The directors present the strategic report for the year ended 28 February 2024.
Our business model is founded on a talented workforce and supply chain, and long term relationships with clients and partners. We use these resources to deliver high quality construction projects.
What We Do
SCS Building Solutions are Specialists in the supply & installation of SFS, metal stud partitions / drylining, GRG encasements / profiles and suspended ceilings. The diversity of our offering mitigates the impact of fluctuating individual markets.
Our resources
A Talented Workforce
We employ approximately 36 directly employed members of staff. We have a low staff turnover with the current average staff retention of 8.36 years. Many existing senior staff members have been with the group for over 15 years and many site managers worked for the group as subcontractors prior to being employed full time by the SCS Group.
High Quality Supply Chain
We have a trusted network of suppliers and subcontractors who are aligned to our values and can help us deliver projects efficiently and to a high standard.
Strong Client relationships
We have formed long term relationships with our clients.
Maintaining and enhancing our resources
Staff
We develop our staff through training and mentoring to increase the skills and knowledge they require to maximise their potential and meet the needs of our markets. We create a safe working environment in which our employees work.
Our Supply Chain
We build long term relationships with our suppliers and subcontractors based on fairness and respect. By aligning our supply chain to our values and quality criteria we reduce the likelihood of error on projects and increase efficiency and client satisfaction.
Client Relationships
Using our talented work force and high-quality supply chain we deliver safe, efficiently run, high quality projects that match our clients objectives. The relationships we build as a result increase the prospect of repeat business, which can have a positive impact on profitability and long-term growth.
Disciplined financial managements
We monitor our cash levels daily and foster good relationships with financial institutions.
Our Culture
Underpinning our business model, our core values and total commitment creates a culture that is focused on developing and empowering our employees and delivering high quality projects for clients. Whatever the task everybody can and should take pride in a job well done. We strive to always work in a safe and sustainable way. These principles are driven by the Board.
Our Strategy
Creating and maintaining long term relationships and delivering repeat business. We target opportunities that suit our experience and expertise. We take a long-term approach to relationships with our clients aiming to deliver exceptional quality and service that encourages them to choose us for the next project. To deliver high quality we employ talented people and work closely with our supply chain.
Key Challenges identified by Management are:
Government changes - a significant amount of construction work is driven by UK Government expenditure, in particular education and healthcare projects and therefore any reduction in this expenditure could adversely impact on SCS workflow. We have looked to mitigate this risk by ensuring we work on projects across a variety of sectors, including commercial and non commercial.
Poor Contract Selection – A failure to identify the risks of a project and what has been included within the contracts of work may lead to poor delivery and ultimately result in reputational damage and loss of opportunities. We have looked to mitigate this risk by employing an internal advisor to review our contracts.
Over reliance on certain customers - We have made a move to work for a varied range of contractors to help spread risk. We are looking to diversify and refresh customers in line with market trends by increasing work with different main contractors.
We have seen stabilizations in the debtors of the business. These are still extremely high due to extended payment terms which affect the industry as a whole. The group continues to manage this liquidity risk by making good use of the funding which is available to the business. The Group has in place Credit Insurance against our debtors, which provides comfort in a volatile market.
Financial Risk – Following the MBO the company has a high level of debt. This has been necessary to finance the share purchase. The group has agreed to meet a number of covenants as part of its financing arrangements. The group has put in place several strategies to monitor the working capital which include daily cash reporting and monthly cash flow forecasting.Key
Personnel – the success of our business is dependant on the staff that we employ. We are focused on engaging with all our staff within the organisation to ensure that they continue to deliver great customer services for our clients. We carry out a two-way feedback on performance during annual reviews.
Health & Safety – the nature of the business means that employees and third parties are exposed to the potential Health and Safety risks and management of these risks is critical to the success of the business .The company is committed to the HS&E. The company has formed a Health & Safety committee and our H&S Advisor carries out a monthly review of the health and safety measures in place on our sites.
Future Direction
To take the group forward, the board continue to strive for efficiencies within the business. We are implementing computer software programmes for most functions within the business, which reduce manual inputting errors which can be evident in traditionally built Spreadsheets.
The group take time to review all material purchase orders for accuracy and ensure no over ordering is taking place. The group engage early with all manufacturers and suppliers to ensure material procurement is in place well ahead of site requirements.
The group deal directly with subcontractors who can deliver the schemes that the group are working on, and ensuring the group maintains the required labour levels to maintain programme.
The group has enjoyed good year to year end February 2024, and whilst turnover maybe lower than the previous year, the profit % has remained stable. SCS implemented lessons learnt from previous years to engage our supply chain early in the project life cycle.
Securing fixed or capped prices on materials has had a positive impact in maintaining budgeted costs on all projects.
Communicating clearly and regularly with the SCS subcontract operatives has ensured a reliable workforce across all SCS sites, ensuring that programme requirements are met.
Key Performance Indicators
Feb-24 Feb-23
Turnover £14,436,999 £22,455,928
Operating Profit £1,653,400 £2,681,363
Operating Profit Margin 11.45% 11.94%
Overheads as a % of Revenue 14.84% 9.0%
On behalf of the board
The directors present their annual report and financial statements for the year ended 28 February 2024.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £333,316. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Azets Audit Services Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting period.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Specialist Ceiling Services Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is Newmarket House, Aberford Road, Stanley, Wakefield, WF3 4AL.
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 £1.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.
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 company after deducting all of its 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company 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 company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors do not consider that there are any key estimates and judgements included within these financial statements.
The average monthly number of persons (including directors) employed by the company during the year was:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 28 February 2024 are as follows:
The Company has provided an unlimited guarantee dated 8 August 2019 in respect of the bank borrowings by its ultimate parent company. As at 28 February 2023 this amounted to £nil as the charge was satisfied in December 2022(2022 - £1,004,557). The guarantee is secured by way of both a fixed and floating charge over the company assets.