the sale and purchase of land for residential property development. Principal activity of the group continued to be that of a new build contractor and developer.

Results and dividends

The results for the year are set out on page 9.

Ordinary dividends were paid amounting to £93,280. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr RT Watson
Mr MR Watson
Auditor

The auditor, PM+M Solutions for Business LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

WATSON CONSTRUCTION (HOLDINGS) LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
On behalf of the board
Mr RT Watson
Director
30 September 2023
WATSON CONSTRUCTION (HOLDINGS) LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF WATSON CONSTRUCTION (HOLDINGS) LTD
- 5 -
Opinion

We have audited the financial statements of Watson Construction (Holdings) Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

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 group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

WATSON CONSTRUCTION (HOLDINGS) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WATSON CONSTRUCTION (HOLDINGS) LTD
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

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 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 parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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.

Extent to which the audit was considered capable of detecting irregularities, including fraud

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

 

We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

WATSON CONSTRUCTION (HOLDINGS) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WATSON CONSTRUCTION (HOLDINGS) LTD
- 7 -

Identifying and assessing potential risks related to irregularities

 

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we have considered the following:

 

 

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: timing of recognition of commercial income, posting of unusual journals and complex transactions; and manipulating the Group's performance to meet targets. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

 

We also obtained an understanding of the legal and regulatory frameworks that the Company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included UK Companies Act, employment law, health and safety, pensions legislation and tax legislation.

Audit response to risks identified

Our procedures to respond to risks identified included the following:

 

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.

WATSON CONSTRUCTION (HOLDINGS) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WATSON CONSTRUCTION (HOLDINGS) LTD
- 8 -

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Ceri Dixon BSc ACA
Senior Statutory Auditor
For and on behalf of PM+M Solutions for Business LLP
30 September 2023
Chartered Accountants
Statutory Auditor
New Century House
Greenbank Technology Park
Challenge Way
Blackburn
Lancashire
BB1 5QB
WATSON CONSTRUCTION (HOLDINGS) LTD
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
as restated
Notes
£
£
Turnover
3
27,372,962
25,480,485
Cost of sales
(25,812,136)
(22,468,694)
Gross profit
1,560,826
3,011,791
Administrative expenses
(1,684,591)
(1,500,411)
Other operating income
-
2,505
Operating (loss)/profit
4
(123,765)
1,513,885
Interest receivable and similar income
7
4,622
13,472
Interest payable and similar expenses
8
(231,496)
(153,641)
Increase in the fair value of investment properties
9
228,881
78,000
(Loss)/profit before taxation
(121,758)
1,451,716
Tax on (loss)/profit
10
7,533
(264,589)
(Loss)/profit for the financial year
(114,225)
1,187,127
Total comprehensive income for the year is all attributable to the owners of the parent company.
WATSON CONSTRUCTION (HOLDINGS) LTD
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
as restated
Notes
£
£
£
£
Fixed assets
Intangible assets
12
78,165
129,634
Tangible assets
11
144,567
77,739
Investment property
13
1,429,367
1,384,226
1,652,099
1,591,599
Current assets
Stocks
16
2,848,849
3,860,532
Debtors falling due after more than one year
17
457,694
416,047
Debtors falling due within one year
17
5,036,795
3,771,027
Cash at bank and in hand
3,206,956
3,295,109
11,550,294
11,342,715
Creditors: amounts falling due within one year
18
(6,731,724)
(4,242,981)
Net current assets
4,818,570
7,099,734
Total assets less current liabilities
6,470,669
8,691,333
Creditors: amounts falling due after more than one year
19
(625,094)
(2,665,045)
Provisions for liabilities
Deferred tax liability
20
194,945
168,153
(194,945)
(168,153)
Net assets
5,650,630
5,858,135
Capital and reserves
Called up share capital
22
1,000
1,000
Revaluation reserve
23
571,831
401,050
Profit and loss reserves
5,077,799
5,456,085
Total equity
5,650,630
5,858,135
The financial statements were approved by the board of directors and authorised for issue on 30 September 2023 and are signed on its behalf by:
30 September 2023
Mr RT Watson
Director
Company registration number 12650411 (England and Wales)
WATSON CONSTRUCTION (HOLDINGS) LTD
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
as restated
Notes
£
£
£
£
Fixed assets
Investments
15
201,001
201,001
Current assets
Stocks
16
2,798,849
3,813,715
Debtors
17
57,211
27,553
Cash at bank and in hand
1,900,925
506,521
4,756,985
4,347,789
Creditors: amounts falling due within one year
18
(4,158,378)
(2,148,609)
Net current assets
598,607
2,199,180
Total assets less current liabilities
799,608
2,400,181
Creditors: amounts falling due after more than one year
19
(200,000)
(2,093,750)
Net assets
599,608
306,431
Capital and reserves
Called up share capital
22
1,000
1,000
Profit and loss reserves
598,608
305,431
Total equity
599,608
306,431

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 £386,457 (2021 - £124,132 loss).

The financial statements were approved by the board of directors and authorised for issue on 30 September 2023 and are signed on its behalf by:
30 September 2023
Mr RT Watson
Director
Company registration number 12650411 (England and Wales)
WATSON CONSTRUCTION (HOLDINGS) LTD
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
Share capital
Revaluation reserve
Profit and loss reserves
Total
Notes
£
£
£
£
As restated for the period ended 31 December 2021:
Balance at 1 January 2021
1,000
369,850
4,383,871
4,754,721
Year ended 31 December 2021:
Profit and total comprehensive income
-
-
1,229,836
1,229,836
Dividends
-
-
(126,422)
(126,422)
Transfers
-
31,200
(31,200)
-
Balance at 31 December 2021
1,000
401,050
5,456,085
5,858,135
Year ended 31 December 2022:
Loss and total comprehensive income
-
-
(114,225)
(114,225)
Dividends
-
-
(93,280)
(93,280)
Transfers
-
170,781
(170,781)
-
Balance at 31 December 2022
1,000
571,831
5,077,799
5,650,630
WATSON CONSTRUCTION (HOLDINGS) LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
As restated for the period ended 31 December 2021:
Balance at 1 January 2021
1,000
555,985
556,985
Year ended 31 December 2021:
Loss and total comprehensive income for the year
-
(124,132)
(124,132)
Dividends
-
(126,422)
(126,422)
Balance at 31 December 2021
1,000
305,431
306,431
Year ended 31 December 2022:
Profit and total comprehensive income
-
386,457
386,457
Dividends
-
(93,280)
(93,280)
Balance at 31 December 2022
1,000
598,608
599,608
WATSON CONSTRUCTION (HOLDINGS) LTD
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 14 -
2022
2021
as restated
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
26
520,685
(2,619,185)
Income taxes paid
(263,050)
(435,280)
Net cash inflow/(outflow) from operating activities
257,635
(3,054,465)
Investing activities
Purchase of intangible assets
-
(35,880)
Purchase of tangible fixed assets
(111,665)
(43,958)
Proceeds from disposal of investment property
238,267
-
Interest received
4,622
13,472
Net cash generated from/(used in) investing activities
131,224
(66,366)
Financing activities
Proceeds from new bank loans
-
1,893,750
Repayment of bank loans
(152,236)
(16,726)
Interest paid
(231,496)
(153,641)
Dividends paid to equity shareholders
(93,280)
(126,422)
Net cash (used in)/generated from financing activities
(477,012)
1,596,961
Net decrease in cash and cash equivalents
(88,153)
(1,523,870)
Cash and cash equivalents at beginning of year
3,295,109
4,818,979
Cash and cash equivalents at end of year
3,206,956
3,295,109
WATSON CONSTRUCTION (HOLDINGS) LTD
GROUP STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 15 -
1
Judgements and key sources of estimation uncertainty

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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Construction contract profitability

Construction contract profitability is assessed on a contract by contract basis using the total contract value less costs incurred to date and expected future costs to completion. Completion percentage of each contract is determined by the level of costs incurred at the reporting date as a percentage of the expected total costs of the contract. Calculation of these requires judgements which includes forecasted costs based on site designs and prior industry knowledge.

Useful life of intangible and tangible assets

Amortisation and depreciation are recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases. These estimates require judgement to assess what the useful lives of the assets are.

Recoverability of retentions

Retentions are recognised at transactions price and are subsequently carried at amortised cost using the effective interest method. Where the effect of the using the effective interest method is not material to the financial statements or financial assets classified as receivable within one year are not amortised. At the reporting date judgements are made over the need for provisions against the recoverable amount.

Investment property

Investment property valuation is determined off a judgement from directors. All investment properties are recognised at fair value and any changes in valuation is recognised in profit or loss.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 16 -
2
Accounting policies
Company information

Watson Construction (Holdings) Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Spark Studio, 208-210 Clowes Street, Salford, Manchester, M7 2ZS.

 

The group consists of Watson Construction (Holdings) Ltd and all of its subsidiaries.

2.1
Accounting convention

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 investment properties. The principal accounting policies adopted are set out below.

The consolidated group financial statements consist of the financial statements of the parent company Watson Construction (Holdings) Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

 

All financial statements are made up to 31 December 2022.

 

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.

2.2
Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group 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.

2.3
Turnover

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 construction contracts 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.

Construction contract revenue is recognised in line with the specific accounting policy 1.13 below.

2.4
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Accounting policies
(Continued)
- 17 -

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Development costs
20% Straight line
2.5
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Plant and equipment
33% Straight line
Fixtures and fittings
25% Straight line
Computers
33% Straight line
Motor vehicles
25% Reducing balance

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.

2.6
Investment properties

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

2.7
Fixed asset investments

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

 

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities 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.

2.8
Impairment of fixed assets

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.

2.9
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Accounting policies
(Continued)
- 18 -

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss.

2.10
Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

 

When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.

 

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

The “percentage of completion method” is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets depending on their nature, and provided it is probable they will be recovered.

2.11
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

2.12
Financial instruments

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.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Accounting policies
(Continued)
- 19 -
Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

2.13
Equity instruments

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

2.14
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current 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

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.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Accounting policies
(Continued)
- 20 -
2.15
Employee benefits

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.

2.16
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

2.17
Leases

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.

2.18
Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

 

Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

2.19
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

2.20

Other non-distributable reserve

The cumulative fair value movements in respect of investment properties, including fair value movements initially reflected in profit and loss, which are then transferred via a reserve movement between profit and loss account reserve and the other non-distributable reserve.

3
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Construction contracts
23,742,962
25,215,485
Sale of land
3,630,000
265,000
27,372,962
25,480,485
2022
2021
£
£
Other revenue
Interest income
4,622
13,472
Grants received
-
0
2,505

During the year, the group received £Nil (2021 - £2,505) from the government as part of the coronavirus job retention scheme.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
4
Operating (loss)/profit
2022
2021
£
£
Operating (loss)/profit for the year is stated after charging/(crediting):
Government grants
-
0
(2,505)
Depreciation of owned tangible fixed assets
44,724
33,580
Loss on disposal of tangible fixed assets
113
52
Profit on disposal of investment property
(7,710)
-
0
Amortisation of intangible assets
51,469
48,859
Operating lease charges
61,721
59,913
5
Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

Group
Company
2022
2021
2022
2021
Number
Number
Number
Number
Direct Labour
22
28
-
-
Administration
38
37
2
2
Total
60
65
2
2

Their aggregate remuneration comprised:

Group
Company
2022
2021
2022
2021
£
£
£
£
Wages and salaries
2,210,852
2,106,538
-
0
-
0
Social security costs
214,994
205,491
-
0
-
0
Pension costs
78,673
67,778
-
0
-
0
2,504,519
2,379,807
-
0
-
0
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
6
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
7,199
6,545
Audit of the financial statements of the company's subsidiaries
18,899
16,445
26,098
22,990
For other services
Taxation compliance services
2,179
1,980
7
Interest receivable and similar income
2022
2021
£
£
Interest income
Interest on bank deposits
4,622
13,472
2022
2021
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
4,622
13,472
8
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
217,917
137,416
Dividends on redeemable preference shares not classified as equity
10,000
10,000
Other interest on financial liabilities
3,579
6,225
231,496
153,641
9
Other gains/(losses)
2022
2021
£
£
Fair value gains/(losses) on financial instruments
Gain on financial assets held at fair value through profit or loss
89,698
78,000
Other gains/(losses)
Changes in the fair value of investment properties
139,183
-
228,881
78,000
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
10
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
22,103
239,966
Adjustments in respect of prior periods
(56,428)
(76,204)
Total current tax
(34,325)
163,762
Deferred tax
Origination and reversal of timing differences
26,792
9,686
Changes in tax rates
-
0
40,357
Adjustment in respect of prior periods
-
0
8,075
Total deferred tax
26,792
58,118
Total tax (credit)/charge
(7,533)
221,880

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2022
2021
£
£
(Loss)/profit before taxation
(121,758)
1,451,716
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
(23,134)
275,826
Tax effect of expenses that are not deductible in determining taxable profit
2,971
4,046
Tax effect of income not taxable in determining taxable profit
(17,043)
-
0
Adjustments in respect of prior years
(56,428)
(68,129)
Effect of change in corporation tax rate
4,640
-
Permanent capital allowances in excess of depreciation
(3,474)
(461)
Research and development tax credit
-
0
(25,591)
Other permanent differences
4,771
-
0
Remeasurement of deferred tax for changes in tax rate
-
0
40,357
Deduction for land remediation expenditure
-
0
(4,168)
Chargeable gains
19,271
-
0
Losses carried back
60,893
-
0
Taxation (credit)/charge
(7,533)
221,880
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
11
Tangible fixed assets
Group
Plant and equipment
Fixtures and fittings
Computers
Motor vehicles
Total
£
£
£
£
£
Cost or valuation
At 1 January 2022
36,388
12,102
57,952
67,947
174,389
Additions
55,115
1,011
13,463
42,076
111,665
Disposals
-
0
-
0
(5,694)
-
0
(5,694)
At 31 December 2022
91,503
13,113
65,721
110,023
280,360
Depreciation and impairment
At 1 January 2022
21,192
9,484
33,084
32,890
96,650
Depreciation charged in the year
12,268
1,628
15,599
15,229
44,724
Eliminated in respect of disposals
-
0
-
0
(5,581)
-
0
(5,581)
At 31 December 2022
33,460
11,112
43,102
48,119
135,793
Carrying amount
At 31 December 2022
58,043
2,001
22,619
61,904
144,567
At 31 December 2021
15,196
2,618
24,868
35,057
77,739
The company had no tangible fixed assets at 31 December 2022 or 31 December 2021.
12
Intangible fixed assets
Group
Development costs
£
Cost
At 1 January 2022 and 31 December 2022
257,346
Amortisation and impairment
At 1 January 2022
127,712
Amortisation charged for the year
51,469
At 31 December 2022
179,181
Carrying amount
At 31 December 2022
78,165
At 31 December 2021
129,634
The company had no intangible fixed assets at 31 December 2022 or 31 December 2021.
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
13
Investment property
Group
Company
2022
2022
£
£
Fair value
At 1 January 2022 and 31 December 2022
1,384,226
-
Transfers from inventories
186,000
-
Disposals
(230,557)
-
Net gains or losses through fair value adjustments
89,698
-
At 31 December 2022
1,429,367
-

The valuations were made by the Directors as at 31 December 2022, on an open market value basis.

The carrying value of land and buildings comprises:

Group
Company
2022
2021
2022
2021
£
£
£
£
Freehold
1,429,367
1,384,226
-
-
14
Subsidiaries

Details of the company's subsidiaries at 31 December 2022 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
WC Investments Limited
Spark Studio, 208-210 Great Clowes Street, Salford, M7 2ZS, United Kingdom
Ordinary
100.00
Watson Construction Limited
Spark Studio, 208-210 Great Clowes Street, Salford, M7 2ZS, United Kingdom
Ordinary
100.00
15
Fixed asset investments
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Investments in subsidiaries
14
-
0
-
0
201,001
201,001
16
Stocks
Group
Company
2022
2021
2022
2021
£
£
£
£
Work in progress
2,848,849
3,860,532
2,798,849
3,813,715
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 26 -
17
Debtors
Group
Company
2022
2021
2022
2021
Amounts falling due within one year:
£
£
£
£
Trade debtors
3,667,697
3,458,525
-
0
-
0
Corporation tax recoverable
127,779
-
0
-
0
-
0
Amounts owed by group undertakings
-
-
50,000
-
Other debtors
276,769
198,846
7,211
1,814
Prepayments and accrued income
964,550
113,656
-
0
25,739
5,036,795
3,771,027
57,211
27,553
Amounts falling due after more than one year:
Trade debtors
457,694
416,047
-
0
-
0
Total debtors
5,494,489
4,187,074
57,211
27,553

At 31 December 2022, retentions held by customers for contract work amounted to £1,830,775 (2021 - £1,657,067). At 31 December 2022, amounts of £457,694 (2021 - £416,047) included in trade debtors and arising from construction contracts are due for settlement after more than 12 months.

 

18
Creditors: amounts falling due within one year
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Bank loans
1,924,716
37,001
1,893,750
-
0
Trade creditors
2,493,280
1,787,911
11,217
159
Amounts owed to group undertakings
-
0
-
0
2,132,194
2,132,194
Corporation tax payable
-
0
169,596
-
0
-
0
Other taxation and social security
74,068
106,762
-
-
Other creditors
94,680
101,918
-
0
-
0
Accruals and deferred income
2,144,980
2,039,793
121,217
16,256
6,731,724
4,242,981
4,158,378
2,148,609

Included in other creditors as at the year ended 31 December 2022 is a loan balance of £Nil (2021: £5,000) owed to Watson Construction Pension Scheme. The pension scheme has a first charge over assets owned by the group. Also included within other creditors is an amount due to directors £19,636 (2021 - £19,636), that is interest free and repayable on demand.

 

Included within accruals is a gross amount due to customers for contract work as a liability £1,936,094 (2021 - £1,262,252).

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 27 -
19
Creditors: amounts falling due after more than one year
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Bank loans and overdrafts
425,094
2,465,045
-
0
1,893,750
Other creditors
200,000
200,000
200,000
200,000
625,094
2,665,045
200,000
2,093,750

Bank loans are secured by a fixed and floating charge over the company.

Amounts included above which fall due after five years are as follows:
Payable by instalments
301,229
424,427
-
-
20
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Liabilities
Liabilities
2022
2021
Group
£
£
Accelerated capital allowances
43,988
36,471
Investment property
152,583
133,250
Short term timing differences
(1,626)
(1,568)
194,945
168,153
The company has no deferred tax assets or liabilities.
Group
Company
2022
2022
Movements in the year:
£
£
Liability at 1 January 2022
168,153
-
Charge to profit or loss
26,792
-
Liability at 31 December 2022
194,945
-
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 28 -
21
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
78,673
67,778

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.

22
Share capital
Group and company
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1,000
1,000
1,000
1,000
2022
2021
2022
2021
Preference share capital
Number
Number
£
£
Issued and fully paid
Preference shares of £1,000 each
200
200
200,000
200,000
Preference shares classified as liabilities
200,000
200,000

The holders of the preference shares are entitled to be paid a fixed cumulative preferential dividend at the rate of £10,000 per annum. The preferential dividend shall be paid quarterly on January 31, April 30, July 31 and October 31.

 

In the event of a winding up, the holders of these shares shall be entitled to repayment of a sum equal to the nominal capital paid up or credited as paid up on the preference shares held by them respectively, together with a sum equal to all arrears and accruals of the preferential dividend.

 

The holder of preference shares shall have the right to receive notice of, attend, speak and vote at a General Meeting of the company only if and when the preferential dividend on such shares is six months or more in arrears or the preference shares required to be redeemed, or if a resolution is to be proposed abrogating, varying or modifying any of the rights or privileges of the holders, or for the winding-up of the company, or for sanctioning the sale of the company. Otherwise, the holders shall not have the right to receive notice of, attend, speak or vote at any General Meeting of the company.

 

When the holders are entitled to vote, every such holder who is present in person or by proxy or by a representative shall have one vote in respect of each fully-paid preference share registered in the name of such holder.

 

The company shall have the right to redeem at any time and from time to time during the period commencing on 1 November 2015 and ending on 31 December 2030 all or any of the preference shares for the time being issued and outstanding, upon giving the holders at least 28 days' prior notice in writing of the redemption date. Any partial redemption shall be effected in proportion to the members' respective holdings. There shall be paid on each preference share redeemed the amount paid up on such preference share together with a sum equal to all arrears and accruals of the preferential dividend to and including the redemption date. The company shall redeem on 31 December 2030 all of the preference shares in issue on that date. The amount paid will be as specified above.

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 29 -
23
Revaluation reserve
Group
Company
2022
2021
2022
2021
£
£
£
£
At the beginning of the year
401,050
369,850
-
0
-
0
Transfer from/(to) retained earnings
170,781
31,200
-
-
At the end of the year
571,831
401,050
-
0
-

The above transfer from retained earnings is the revaluation surplus arising in the year, shown net of the deferred taxation charge £14,583 (2021 - £46,800) and realisation of investment property disposal £17,117 (2021 - £Nil).

24
Operating lease commitments
Lessee

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:

Group
Company
2022
2021
2022
2021
£
£
£
£
Within one year
49,702
61,721
-
-
Between two and five years
106,086
130,788
-
-
In over five years
-
25,000
-
-
155,788
217,509
-
-
25
Related party transactions

During the year the group incurred rental expense with Watson Construction Pension Scheme amounted to £25,000 (2021 - £25,000).

WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 30 -
26
Cash generated from/(absorbed by) group operations
2022
2021
£
£
(Loss)/profit for the year after tax
(114,225)
1,229,836
Adjustments for:
Taxation (credited)/charged
(7,533)
221,880
Finance costs
231,496
153,641
Investment income
(4,622)
(13,472)
Loss on disposal of tangible fixed assets
113
52
Gain on disposal of investment property
(7,710)
-
0
Fair value gain on investment properties
(139,183)
-
0
Amortisation and impairment of intangible assets
51,469
48,859
Depreciation and impairment of tangible fixed assets
44,724
33,580
Fair value gain on investment properties
(89,698)
(78,000)
Movements in working capital:
Decrease/(increase) in stocks
964,866
(3,445,715)
Increase in debtors
(1,179,636)
(1,168,689)
Increase in creditors
770,624
398,843
Cash generated from/(absorbed by) operations
520,685
(2,619,185)
27
Analysis of changes in net funds - group
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
3,295,109
(88,153)
3,206,956
Borrowings excluding overdrafts
(2,502,046)
152,236
(2,349,810)
793,063
64,083
857,146
WATSON CONSTRUCTION (HOLDINGS) LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 31 -
28
Prior period adjustment
Reconciliation of changes in equity - group
1 January
31 December
2021
2021
£
£
Adjustments to prior year
Reassessment of estimated costs of completion on long-term construction contracts net of corporation tax
-
(371,715)
Equity as previously reported
4,754,721
6,229,850
Equity as adjusted
4,754,721
5,858,135
Analysis of the effect upon equity
Profit and loss reserves
-
(371,715)
Reconciliation of changes in profit for the previous financial period
2021
£
Adjustments to prior year
Reassessment of estimated costs of completion on long-term construction contracts
(458,907)
Corporation tax effect of the above
87,192
Total adjustments
(371,715)
Profit as previously reported
1,601,551
Profit as adjusted
1,229,836
Reconciliation of changes in equity - company
The prior period adjustments do not give rise to any effect upon equity.
Reconciliation of changes in loss for the previous financial period
2021
£
Adjustments to prior year
Total adjustments
-
Loss as previously reported
(124,132)
Loss as adjusted
(124,132)
2022-12-312022-01-01falseCCH SoftwareCCH Accounts Production 2023.200Mr RT WatsonMr MR 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