The directors present the strategic report for the year ended 31 December 2023.
Principal activity
The principal activity of the company is that of a parent company of a group of companies engaged in the construction industry.
2023 saw a 3.71% decrease in turnover (2022: 56.76% increase). Profit before tax decreased from £1,495,472 to £563,590.
The group’s performance is centred around its two main operating companies, Clegg Construction Limited and Clegg Food Projects Limited.
Within Clegg Construction Limited, strong trading through 2023 was held back by the completion of remaining fixed-price contracts secured in earlier years which had been affected by external factors that exerted unavoidable pressures on the cost of work and supply chain resources.
These final challenging projects had a cost base from 2020 and included student accommodation, care and residential projects which had been affected by market pressures throughout, including subcontractor failures.
However, with a focus on negotiated and repeat business tendering, along with selective supply-chain procurement, the business has generated a pipeline of well-performing contracts trading through 2023, 2024 and extending into 2025.
This pipeline of projects has been secured from a number of sectors providing resilience in the supply of work and funding streams; defence, education, residential, care, leisure and commercial with values ranging from £5m to £35m.
Within Clegg Food Projects Limited the previous year benefitted from some historic final account settlements, and therefore the directors considered the 2023 performance to be at normalised levels.
Capital spend within the food and drink sector remained buoyant throughout the year with continued strong demand from new and existing clients. The company continues to enjoy a market leading position within the sector.
The group and its subsidiary companies make sales and applications for payment on normal credit terms and manage related risks through their credit control procedures. Neither the group nor its subsidiary companies hedge interest payments on any of their borrowings.
The group and its subsidiary companies aim to minimise risks and uncertainties to the level of the market place in which it operates and achieve this through its internal controls and review procedures.
The directors use a range of key performance indicators to evaluate the performance of the business. Of these, the level of sales and gross profit are the key factors. There was a slight increase in gross profit margin compared with the prior year at 3.5% of sales (2022: 3.4%).
Trading conditions have continued to improve within Clegg Construction Limited which has allowed negotiation and tendering of new work to be secured and delivered at increased profitably into 2024 and 2025.
Clegg Food Projects Limited has seen continued strong investment in the food and drink sectors, driven by innovation, the drive for more sustainable and processes and new product development.
Across the group, 95% of the 2024 forecast revenue and around 80% of the rolling 12-month forecast is secured, which gives the directors confidence around the forthcoming trading period.
As required by Section 172 of the Companies Act, a Director of a company must act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard, amongst other matters, to:
The likely consequences of any decision in the long term;
The interest of the company's employees;
The need to foster the company's business relationships with suppliers, customers and others;
The impact of the company's operations on the community and the environment;
The desirability of the company maintaining a reputation for high standards of business conduct; and
The need to act fairly as between members of the company.
The Company's engagement with its stakeholders and consideration of their respective interests is as follows:
The directors ensured all employees were aware of the objectives and results of the company through presentations and meetings. It has also been their focus to provide a positive work environment for all employees with opportunities for all to grow and achieve their potential.
The group collaborates with a variety of customers and our success depends on having the resources and skills necessary to guarantee a superior service level and product quality. The group has a longstanding relationship with local and international suppliers ensuring conformance of quality, cost competiveness and sourcing guarantee.
Clegg Group and its subsidiaries are important job contributors in our regions and invest in solutions to reduce our impact on the environment.
By order of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £1,000,000 (2022 - £1,500,000). 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 auditor, UHY Hacker Young, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The UK Government's Streamline Energy and Carbon Reporting (SECR) policy was implemented on 1 April 2019, this is the fourth time adoption of disclosures on energy and carbon. The table below represents the Group's energy use and associated greenhouse gas (GHG) emissions from electricity and fuel in the UK for the year ended 31 December 2023. The data covers all of the subsidiaries.
The boundaries of this report are based on operational control. We report our emissions with reference to the latest Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (GHG Protocol). In accordance with the 2018 Regulations, the energy use and associated greenhouse gas emissions are for those within the UK only that come under the operational control boundary. The 2023 UK Government GHG Conversion Factors for Company Reporting published by the UK Department for Environment Food & Rural Affairs (DEFRA) are used to convert energy use in our operations to emissions of CO2e. Carbon emission factors for purchased electricity calculated according to the ‘location-based grid average’ method.
This reflects the average emission of the grid where the energy consumption occurs. Data sources include billing, invoices and the Group’s internal systems. For the Cambridge and London offices, utilities are included in the rent, so benchmarking based on floor area against industry benchmarks has been used to provide estimated energy consumption at these sites. The Nottingham site is shared between all 3 companies so the energy use at this site is split evenly between them. For transport data where actual usage data (e.g. litres) was unavailable conversions were made using average fuel consumption factors to estimate the usage.
We have chosen to report our gross emissions against £m turnover. The value for the intensity ratio was 3.83 tCO2e per £m turnover (2022: 3.04).
We are committed to responsible energy management and will practice energy efficiency throughout our organisation, wherever it is cost effective. We recognise that climate change is one of the most serious environmental challenges currently threatening the global community and we understand we have a role to play in reducing greenhouse gas emissions.
Energy efficiency actions taken in 2023 include:
• Further upgrades for LED & PIR light systems for the main office in Nottingham;
• Review of supply chain to commit to carbon reduction initiatives and become more sustainable;
• Increase the use of TEAMs meetings to help reduce emissions and energy use;
• Encourage the use of public transport where practicable;
• Encourage car share where practicable; and
• Introduce software systems across the Group, which reduces the need for paper and storage requirements.
We have audited the financial statements of Clegg Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity and notes to the financial statements, 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 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 and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
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 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and the industry in which it operates, we identified that the principal risks of non-compliance with laws and regulations related to the acts by the company, which were contrary to applicable laws and regulations including fraud, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and The Building Regulations 2010.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to inflated revenue on the long term construction contracts and recognition of the profit on this work.
Audit procedures performed included:
Challenge management's forecasts, assessing the expected margin on significant projects in light of the post year end information available;
Challenge management's forecasts, assessing the appropriateness of the key assumptions, which includes the expected recovery of variations and retentions;
Enquiry of management regarding any instances of actual or potential fraud during the year;
Review of historic estimates on since completed contracts for evidence of management bias;
Enquiry of management regarding actual and potential litigation and claims, or any potential breaches of laws and regulations;
Review of the financial statement disclosures to underlying supporting documentation;
Enquiries of management and testing of journals and evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud; and
Reviewing minutes of meetings of those charged with governance.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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 £1,063,649 (2022 - £1,449,647 profit).
Clegg Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Bishops House, 42 High Pavement, Nottingham, NG1 1HN.
The group consists of Clegg Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and investment properties to fair value. The principal accounting policies adopted are set out below.
In preparing the separate financial statements of the company, advantage has been taken of the following disclosure exemptions available in FRS 102:
No cash flow has been presented for the company.
No profit or loss account has been presented for the company.
The information is included in the consolidated financial statements of Clegg Holdings Limited as at 31 December 2023 and these financial statements may be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.
The consolidated financial statements incorporate those of Clegg Group Limited and all of its subsidiaries. The results of subsidiaries acquired are consolidated for the periods from the date on which control passed. Business combinations are accounted for under the purchase method.
The directors continue to closely monitor the cash position on current construction projects measured against project budgets and forecasts, which are also regularly reviewed as part of the monitoring of on - site project performance. Final account negotiations are also closely monitored and scrutinised on a regular basis along with working capital requirements.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Revenue comprises of the value of contracting work executed during the year plus the invoiced value of other sales. The value of contracted work is based on measured valuations, incorporating profit earned to the valuation date, taking into account cost to completion and any anticipated losses.
The amount by which recorded revenue on uncompleted contracts is in excess of payments on account is classified as amounts recoverable on contracts and separately disclosed in debtors.
Cash received on account of contracts is deducted from amounts recoverable on contracts. Such amounts which have been received and exceed amounts recoverable are included in creditors.
Rental income is accounted for on a receivable basis under the terms of ongoing leases.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the land and buildings is usually considered to be their market value.
Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and loss are recognised in profit or loss.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Basic financial assets and liabilities, which include debtors, creditors and cash and bank balances, are initially measured at transaction price. Financial assets and liabilities classified as within one year are not amortised.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The group uses the percentage-of-completion method in accounting for its construction contracts. Use of the percentage of completion method requires the group to estimate the construction performed to date as a proportion of the total construction to be performed. The estimation of the revenue and profit recognition by reference to the stage of completion can involve considerable judgement around future margins. The percentage of completion is determined using stage valuations provided by third party chartered surveyors and therefore provides an independent reliable valuation.
The group reviews these estimates and assumptions as each contract progresses. To the extent that the amounts receivable on the contracts are different to the amounts recorded such differences will impact revenue and cost of sales in the period in which such determination is made.
The directors consider that the investment properties are held at their fair value and no impairment is required. Whilst there is a level of judgement involved with the valuation, the current value of the properties is based on independent valuations. These valuation are considered to be a true reflection of the value of the properties as assets held for the purposes of receiving rental income.
The retentions held due from customers in respect of long term construction contracts are included within trade debtors. Retention balances are regularly reviewed by the directors to assess their recoverability. Whilst the retention balances recognised at the year end are all considered to be recoverable, there is a degree of judgement regarding the customer's ability to pay.
A small number of contracts have ongoing claims against the subcontractors and or the customer, whilst legal advice has been taken on the majority of these claims there is still a degree of judgement on the recoverability of these claims. The directors believe the claims recognised as at the year end to be fully recoverable.
An analysis of the group's turnover is as follows:
The whole of the turnover is attributable to one class of business.
The average monthly number of persons (including directors and company secretary) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 3).
The actual (credit)/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 prior year adjustments shown predominantly relates to research and development claims.
Group revaluation of assets
The Bishop's House property was valued at £1,000,000 on 14 September 2023 by independent valuers, Knight Frank, who are not connected with the company. The valuation conforms to International Valuation Standards.
The Bloomsgrove Road property was valued at £410,000 on 4 December 2023 by independent valuers, Knight Frank, who are not connected with the company. The valuation conforms to International Valuation Standards.
Land and buildings are carried at valuation. If land and buildings were measured using the cost model, the carrying amounts would have been approximately £478,976 (2022 - £482,136), being cost £777,119 (2022 - £777,119) and depreciation £298,223 (2022 - £295,063).
After transfer of these properties from stock (note 17) they were valued at £1,185,000 in September 2023 by Knight Frank, who are not connected with the company. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments, denoted by 'n/a' above.
Financial asset debt instruments measured at amortised cost represents trade debtors, amounts owed by related parties, amounts owed by the shareholders and other debtors.
Financial liabilities measured at amortised cost represents bank loans, trade creditors, other creditors and accruals.
The properties held for sale have been transferred to investment properties (note 13) as the directors believe that this better reflects their ongoing use.
Included within group trade debtors is an amount of £2,812,221 (2022 - £2,621,297) relating to retentions due over 1 year.
Included within company trade debtors is an amount of £290,417 (2022 - £260,711) relating to retentions due over 1 year.
Included within group other creditors is an amount of £1,418,379 (2022 - £1,234,241) relating to supply chain finance.
The full £279,525 (2022 - £354,525) is secured over properties held for sale by the group and by way of cross guarantees over the assets of Clegg Holdings Limited group of companies. The loan attracts interest at a rate of 2.25% above LIBOR and is repayable in full by 2025.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax balance set out above relating to accelerated capital allowances is expected to reverse within 12 months.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund. At the balance sheet date, the company had pension contributions due of £70,710 (2022 - £76,478).
The revaluation reserve arose on revaluations of properties.
The capital redemption reserve contains the nominal value of own shares that have been acquired by the company and cancelled.
Merger reserve arose on a past business combination that was accounted for as a merger in accordance with UK GAAP as applied at that time.
Profit and loss account represents cumulative profit or losses, net of dividends paid and other adjustments.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The operating leases wholly represents leases to third parties. The leases are negotiated over terms of 5 years and rentals are fixed for 1 year. There are no options in place for either party to extend the lease terms.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
Key Management Personnel
Key Management personnel are deemed to be the directors of the group and the directors of the subsidiary companies. The total combined remuneration paid to key management personnel for the year was £1,433,351 (2022 - £1,345,817).
Related Parties
During the year £1,050,383 of the loan due to the company from Clegg Developments Limited was repaid, and a further £180,000 was written off. Clegg Developments Limited is a company with a common director.
The company has taken advantage of the exemption available under section 1AC.35 of FRS 102, from disclosing transactions entered into between two or more wholly-owned members of the group.