Registered number: 07398848
KNOWLES CONSTRUCTION LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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KNOWLES CONSTRUCTION LTD
COMPANY INFORMATION
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R Anderson (resigned 31 May 2022)
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A Nixon (appointed 13 March 2023)
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12th Floor, Capital House
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Chartered Accountants & Statutory Auditors
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KNOWLES CONSTRUCTION LTD
CONTENTS
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Independent auditors' report
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Statement of comprehensive income
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Statement of financial position
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Statement of changes in equity
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Notes to the financial statements
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KNOWLES CONSTRUCTION LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 OCTOBER 2022
The Board has now firmly established the Company as a premier construction business in the prime residential market, offering a complete service proposition from concept through to the highest quality finishes and ongoing building aftercare in London, the Home Counties and the Cotswolds.
2022 saw Knowles complete several major private residential new build and refurbishment projects in London and the country. Whilst the number of projects that the company undertook during the year did not increase, the value of key projects increased significantly which resulted in a doubling of turnover.
Whilst the Company managed to successfully work through the pandemic, significant increases in material costs and changes in the labour market following Brexit, all impacted the business. This, along with other exceptional items, reduced the gross margin.
The Board remains focussed on profitable growth, seeking out projects which best suit the business’s unique combination of subterranean, structural, specialist building and finishes skills. As noted above, the number of projects undertaken at any one time remains relatively constant, however, the business continues to actively look to win higher value projects. This has resulted the company securing several very significant contracts and the turnover in 2022-2023 will be in the order of £100 million, with major projects both in central London and in the Home Counties, notably in the Cotswolds and Surrey. The company also has a strong order book for 2023-2024.
The business has had profitable year. As noted above, turnover has increased significantly to £76m from £37m the previous year, however, a number of challenging Covid legacy projects and exceptional items depressed the gross margin. The underlying gross margin across the majority of projects in the business remains strong. The Board is focused on carefully managing overheads and on delivering a profit above the industry norm.
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KNOWLES CONSTRUCTION LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
Principal risks and uncertainties
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Financial Risk
With rising labour and material costs the principal financial risks that the business faces are associated with our ability to accurately estimate the costs of completing contracts, the risk of correctly incurring and controlling those costs, the ability to recover costs under the payment terms of all contracts, the financial standing of our clients, subcontractors and suppliers in terms of their ability to discharge their obligations to us.
The Board continues to control these risks in several ways; the company is selective in the type of work that it tenders for in terms of the client, contract type, project size, location, complexity, profitability, and contract duration. The Board favours ”phased” contracts which minimise the risks associated with long term fixed price contracts. These criteria are constantly reviewed by the Board to ensure that risks are mitigated.
Performance Risk
The Company is committed to delivering our contracts on time whilst maintaining the required levels of safety, quality, productivity, and cost control which lie at the core of our general contracting activities. To manage and control performance the Group delivers its’ activities through a decentralised organisation that empowers key managers in all parts of the business. Strong processes and in-house resources are in place to support the management team including structural design, procurement, administrative support, financial control, training and personal development.
Health & Safety
The Board recognises the importance of the health and safety of all workers and sites and operates policies to ensure that the risks associated with accidents and health are properly managed, controlled and reduced.
The Environment
The Board recognises the importance of minimising the impact on the environment and is pro-actively managing this with procedures to measure and manage outputs and to set targets for reduction.
Financial key performance indicators
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The business monitors its sales enquiries and tracks it through to tender/bid stage. The monitoring of sales forecasts and new business is on-going and reviewed on a regular basis to manage the workforce requirement. Performance against budget through turnover, margins and expenditure is closely monitored with working capital management undertaken daily across the Group. KPI’s are in place throughout the business to quickly identify any issues requiring Senior Management attention. The Board continues to manage the exposure of the company and its fellow subsidiary undertakings to price risk, credit risk, liquidity risk and cash flow risk.
Other key performance indicators
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Consistently delivering quality in terms of both work on site and service are priorities for the Board and are subject to constant review by the directors.
Directors' statement of compliance with duty to promote the success of the Company
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The Board of Directors continue to operate in the way that they consider would most likely promote the success of the company for the benefit of its members as a whole. Decisions are made following a balanced process to consider the long term implications of the decision on the business itself, as well as on its stakeholders, and also by considering the decisions against the values of the business.
The methods used to engage stakeholders vary depending on what feels most appropriate for a given situation, but always focussing on openness, transparency and fairness. The effect of this has been to continue to strengthen and deepen existing relationships with key stakeholders.
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KNOWLES CONSTRUCTION LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
This report was approved by the board and signed on its behalf.
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KNOWLES CONSTRUCTION LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 2022
The directors present their report and the financial statements for the year ended 31 October 2022.
Directors' responsibilities statement
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The directors are responsible for preparing the Strategic report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements 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.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Knowles Construction Ltd is a leader in providing value-added construction services by creating successful partnerships throughout the construction process.
The profit for the year, after taxation, amounted to £1,810,684 (2021 - £1,728,400).
The directors recommend that a dividend of £923,573 (2021: £1,090,348) is paid in the year.
The directors who served during the year were:
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R Anderson (resigned 31 May 2022)
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KNOWLES CONSTRUCTION LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
Knowles Construction is now a well-established as one of the principal prime residential contractors in the south of England offering a complete construction service from major new residences builds through to specialist historic building projects. The Board continues to focus on consistently securing a range of full construction projects in the value range £2m to £20m to sit, at any one time, alongside 2 to 3, major, £40m++ contracts.
The company’s structural division, “Knowles Structures” will continue to support Knowles Main Contracts, whilst also undertaking stand-alone basement and structural projects. The company has major projects underway in London, Oxfordshire, the Cotswolds and Surrey. The Board plans to build on this secured work and to continue to grow in the private new-build residential and Country House restoration market, as well as in the luxury hospitality sector, where the Knowles management team has extensive experience.
Research and development activities
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The Board believes that an innovative approach to adding value is central to continued success in the current business environment. It remains vitally important that, through innovation, we maintain our drive to improve the efficiency of everything we do to maintain the highest standards and to deliver value for money that our clients rightly demand.
The business strives to provide innovative solutions to everyday problems and deliver projects ranging from traditional construction to the extremely complex.
The Board is committed to investing in continuous development and process improvement to ensure that Knowles continues to be competitive in the marketplace.
Our aim is also to offer our clients, partners, and professional teams’ greater choice through a range of high value systems, products, and solutions.
Engagement with suppliers, customers and others
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The Board have continued to invest in their relationships with key suppliers and customers, seeing these areas in particular as the bedrock of the business. This approach has generated significant word of mouth recommendations, resulting in the continued growth and expansion of the business.
Disclosure of information to auditors
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Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Under section 487 (2) of the Companies Act 2006, BKL Audit LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
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KNOWLES CONSTRUCTION LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
This report was approved by the board and signed on its behalf.
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KNOWLES CONSTRUCTION LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KNOWLES CONSTRUCTION LTD
We have audited the financial statements of Knowles Construction Ltd (the 'Company') for the year ended 31 October 2022, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of changes in equity and the related notes, including a summary of 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:
∙give a true and fair view of the state of the Company's affairs as at 31 October 2022 and of its 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.
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 Auditors' 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 United Kingdom, including the Financial Reporting Council'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
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In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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KNOWLES CONSTRUCTION LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KNOWLES CONSTRUCTION LTD (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
Opinion on other matters prescribed by the Companies Act 2006
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In our opinion, based on the work undertaken in the course of the 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.
Matters on which we are required to report by exception
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In the light of the knowledge and understanding of the Company and its 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:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the 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.
Responsibilities of directors
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As explained more fully in the Directors' responsibilities statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
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KNOWLES CONSTRUCTION LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KNOWLES CONSTRUCTION LTD (CONTINUED)
Auditors' responsibilities for the audit of the financial statements
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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 Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙Enquiring of management and those charged with governance around actual and potential litigation and claims;
∙Enquiring of entity staff in finance and compliance functions to identify any instances of non-compliance with laws and regulations;
∙Reviewing minutes of meetings of those charged with governance;
∙Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
∙Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
∙Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
∙Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control.
∙Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
∙Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors' report. However,
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KNOWLES CONSTRUCTION LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KNOWLES CONSTRUCTION LTD (CONTINUED)
future events or conditions may cause the Company to cease to continue as a going concern.
∙Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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 Auditors' 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.
Nick Bishop FCA (Senior statutory auditor)
for and on behalf of
BKL Audit LLP
Chartered Accountants
Statutory Auditors
London
25 October 2023
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KNOWLES CONSTRUCTION LTD
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2022
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Interest receivable and similar income
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Interest payable and similar expenses
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Profit for the financial year
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There was no other comprehensive income for 2022 (2021:£NIL).
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The notes on pages 15 to 28 form part of these financial statements.
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KNOWLES CONSTRUCTION LTD
REGISTERED NUMBER: 07398848
STATEMENT OF FINANCIAL POSITION
AS AT 31 OCTOBER 2022
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Debtors: amounts falling due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Provisions for liabilities
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Capital redemption reserve
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KNOWLES CONSTRUCTION LTD
REGISTERED NUMBER: 07398848
STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 OCTOBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 15 to 28 form part of these financial statements.
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KNOWLES CONSTRUCTION LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2022
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Capital redemption reserve
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Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Dividends: Equity capital
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Total transactions with owners
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Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Dividends: Equity capital
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Total transactions with owners
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The notes on pages 15 to 28 form part of these financial statements.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
Knowles Construction Ltd is a limited liability company incorporated in England & Wales.
The principal activity of the company is that of providing value-added construction services by creating successful partnerships throughout the construction process.
The registered office is 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The Company has taken advantage of paragraph 1.12 of FRS 102 and not disclosed the cash flow statement of the Company. The parent company's consolidated accounts are available from the registered office, 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.
The following principal accounting policies have been applied:
The financial statements have been prepared on the going concern basis, which assumes that the Company will continue to trade for the foreseeable future, being a period of at least twelve months from the date of approval of these financial statements, and will be able to meet its debts as they fall due.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
Revenue is recognised based on the percentage of the project completed, explained further in note 2.4 and note 3, and all foreseeable losses are provided for in full.
Amounts received in excess of the value of work completed are included within deferred income and will be recognised in the period in which the work is completed. Where amounts received are lower than the value of work competed, amounts are included within accrued income and the revenue earned is recognised in the period in which the work was completed.
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by the 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 the total contract costs will exceed total contract turnover, the expected loss is recognised as an expense liability.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of the 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 sales per QS reports incurred for work performed to date compared to the estimated total contract value. 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 prepayments or accruals depending on their nature, and provided it is probable they will be recovered.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
2.Accounting policies (continued)
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately from the Company in independently administered funds.
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
2.Accounting policies (continued)
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, on a reducing balance basis.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
2.Accounting policies (continued)
(i) Financial assets
Basic financial assets, including trade and other debtors, and amounts due from related companies, are initially recognised at transaction price, 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.
Such assets are subsequently carried at amortised cost using the effective interest method.
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the Statement of Comprehensive Income.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
(ii) Financial liabilities
Basic financial liabilities, including trade and other creditors and accruals, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade creditors 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.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
(iii) Offsetting
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.
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:
(i) Revenue recognition on long term contracts
Revenue on long term contracts is measured each month with reference to the stage of completion of the contract. The directors' best estimates of contract outcomes and stage of completion are used. These include an assessment of the profitability of the contracts. The directors draw on the expertise of qualified personnel to undertake such estimates and to apply appropriate levels of scrutiny to ensure the required level of accuracy, in order to limit concern over the recoverability of these balances. Costs to complete and contract profitability are subject to estimation uncertainty.
(ii) Recovery of debtors
At each period end debtors are assessed for recoverability. If there are doubts over the recoverability of a debtor, a provision is made against the balance.
The whole of the turnover is attributable to the provision of construction services.
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All turnover arose within the United Kingdom.
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The operating profit is stated after charging:
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Other operating lease rentals
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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During the year, the Company obtained the following services from the Company's auditors and their associates:
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Fees payable to the Company's auditors and their associates for the audit of the Company's financial statements
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The Company has taken advantage of the exemption not to disclose amounts paid for non-audit services as these are disclosed in the consolidated accounts of the parent Company.
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Staff costs, including directors' remuneration, were as follows:
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Cost of defined contribution scheme
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The average monthly number of employees, including the directors, during the year was as follows:
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Company contributions to defined contribution pension schemes
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During the year retirement benefits were accruing to 3 directors (2021 - 6) in respect of defined contribution pension schemes.
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The highest paid director received remuneration of £125,833 (2021 - £108,900).
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The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £NIL (2021 - £2,047).
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Origination and reversal of timing differences
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Taxation on profit on ordinary activities
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Factors affecting tax charge for the year
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The tax assessed for the year is lower than (2021 - lower than) the standard rate of corporation tax in the UK of 19% (2021 - 19%). The differences are explained below:
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Profit on ordinary activities before tax
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Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2021 - 19%)
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Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
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Capital allowances for year in excess of depreciation
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Adjustments to tax charge in respect of prior periods
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Non-taxable income less expenses not deductible for tax purposes, other than goodwill and impairment
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Other differences leading to an increase (decrease) in the tax charge
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Total tax charge for the year
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
11.Taxation (continued)
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Factors that may affect future tax charges
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The UK Government announced its intention to increase the rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. The increase in the rate of UK corporation tax was enacted in the Finance Act 2021, which received Royal Assent on 10 June 2021.
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Provision against group and third party debtor balances
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Charge for the year on owned assets
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Due after more than one year
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Amounts owed by group undertakings
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Prepayments and accrued income
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Creditors: Amounts falling due within one year
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Other taxation and social security
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Accruals and deferred income
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Charged to profit or loss
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The provision for deferred taxation is made up as follows:
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Accelerated capital allowances
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Charged to profit or loss
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Allotted, called up and fully paid
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9,000 (2021 - 9,000) A Ordinary shares of £0.01 each
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900 (2021 - 900) B Ordinary shares of £0.01 each
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100 (2021 - 100) D Ordinary shares of £0.01 each
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
Share premium account
The share premium account is made up of amounts paid over the nominal value for issued share capital.
Capital redemption reserve
The capital redemption reserve is made up of the nominal value of the shares repurchased by the company.
Profit and loss account
The profit and loss account is made up of all prior year profits and losses less dividends paid.
Following the year end the Company has an ongoing enquiry with HMRC relating to historic VAT returns. The directors are anticipating no material adjustment and so no amount has been included in the accounts relating to this enquiry.
The company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to £31,656 (2021: £17,118).
Contributions totalling £12,722 (2021: £(6,257)) were payable to the fund at the reporting date and are included in creditors.
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Commitments under operating leases
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At 31 October 2022 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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23.Other financial commitments
The Company forms part of a VAT group with other 100% controlled subsidiaries of Knowles Holdings Limited. The Company carries joint and several liability for all group VAT balances.
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KNOWLES CONSTRUCTION LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
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Related party transactions
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Where possible, the company has taken advantage of the exemption within s33.1A of FRS 102 not to disclose related party transactions with other wholly owned group undertakings.
The directors are considered key management and their salaries are disclosed in note 9 to the financial statements.
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The immediate parent undertaking is Knowles Holdings Limited, a company incorporated in England and Wales.
Knowles Holdings Limited prepare group financial statements and copies can be obtained from the Registered Office at 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.
The ultimate controlling party are R & M Knowles by virtue of their majority shareholding in the parent entity.
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