Company registration number 11553738 (England and Wales)
VVB ENGINEERING (UK) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VVB ENGINEERING (UK) LIMITED
COMPANY INFORMATION
Directors
N Beedle
G Race
A Jellis
R Nurick
S Bundy
(Appointed 29 September 2023)
D Korvyakov
(Appointed 25 January 2024)
Company number
11553738
Registered office
3rd Floor
25 Watling Street
London
EC4M 9BR
Auditor
Gerald Edelman LLP
73 Cornhill
London
EC3V 3QQ
VVB ENGINEERING (UK) LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 23
VVB ENGINEERING (UK) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Principle Activities

VVB Engineering (UK) Limited is a leading mechanical, electrical, fire and communications engineering contractor for infrastructure projects working across four main sectors: tunnelling, highways, rail, and power.

The Company has invested in its people, processes and systems to ensure that it is well positioned to move forwards towards a profit generating future.

Business Environment

Infrastructure has continued to experience challenging market conditions over the last 12 months, created by the continuing uncertainty following high inflationary pressures in the global market.

 

A significant backlog of UK projects exists however and our continued investment in developing our systems and processes has seen our pipeline continue to grow.

 

The Company is committed to operating safely and sustainably.

Business Performance

Driven by a blend of existing contracts sustained through strong client relationships, and newly won contracts from the growing infrastructure pipeline, the Group has generated in excess of £27.5m of turnover in the period before exceptional items.

 

Securing the major fit out of a HS2 station in FY23 has underlined the work done in building our Tier 2+ model and demonstrated our capability to deliver UK Infrastructure.

The Company enters FY24 with secured work in excess of previous years and a significant pipeline of opportunities across its key market sectors.

 

The Company uses a CVR (Cost Value Reconciliation) process to manage contract performance and KPls such as revenue, gross profit, client engagement and employee engagement to monitor and assess the overall business performance. Total revenue and gross profit for the period can be found on page 8.

 

In 2023 we have continued to work with Business in the Community (BITC) to establish our Responsible Business benchmark as part of developing our 2025 strategy for Social Value and Wellbeing.

 

We have received an award for our success in reducing our Carbon usage over successive years, underlining our commitment to sustainability.

 

The 2023 Gross Profit was influenced by various factors, including certain exceptional items as well as the intensive bidding activity of VVB.

 

The £6.25m exceptional Gross Profit items pertain to project write-downs and provisions for onerous contracts, following the 2019 Pre-Pack Administration and projects tendered during the Covid-19 pandemic. Over £1.5m was spent on two particular bids from 2022 resulting in two major project wins, boosting VVB’s order book to approximately £150m by early 2024. However, due to the material value and ageing of the recoverability of these bid costs, provisions have been booked in 2023.

 

Adjusting for these items above Gross Profit Margin is inline with previous years and Management are confident in being able to maintain these positions moving forward.

 

VVB ENGINEERING (UK) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Principal Risks

Risk management is a high priority for the business. Processes are designed to identify, mitigate, and manage risks. The Board of Directors are ultimately responsible for risk management. The principal risks facing the business are as follows:

Dependence on key executives and personnel

Availability of skilled resources presents an ongoing risk to the business and industry as a whole. The company has a competitive compensation, benefits and employee welfare structure to attract and retain key employees.

Credit risk

The Company faces the usual credit risk associated with carrying out work ahead of being paid. The Company has robust cash collection procedures in place to ensure timely cash collection

Liquidity risk

The Company monitors cash balances and performs weekly forecasts to ensure sufficient liquid resources are available to operate. The business is well funded and fully supported by its investors.

Information risk

The business continues to sustain its ISO 27001 and Cyber Essentials plus accreditations reinforcing our commitment to Information Security.

Health and Safety

The construction industry presents an inherent risk around health and safety. The Company takes this very seriously, with comprehensive procedures to ensure risk is minimised including safe working practices. The Company operates a behavioral safety management process driving improved standards throughout the business and has a Safe, Sustainable and Wellbeing Strategy underpinning our business activities. The Executive Leadership of the business have all completed an IOSH safety qualification alongside the business accreditation to ISO 45001 which underlies the robustness of our Safety Management System.

Economic conditions

The Company operates in a market that is heavily influenced by government policy. Global economic conditions, following COVID continue to have a negative impact on the award of infrastructure projects, leading to ongoing delay of significant project awards. The Company has used this time to build meaningful relationships with clients and a healthy opportunity pipeline.

Outlook

The business has contracts in place with customers delivering nationally important infrastructure projects across multiple sectors. The Company has considered the potential ongoing impact of the Russia/Ukraine conflict and the global inflationary impacts to its clients, suppliers and staffing needs and do not consider this a material risk.

On behalf of the board

A Jellis
Director
24 September 2024
VVB ENGINEERING (UK) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company is that of the delivery of mechanical, electrical, fire and communications engineering contracts.

Results and dividends

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

Directors

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

N Beedle
G Race
A Pearson
(Resigned 25 January 2024)
A Jellis
A Brown
(Resigned 29 September 2023)
R Nurick
S Bundy
(Appointed 29 September 2023)
D Korvyakov
(Appointed 25 January 2024)
Auditor

In accordance with the company's articles, a resolution proposing that Gerald Edelman LLP be reappointed as auditor of the company will be put at a General Meeting.

Statement of directors' responsibilities

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

 

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

 

 

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

Statement of disclosure to auditor

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

VVB ENGINEERING (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Going concern

The directors have prepared these financial statements on the going concern basis, notwithstanding that the company made significant losses of £5.02m (2022: £5.54m profit) in the year. The validity of the going concern basis is dependent on the continued support of the company's parent undertaking and ultimate controlling parties, who have confirmed that they will continue to provide the company with financial support for the foreseeable future and for not less than 12 months from the date of approval of these financial statements but only to the extent that money is not otherwise available to VVB Engineering (UK) Limited to meet such liabilities.

Accordingly, these financial statements do not include any adjustments that would result from the discontinuance of their financial support. On this basis, the director considers that it is appropriate for the financial statements to be prepared on the going concern basis.

 

The directors have reviewed the forecasts for the business for at least 12 months from the date of the approval of the financial statements in reaching their conclusion. Funding arrangements in place with Sandton Credit III (Luxembourg) S.à r.l. will provide sufficient working capital to deal with any funding needs for the foreseeable future.

 

On behalf of the board
A Jellis
Director
24 September 2024
VVB ENGINEERING (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF VVB ENGINEERING (UK) LIMITED
- 5 -
Opinion

We have audited the financial statements of VVB Engineering (UK) Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the 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 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:

VVB ENGINEERING (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF VVB ENGINEERING (UK) LIMITED (CONTINUED)
- 6 -
Matters on which we are required to report by exception

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

 

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

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

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.

Our audit procedures were primarily directed towards testing the accounting systems in operation upon which we have based our assessment of the financial statements for the year ended 31 December 2023.

We planned our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements resulting from irregularities, fraud or non-compliance with law or regulations.

The extent to which the audit was considered capable of detecting irregularities including fraud

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:

VVB ENGINEERING (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF VVB ENGINEERING (UK) LIMITED (CONTINUED)
- 7 -

Audit response to risks identified

 

Fraud due to management override

To address the risk of fraud through management bias and override of controls, we:

Irregularities and non-compliance with laws and regulation

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but are not limited to:

 

The test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, mean that there is an unavoidable risk that even some material misstatements in respect of irregularities may remain undiscovered even though the audit is properly planned and performed in accordance with ISAs (UK). Furthermore, the more removed that laws and regulations are from financial transactions, the less likely that we would become aware of non-compliance.

 

Our examination should therefore not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance that might exist. The responsibility for safeguarding the assets of the company and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the directors of VVB Engineering (UK) Limited.

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.

Hemen Doshi FCCA
Senior Statutory Auditor
For and on behalf of Gerald Edelman LLP
25 September 2024
Chartered Accountants
Statutory Auditor
73 Cornhill
London
EC3V 3QQ
VVB ENGINEERING (UK) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
27,522,348
28,174,411
Cost of sales
(27,032,575)
(26,634,006)
Gross (loss)/profit before exceptional items
489,773
1,540,405
Exceptional items
4
(6,251,291)
(40,385)
Gross (loss)/profit
(5,761,518)
1,500,020
Administrative expenses
Goodwill amortisation
1,134,132
1,134,132
Other administrative expenses
4,041,583
3,964,682
(5,175,715)
(5,098,814)
Write back of intercompany debt
4
5,930,805
8,975,652
Operating (loss)/profit
5
(5,006,428)
5,417,243
Interest payable and similar expenses
7
(10,221)
-
(Loss)/profit before taxation
(5,016,649)
5,417,243
Tax on (loss)/profit
8
-
0
159,868
(Loss)/profit for the financial year
(5,016,649)
5,536,726

The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.

VVB ENGINEERING (UK) LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Goodwill
9
6,034,799
7,168,931
Other intangible assets
9
40,761
70,028
Total intangible assets
6,075,560
7,238,959
Tangible assets
10
1,783
14,855
6,077,343
7,253,814
Current assets
Debtors
11
9,938,217
11,077,383
Cash at bank and in hand
3,192,766
1,662,766
13,130,983
12,740,149
Creditors: amounts falling due within one year
12
(5,589,684)
(3,377,377)
Net current assets
7,541,299
9,362,772
Total assets less current liabilities
13,618,642
16,616,586
Provisions for liabilities
13
(2,018,705)
-
0
Net assets
11,599,937
16,616,586
Capital and reserves
Called up share capital
15
1
1
Capital contribution reserve
6,713,449
6,713,449
Profit and loss reserves
4,886,487
9,903,136
Total equity
11,599,937
16,616,586
The financial statements were approved by the board of directors and authorised for issue on 24 September 2024 and are signed on its behalf by:
A Jellis
Director
Company Registration No. 11553738
VVB ENGINEERING (UK) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Capital contribution reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2022
1
6,713,449
4,366,410
11,079,860
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
-
5,536,726
5,536,726
Balance at 31 December 2022
1
6,713,449
9,903,136
16,616,586
Year ended 31 December 2023:
Loss and total comprehensive income for the year
-
-
(5,016,649)
(5,016,649)
Balance at 31 December 2023
1
6,713,449
4,886,487
11,599,937
VVB ENGINEERING (UK) LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
19
1,542,163
(1,656,415)
Interest paid
(10,221)
-
0
Income taxes (paid)/refunded
-
0
159,868
Net cash inflow/(outflow) from operating activities
1,531,942
(1,496,547)
Investing activities
Purchase of tangible fixed assets
(1,942)
-
0
Net cash used in investing activities
(1,942)
-
0
Net increase/(decrease) in cash and cash equivalents
1,530,000
(1,496,547)
Cash and cash equivalents at beginning of year
1,662,766
3,159,313
Cash and cash equivalents at end of year
3,192,766
1,662,766
VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
1
Accounting policies
Company information

VVB Engineering (UK) Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3rd Floor, 25 Watling Street, London, EC4M 9BR.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

1.2
Going concern

The directors have prepared these financial statements on the going concern basis, notwithstanding that truethe company made significant losses of £5.02m (2022: £5.54m profit) in the year. The validity of the going concern basis is dependent on the continued support of the company's parent undertaking and ultimate controlling parties, who have confirmed that they will continue to provide the company with financial support for the foreseeable future and for not less than 12 months from the date of approval of these financial statements but only to the extent that money is not otherwise available to VVB Engineering (UK) Limited to meet such liabilities.

Accordingly, these financial statements do not include any adjustments that would result from the discontinuance of their financial support. On this basis, the director considers that it is appropriate for the financial statements to be prepared on the going concern basis.

1.3
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

 

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

1.4
Intangible fixed assets - goodwill

Goodwill represents the excess of the cost of acquisition of businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
1.5
Intangible fixed assets other than goodwill

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

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

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

Software
5 years straight line
1.6
Tangible fixed assets

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

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

Plant and equipment
Straight line over 3 years
Fixtures and fittings
Straight line over 5 years
Motor vehicles
Straight line over 4 years

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.

1.7
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
1.8
Construction contracts

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

 

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

 

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

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

1.9
Cash and cash equivalents

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

1.10
Financial instruments

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

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.

Basic financial assets

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

Other financial assets

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.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, 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 profit or loss.

 

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 amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the 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.

Classification of financial liabilities

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

Basic financial liabilities

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

 

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

 

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

Other financial liabilities

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.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.11
Equity instruments

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.

A capital contribution will arise from a loan made by a parent company to its subsidiary other than on normal commercial terms. Where the interest rate is below market terms, the excess of the loan amount over fair value will be recognised as a capital contribution by the lender (parent entity) and capitalised as part of the cost of the investment.

1.12
Taxation

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

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.13
Provisions

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
1.14
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

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.

1.15
Retirement benefits

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

1.16
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

2
Judgements and key sources of estimation uncertainty

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.

Critical judgements

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

Work in progress

The directors of the company make an assessment, based on the information available to them, regarding the status of the jobs that are ongoing at the year end. Based on this assessment, the directors will then consider the level of work that has been undertaken before the year end, and accrue or defer any income and/or costs in relation to this work accordingly.

3
Turnover

An analysis of the company's turnover is as follows:

2023
2022
£
£
Turnover analysed by class of business
Mechanical and electrical contract revenue
27,522,348
28,174,411

The turnover is derived from the principal activity wholly undertaken in the UK.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
4
Exceptional items
2023
2022
£
£
Expenditure
Loss of contract
6,251,291
40,385
Write back of intercompany debt
(5,930,805)
(8,975,652)
The 2023 Gross Profit was influenced by various factors, including certain exceptional items as well as the intensive bidding activity of VVB.

The £6.25m exceptional Gross Profit items pertain to project write-downs and provisions for onerous contracts, following the 2019 Pre-Pack Administration and projects tendered during the Covid-19 pandemic. Over £1.5m was spent on two particular bids from 2022 resulting in two major project wins, boosting VVB's order book to approximately £150m by early 2024. However due to the material value and ageing of the recoverability of these bid costs, provisions have been booked in 2023. Due to the 2022 comparative being immaterial, this was not the case for the prior year.

Adjusting for these items above Gross Profit Margin is inline with previous years and Management are confident in being able to maintain these positions moving forward.
Loss on Contract Exceptional items broken down further
2023
2022
£
£
Bid Costs
748,390
40,385
Onerous Contracts
5,502,901
-
6,251,291
40,385
5
Operating (loss)/profit
2023
2022
Operating (loss)/profit for the year is stated after charging:
£
£
Exchange losses
740
-
0
Fees payable to the company's auditor for the audit of the company's financial statements
36,450
38,000
Depreciation of owned tangible fixed assets
15,014
14,410
Amortisation of intangible assets
1,163,399
1,163,398
Operating lease charges
13,085
26,612
VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
6
Employees

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

2023
2022
Number
Number
Operational
118
110
Administrative
22
20
Total
140
130

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
12,203,133
11,625,070
Social security costs
1,338,975
1,403,279
Pension costs
308,439
304,352
13,850,547
13,332,701
7
Interest payable and similar expenses
2023
2022
£
£
Other finance costs:
Other interest
10,221
-
0
8
Taxation
2023
2022
£
£
Current tax
Adjustments in respect of prior periods
-
0
(159,868)
VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Taxation
(Continued)
- 20 -

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

2023
2022
£
£
(Loss)/profit before taxation
(5,016,649)
5,376,858
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
(1,178,913)
1,021,603
Tax effect of expenses that are not deductible in determining taxable profit
359
(1,705,009)
Tax effect of utilisation of tax losses not previously recognised
(1,099,688)
-
0
Unutilised tax losses carried forward
3,395,373
459,755
Permanent capital allowances in excess of depreciation
1,404
727
Amortisation on assets not qualifying for tax allowances
273,399
221,046
Research and development tax credit
-
0
(159,868)
Other permanent differences
(1,391,934)
1,878
Taxation charge/(credit) for the year
-
(159,868)
9
Intangible fixed assets
Goodwill
Software
Total
£
£
£
Cost
At 1 January 2023 and 31 December 2023
11,341,305
146,333
11,487,638
Amortisation and impairment
At 1 January 2023
4,172,374
76,305
4,248,679
Amortisation charged for the year
1,134,132
29,267
1,163,399
At 31 December 2023
5,306,506
105,572
5,412,078
Carrying amount
At 31 December 2023
6,034,799
40,761
6,075,560
At 31 December 2022
7,168,931
70,028
7,238,959
VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
10
Tangible fixed assets
Plant and equipment
Fixtures and fittings
Motor vehicles
Total
£
£
£
£
Cost
At 1 January 2023
42,450
3,635
39,552
85,637
Additions
-
0
1,942
-
0
1,942
At 31 December 2023
42,450
5,577
39,552
87,579
Depreciation and impairment
At 1 January 2023
38,945
2,559
29,278
70,782
Depreciation charged in the year
3,079
1,661
10,274
15,014
At 31 December 2023
42,024
4,220
39,552
85,796
Carrying amount
At 31 December 2023
426
1,357
-
0
1,783
At 31 December 2022
3,505
1,076
10,274
14,855
11
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
1,004,602
1,016,376
Amounts owed by group undertakings
6,188,840
6,180,917
Other debtors
770,662
610,862
Prepayments and accrued income
1,974,113
3,269,228
9,938,217
11,077,383
12
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
1,545,215
801,774
Taxation and social security
917,583
585,570
Accruals and deferred income
2,306,611
1,880,314
Other creditors
820,275
109,719
5,589,684
3,377,377
13
Provisions for liabilities
2023
2022
£
£
Legal provision
2,018,705
-
VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
13
Provisions for liabilities
(Continued)
- 22 -
Movements on provisions:
Legal provision
£
Additional provisions in the year
2,018,705

Legal Provision

The directors consider that disclosure of details regarding legal claims provided in the accounts would prejudice the Company's position with respect to this matter and accordingly no further disclosure will be made.

14
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
308,439
304,352

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

15
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary share of £1 each
1
1
1
1
16
Financial commitments, guarantees and contingent liabilities

The company has given guarantees and agreed to charges over all its assets and undertakings in favour of other group companies in support of certain borrowings of those companies of £13,428,141 (2022: £13,074,121).

 

Those borrowings are owed to Sandton Credit III (Luxembourg) S.à r.l., an intermediate parent company, and all group companies irrevocable and unconditionally jointly and severally guarantee the secured obligations.

 

The loans are not due for repayment until 3 October 2025.

17
Related party transactions

The company has taken advantage of the provisions in paragraph 33.1A of FRS 102 to not disclose transactions entered into between two or more members of a group, provided that any subsidiary which is party to the transactions is wholly-owned by such a member.

VVB ENGINEERING (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
18
Parent and ultimate parent company

The ultimate parent company of VVB Engineering (UK) Limited is Sandton Credit Solutions Onshore Fund IV, LP, a company incorporated in the US.

 

Sandton Europe Limited, a company incorporated in England & Wales, is the parent company of the smallest group in which the company is consolidated. The consolidated accounts are available for public use at the registrar of companies.

 

The immediate parent company is VVB Group Limited, a company incorporated in England & Wales.

19
Cash generated from/(absorbed by) operations
2023
2022
£
£
(Loss)/profit for the year after tax
(5,016,649)
5,536,726
Adjustments for:
Taxation charged/(credited)
-
0
(159,868)
Finance costs
10,221
-
0
Amortisation and impairment of intangible assets
1,163,399
1,163,398
Depreciation and impairment of tangible fixed assets
15,014
14,410
Write back of intercompany debt
(5,930,805)
(8,975,652)
Increase in provisions
2,018,705
-
Movements in working capital:
Decrease/(increase) in debtors
1,139,166
(5,738,994)
Increase in creditors
8,217,970
6,045,525
(Decrease)/increase in deferred income
(74,858)
458,040
Cash generated from/(absorbed by) operations
1,542,163
(1,656,415)
20
Analysis of changes in net funds
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
1,662,766
1,530,000
3,192,766
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