The directors present the strategic report for the Group for the year ended 30 November 2023.
The Group has experienced a notable increase in turnover compared to the previous year, which can be attributed to several factors. These include the Group's ability to retain valued clients, successful negotiations, and winning new tenders. Despite facing strong competition in the UK marketplace, rising construction costs, and the economic challenges posed by the COVID-19 pandemic and Brexit, the Group has managed to maintain strong trading levels and secure new tenders for the upcoming accounting periods.
During the year, the Group's gross profit margin has shown a positive growth of 4.43%. This improvement can be attributed to effective pricing strategies and diligent cost management. As a result, the Group finds itself in a robust position to maximise its gross profit. The directors and management team consistently review pricing, costing, and projects to enhance the costing models. Consequently, the Group is well-positioned to continue maximising gross profit while effectively managing cost reduction.
Overhead costs of the group have improved by £0.03. This improvement is primarily due to the group's restructuring efforts. Resources were strategically redirected by the directors to optimise costs, including discontinuing certain subsidiaries as part of this initiative. The Group has also made strategic investments in its people, procedures, and information technology. These investments aim to secure profitable contract work in the coming years.
The Group's financial health is on the upswing, as evidenced by the improvement in its working capital. The net current assets have gone up by £2.5 million, reaching £9.8 million in 2023, compared to £7.4 million in the previous year, 2022. Moreover, the Group's cash balance has experienced a boost of £3.2 million, now standing at £6.9 million in 2023, as opposed to £3.7 million in 2022.
The construction industry has faced numerous challenges, including global supply chain disruptions and rising inflation. The Group has successfully navigated these issues by maintaining flexibility in sourcing materials, adopting innovative construction technologies, and optimising operational efficiencies.
The Group places great importance on ensuring the health and safety of all employees. A dedicated health and safety manager closely monitors and oversees the well-being of everyone working for the Group.
The Group has recognised inflation, the ongoing conflict in Ukraine, and escalating energy costs as major factors driving up expenses, which present substantial risks to its operations. To mitigate these risks, the Group has implemented a strategic plan that includes engaging in transparent and thoughtful discussions with clients to recover the increased costs over both short and long periods. Through these proactive measures, the Group is focused on preserving its financial resilience and ensuring the sustainability of its business operations.
Financial Risk
The Directors have identified that the Group’s financial risk is that of increased construction costs, inflation and energy costs, and the general economic turmoil in the aftermath of the Covid-19 pandemic, Brexit and the war in Ukraine.
Reputational Risk
The Directors are aware of the ongoing reputational risk to the Group arising from customer claims. The Group promptly responds to these claims and settles them when necessary. To mitigate the occurrence of future claims, the Group diligently records all claims and implements procedures aimed at prevention.
Economic Risk
The Group places a strong emphasis on cultivating close relationships with its key customers to identify early signs of potential financial difficulties. Regular reviews of sales trends in major markets provide insights that allow the Group to take proactive actions in the event of declining sales. By conducting regular contract reviews and fostering strong relationships with key customers, the Group minimizes the risk of disputes and ensures continued financial stability.
Safety and People
Safety remains a core priority for the Group, and all employees, including the Director, are deeply committed to ensuring a safe working environment. Given the inherent hazards associated with the Group's activities, regular meetings of key management are held to monitor health, safety, and environmental aspects. Compliance reviews conducted by a trusted third party, combined with rigorous ongoing training for all staff, further reinforce the Group's commitment to maintaining high safety standards.
The Group recognises that its success hinges on a skilled and motivated executive team and workforce. To foster excellence, the Group places strong emphasis on providing comprehensive training and development opportunities. Investing in its team's growth and professional development is essential to sustaining the Group's continued success.
The Group's key financial performance indicators during the year were as follows:
| Unit | 2023 | 2022 |
Turnover | £ | 55,078,068 | 49,723,730 |
Gross profit | % | 15.19 | 10.76 |
Administrative expenses | £ | 4,186,180 | 3,829,473 |
Profit before taxation | £ | 4,185,731 | 1,467,820 |
Net current assets | £ | 9,817,340 | 7,357,655 |
The directors believe there are no non-financial KPIs that are of strategic importance to the group.
Future developments
The Group's future growth will be fueled by its commitment to innovation, the adoption of cutting-edge technologies, and a willingness to embrace novel approaches that enhance workforce safety, ensure operational continuity, and deliver completed projects to customers. The Group's unwavering dedication to research and development of innovative construction methods and techniques will remain a top priority, with a strong focus on enhancing safety, streamlining project delivery, incorporating new materials and working methods, improving energy efficiency, and utilising information modeling.
Environmental sustainability is a cornerstone of the Group's growth strategy, as it seeks to reduce its carbon footprint and integrate green building practices into its operations. By the conclusion of 2024, the Group sets a goal to achieve ISO14001 certification, demonstrating its firm commitment to environmental responsibility and underscoring its dedication to maintaining a safe and healthy work environment for all employees.
To ensure sustained growth, the Group recognises the importance of mitigating supply chain risks. It will actively work on diversifying its supplier base, thereby establishing a more resilient and dependable procurement process that minimises potential disruptions. By proactively addressing supply chain challenges, the Group aims to create a solid foundation for future growth.
The Directors of Faircloth Holdings Limited are aware of their duty under Section 172 of the Companies Act 2006 to act in a manner that they believe, in good faith, would promote the success of the Company for the benefit of its members as a whole. In doing so, the Directors take into consideration the likely long-term consequences of their decisions, the interests of the Company’s employees, the need to foster business relationships with suppliers, customers, and others, and the impact of the Company’s operations on the community and the environment.
General confirmation of Directors’ duties:
When making decisions, each Director ensures that he acts in the way he considers, in good faith, would most likely promote the Company’s success for the benefit of its members as a whole, and in doing so have regard (among other matters) to:
The likely consequences of any decision in the long term - The company is an investment holding company of UK subsidiaries. The Directors have taken the decisions they believe best support the Company's interests.
The interests of the company’s employees - As the company is a holding company, there are no employees.
The need to foster the company’s business relationships with suppliers, customers and others - As the company is a holding company, it has no suppliers or customers.
The impact of the company’s operations on the community and the environment - As the company is a private company, it has no impact on the community or the environment.
The desirability of the company maintaining a reputation for high standards of business conduct - As the company is a private company, it considers this to be impractical.
The need to act fairly as between members of the company - After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy through the long-term, taking into consideration the impact on stakeholders.
Conclusion
The directors of Faircloth Holdings Limited believe that we have fulfilled our duties under Section 172 of the Companies Act 2006 during the financial year. We will continue to consider the interests of our stakeholders in our decision-making process to promote the long-term success of the company.
On behalf of the board
The Director presents his annual report and financial statements of the Company and the Group for the year ended 30 November 2023.
The results for the year after taxation are shown on the profit and loss account of the financial statements. Further commentary is given in the Strategic Report.
Ordinary dividends were paid amounting to £194,638. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Group's principal financial instruments comprise of bank and loan balances. The main purpose of its financial instrument is to finance the Group's operations.
The financial risk management objectives & policies and information on exposure to various risks are described in detail in Principal risks and uncertainties section in the Strategic Report.
The most significant risk identified by the Group is an increase in costs as a result of inflation, the Ukrainian war, and rising energy costs. To reduce risk, a deliberate and controlled negotiation with Clients was carried out to recover increased costs in the short and long term.
In respect of bank balances, the liquidity risk is managed by managing working capital between payment to suppliers and receipts from debtors. Funds are maintained to maximise cash whilst not impacting on the immediate financial needs of the Group.
Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits.
Liquidity risk in respect of creditors is managed by ensuring sufficient funds are available to meet amounts due.
The Group's strengths, credit, and relationships with suppliers and subcontractors are all growing. In negotiating ongoing and future contracts, the Directors continue to prioritise customer relationships. The Directors' primary responsibilities include the interests of all employees, their health and safety, workplace safety, and well-being.
As part of the group restructuring, one of the subsidiary companies, Faircloth Limited, was dissolved on 7 May 2024.
Future developments are described in detail in Future developments section in the Strategic Report.
The auditor, HW Fisher LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Streamlined Energy and Carbon Reporting
During the year the Group engaged with a RICS regulated property energy consultancy firm to prepare a report for the Company’s SECR reporting requirements. Base data was provided to the consultancy firm and Defra (2023) Conversion Factors were used in line with Environmental Reporting Guidelines (2019) to calculate the Group's energy usage. Gas usage data was collated from invoices totalling 64,996 KwH and the 2023 Defra conversion factor used (0.182928926kgCO2e/kWh) for natural gas supplied by the UK grid. Electricity usage data was collated for all sites from invoices, which totalled 4,916.3 KwH and the 2023 Defra conversion factor used (0.207074289 kgCO2e/ kWh). Business mileage from Group and employee-owned vehicles over the year was provided to the consultancy firm in the form of a data requirements spreadsheet (business mileage – Group pool car and employee car sheets). Carbon emissions were calculated from ‘litres used’ data. Defra 2023 conversion for “Diesel (average biofuel blend)” is 2.512063885 kgCO2e /litre and there are 10.607 kWh/litre. Defra 2023 conversion for “Petrol (average fuel blend)” is 2.16185 kgCO2e /litre and there are 9.515 kWh/litre. Other fuels were collected through supplier invoices. Other fuels purchased for use on site included diesel, Sulphur free gas oil (SFGO (red diesel)) and kerosine (burning oil). Defra 2023 conversion for “Diesel (average biofuel blend)” is 2.512063885 kgCO2e /litre and there are 10.607 kWh/litre. Defra 2023 conversion for “SFGO" is 2.75857 kgCO2e /litre and there are 10.625 kWh/litre. Defra 2023 conversion for “kerosine" is 2.54013 kgCO2e /litre and there are 10.276 kWh/litre. The relevant ratios are detailed after the table below.
A substantial proportion of our emissions are generated from road travel. As there are projects across the Southeast and beyond, van sharing is promoted/encouraged. When practical, overnight accommodation is provided. Driver awareness training is provided to encourage safer, more efficient driving. The Group has deployed the latest EURO 6 vehicles with start-stop fuel saving. We promote environmental awareness, including information posters on all sites. All welfare units on site have PIR controlled heating systems to reduce energy usage, and all machinery is regularly serviced to maintain maximum efficiency.
Emissions are analysed as follows:
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per 100,000, the recommended ratio for the sector.
We have audited the financial statements of Faircloth Holdings Limited (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 November 2023 which comprise the group profit and loss account, 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, the company statement of cash flows and notes to the group 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 or the 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:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company’s financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Detection of 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.
As part of our planning process:
We enquired of management the systems and controls the group and parent company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. Neither the group nor the parent company informed us of any known, suspected or alleged fraud.
We obtained an understanding of the legal and regulatory frameworks applicable to the group and parent company. We determined that the following were most relevant: FRS 102, Companies Act 2006, health and safety.
We considered the incentives and opportunities that exist in the group and parent company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the group and parent company, together with the discussions held with management at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, including revenue recognition on construction contracts and provisions for litigation, onerous contracts, remedial work and warranty work.
Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
Testing key revenue lines, in particular cut-off, for evidence of management bias.
Obtaining third-party confirmation of material bank balances.
Documenting and verifying all significant related party and consolidated balances and transactions.
Reviewing documentation such as the group board minutes for discussions of irregularities including fraud.
Testing all material consolidation adjustments.
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. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £3,116,524 (2022 - £1,054,729 profit).
Faircloth Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is The Old Library, Dudley Road, Tunbridge Wells, Kent, United Kingdom, TN1 1LE.
The group consists of Faircloth Holdings Limited and all of its subsidiaries. The nature of the group’s principal activities and its operations are set out in the Director's Report and Strategic Report.
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.
These financial statements have been prepared using the historical cost convention. The financial statements are prepared in sterling, which is the functional currency of the group. Monetary amounts in these revised financial statements are rounded to the nearest £1.
The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2.
In these financial statements, the Group has applied the exemptions available under FRS102 in respect of the following disclosures:
The Parent Company has taken advantage of the exemption in section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures.
Related party transaction notes - The Company and the Group only discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with its parent or with members of the same group that are wholly owned.
Disclosures in respect of the compensation of key management personnel – The Company and the Group have taken the advantage of the exemption from the requirements to disclose key management personnel when the key management personnel and directors are the same.
The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
The 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 for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
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’: Carrying amounts, 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.
The consolidated group financial statements consist of the financial statements of the parent company Faircloth Holdings Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 30 November 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The financial statements have been prepared on a going concern basis. When making their assessment, the director considered the current economic conditions, which included supply chain constraints, price inflation, an increase in the cost of living, and wider uncertainties resulting from the effects of Brexit and European hostilities. The director will continue to monitor all of these issues and, where possible, take action to mitigate their effects. The Director has a reasonable expectation that the Group will have adequate resources to continue in the foreseeable future at the time of approving the financial statements for the following reasons:
The Group has a strong and growing order book which will provide a pipeline of secured work over the going concern assessment period.
There continues to be strong underlying demand in commercial constructions in the UK.
Sufficient internal generated cash resources to meet its liabilities as they fall due for the next 12 months from the date of approval of these financial statements.
Thus, the Director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents the value of work done during the year net of value added tax. The value of work done is calculated as the certified work, plus the amount anticipated to be certified, adjusted for over and under measure. As described in more detail in the Construction contract note 1.9, revenue and costs are recognised by reference to the stage of completion of construction contracts where it can be reliably measured.
Where the cost of the business combination exceeds the fair value of the group’s interest in the assets, liabilities and contingent liabilities acquired, negative goodwill arises. The group, after consideration of the assets, liabilities and contingent liabilities acquired and the cost of the combination, recognises negative goodwill on the balance sheet and releases this to profit and loss, up to the fair value of non-monetary assets acquired, over the periods in which the non-monetary assets are recovered and any excess over the fair value of non-monetary assets in the income statement over the period expected to benefit.
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 credited or charged to profit or loss.
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.
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 group 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.
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
All financial assets and liabilities are initially measured at transaction price.
Non-current debt instruments, which meet the conditions set out in paragraph 11.9 of FRS 102, are subsequently measured at amortised cost using the effective interest method.
Debt instruments that have no stated interest rate and are classified as payable or receivable within one year and which meet the above conditions are initially measured at the undiscounted amount of the cash or other consideration expected to be paid or received, net of impairment.
Impairment of financial assets
Financial assets
Financial assets are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. 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 profit and loss account. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying value does not exceed what the carrying value would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the profit and loss account.
Financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
Financial assets and liabilities are offset, with 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 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.
The tax expense for the period comprises of current and deferred tax and is recognised in the profit & loss account.
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 represents the future tax consequences of transactions and events recognised in the financial statements of current and tax on acquisition. It is recognised in respect of all timing differences, with certain exceptions. Timing differences are differences between taxable profits and total comprehensive income as stated in the financial statements that arise from the inclusion of income and expense in tax assessments in periods different from those in which they are recognised in the financial statements. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of timing differences. Deferred tax on revalued non-depreciable tangible fixed assets and investment properties is measured using the rates and allowances that apply to the sale of the asset.
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.
Grants are accounted for under the accruals model as permitted by FRS 102.
Grants of a revenue nature are recognised in ‘other income’ within profit or loss account in the same period as the related expenditure. This includes the Government Coronavirus Job Retention Scheme (Furlough).
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.
Retention
Retention income is recognised once there is sufficient certainty over the probability it will be received and the amount to be received can be measured reliably.
Retention expense is recognised when it is paid.
Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the balance sheet date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the balance sheet date.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The judgements estimates and assumptions that have a significant risk of causing a material adjustment to the income and expenses and the carrying amounts of assets and liabilities within the next financial year are addressed below.
The Group’s accounting for contract and margin recognition policies, which are set out in note 1, are central to how the Group values the work it has carried out in each financial year. Contract accounting requires estimates to be made and in many cases these contractual obligations span more than one financial period.
These policies require forecast to be made of the outcome of the construction obligations which require both estimates and judgements to be made of both cost and income recognition on each contract. No margin is recognised until the outcome of the contract can be estimated with reasonable certainty. On the cost side, estimates of budgeted and irrecoverable costs are made on each contract in addition to potential costs to be incurred for any maintenance and defects liabilities. On the income side, estimates and judgements are made on variations to consideration which typically include variations due to changes in scope of work, recoveries of claim income from customers, and potential liquidated damages that may be levied by the customers.
These income and costs may be affected by a number of uncertainties that depend on the outcome of future events and may need to be revised as events unfold and uncertainties are resolved.
The recoverability of debtors especially trade debtors and retentions are regularly reviewed in the light of the available economic information specific to each receivable and specific provisions are recognised for balances considered to be irrecoverable.
Provisions are liabilities of uncertain timing or amount; therefore in making a reliable estimate of the quantum and timing of liabilities, judgement is applied and re-revalued at each reporting date. The range of potential outcomes as the result of uncertain future events could result in a materially positive or negative impact on profit or loss and cash flow.
More specifically on the Group’s provision for onerous contract, a provision is made for all known or expected losses on individual contracts once such losses are foreseen.
The Group also sets aside provisions for remedial and warranty work for any liabilities arising due to defects over the latent defect period stated in the contract. The provision for remedial work reflects the present obligation to rectify the work defects on completed contracts in order to recover retentions withheld by customers. In the year ended 30 November 2023, the provision for remedial works has been estimated to be 10% of total retentions outstanding (2022: 10%). The provision for warranty work reflects the present obligation to rectify the work defects on completed contracts within the warranty period, which can be up to 12 years after completion. A provision for warranty work is only recognised when a reliable estimate can be made.
The Group recognised provisions of £272,431 (2022 £637,164). Please refer to Provisions for liabilities note 20.
The Group also considers Going Concern as a significant area of judgement and has included specific disclosure in relation this within note 1.3.
An analysis of the group's turnover is as follows:
All turnover arose from trading activities within the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of director for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1 ).
There is no director's remuneration paid by the Company.
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:
The rate of tax increased from 19% to 25% on 1 April 2023.
Goodwill arising on consolidation is being amortised over the Director's estimate of its useful life of 10 years.
This estimate is based on a variety of factors such as the expected use of the acquired business, the expected useful life of the cash generating units to which the goodwill is attributed, any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of similar businesses.
Details of the company's subsidiaries at 30 November 2023 are as follows:
Fox Holdings Sussex Limited has taken advantage of the exemption from the requirement to have an audit of its individual accounts under Section 479A of the Companies Act 2006.
Included in other debtors is amount due from customers for contract work of £871,803 (2022: £1,258,940).
Included in other creditors is amount due to customers for contract work of £1,637,023 (2022 £627,035).
The group currently has an outstanding secured loan of £Nil (2022 £1,264,492) with a fixed interest rate of 1.56%. The group has paid off the outstanding loan full during the year .
Provision for litigation
The directors have raised an additional provision for litigation costs relating to the retention of a completed contract. In June 2023 the full brought forward provision was utilised as the dispute was settled.
Provision for onerous contract
When it is probable that the total contract costs will exceed the total contract revenue on construction contracts, the Group recognises the expected losses as an expense immediately with a corresponding provision for losses. These provisions are expected to be utilised within one year after the balance sheet date. The provision for onerous contracts was £Nil (2022 £Nil) as at the balance sheet date.
Provision for remedial work
The Group has a present obligation to rectify the work defects on completed contracts in order to recover retention withheld by customers. These provisions are expected to be utilised within two years after the balance sheet date.
Provision for warranty
The directors have provided for an additional warranty provision for works covered under warranty required on two contracts. The brought forward provision was settled in June 2023.
The above provisions are made when a reliable estimate can be made based on the management's best estimate of known loss making contracts, remedial work, defects and warranty on contracts and legal actions.
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon:
The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund. At the year end £21,826 (2022 £10,034) was payable to the scheme and is included in creditors.
The merger relief reserves have arisen on a past business combination that was accounted under section 612 of the Companies Act 2006 when shares were issued in consideration for the shares of the acquired subsidiary.
Called up share capital reserve represents the nominal value of the shares issued.
Profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.
Company:
The Company has granted a fixed and floating charge over all assets of the Company to its bankers in respect of a loan granted to a fellow group company.
Group:
Financial commitments and guarantees
Performance guarantees were provided by the bank to customers covered by indemnities given to the bank. The amount of the financial guarantee contract is £3,237,950 (2022 £1,546,211).
Contingent liabilities
The Group's provisions have been made for the Director's best estimate of known legal claims, remedial & warranty for any defects work and contract losses. No provision is made where the Director considers, based on legal advice and past practice that the claims or action are unlikely to succeed or that the Group can not make a sufficiently reliable estimate of the potential obligations.
Charges
The Group's bankers also hold a fixed and floating charge over the undertaking and all property and assets present and future, including goodwill, uncalled capital, buildings, fixtures, fixed plant and machinery.
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:
There are no operating lease commitments for the Company.
As part of the group restructuring, one of the subsidiary companies, Faircloth Limited, was dissolved on 7 May 2024.
On 7 August 2024 the company issued 2 Ordinary B shares with a nominal value of £1. Following the allotment, the company had a total of 202 shares with a nominal value of £1 in issue, amounting to an aggregate total value of £202.
Company:
Related Party's Limited Liability Partnership
At the end of the year there was an amount of £1,156,710 (2022 £1,156,710) owed by a limited liability partnership (LLP) of which the Director is also a Member of the LLP. The loan is interest free and repayable on demand.
Family Members of the Director
At the end of the year there was a total amount of £111,916 (2022 £111,916) owed from the family members of the Director. The loans are interest free and repayable on demand.
Director
During the year the Company declared a dividend payment of £194,638 (2022 £100,000) to the Director who is also the ultimate controlling party of the Company and the Group as explained in Controlling party note 28. The amount due to the Director at the year end is £Nil (2022 £160,054). The loan is interest free and repayable on demand.
Group:
Related Party's Group
During the year the Group invoiced construction work of £69,750 (2022 £62,534) and received services amounting to £119,348 (2022 £144,981) to and from a company owned by a family member of the Directors. At the end of the previous year the long outstanding amount due to the Group of £62,534 was deemed irrecoverable and therefore was written off. At the current year no such amount noted off.
At the end of the year an outstanding amount due to the Group of £437,201 (2022 £244,924) was from a company of which a Director is also a director and the ultimate controlling party of that company. There was an increase in the amount due to new advance in the year. The loan is interest free and repayable on demand.
During the year the Group invoiced construction work of £4,546 (2022 £15,992) to a company of which some of the Directors and their family are also the directors and the ultimate controlling party of that company. At the end of the year the outstanding amount due to the Group was £1,183,504 (2022 £683,126). The loan is interest free and repayable on demand.
At the end of the year there was an amount of £1,156,710 (2022 £1,156,710) owed by a limited liability partnership (LLP) of which the Director is also a Member of the LLP. The loan is interest free and repayable on demand.
At the end of the year there was a total amount of £111,916 (2022 £111,916) owed from the family members of the Director. The loan is interest free and repayable on demand.
During the year the parent company declared a dividend payment of £194,638 (2022 £100,000) to the Director who is also the ultimate controlling party of the Group as explained in Controlling party note 28. The amount due from the Director at the year end is £5,360 (2022 £160,054). The loan is interest free and repayable on demand.
Pension Scheme
The Directors who are members of the Faircloth family are the Trustees and the Members of an independent administered Pension Scheme. During the year the Group invoiced interest on a loan of £2,427 (2022 £2,060) to the Pension Scheme. The Pension Scheme charged office rent of £32,000 (2022 £29,000) to the Group. At the end of the year the amount due to the Group was £57,575 (2022 £49,016). The loan is repayable on demand.
There are no restrictions over the use of the cash and cash equivalents balances which comprises cash at bank and in hand.