FOR THE YEAR ENDED 30 APRIL 2024
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KENSA CONTRACTING LIMITED
COMPANY INFORMATION
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KENSA CONTRACTING LIMITED
CONTENTS
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KENSA CONTRACTING LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 APRIL 2024
The Directors present their strategic report for the year ended 30 April 2024.
Principal activity
The principal activity of the company is the design and installation of Ground Source Heat Pumps (GSHPs), as part of large contracts, for a wide range of applications providing heating, cooling and hot water in an environmentally friendly and cost efficient manner.
Our vision
To electrify the transition to sustainable and affordable heating and cooling for everyone.
Our core values, mission and priorities
Our core values are:
∙We do the right thing by the planet, by people and by Kensa
∙We want to be the best we can be
∙We innovate with purpose
In line with this our mission is to create the best heating and cooling solutions to connect a fossil-free world to Networked Heat Pumps.
The company has therefore set the following priorities:
∙Develop and sell offers to customers that meet their needs and are better than the competition, so we can make the biggest impact on the planet and fuel poverty
∙Deliver and scale our projects safely, efficiently and delivering great solutions for our customers to keep them warm or cool
∙Continue the Kensa Group spirit and be a great place to work, where we are excited by the adventure and act as a strong team
∙Continue to innovate across everything we do to deliver better solutions for our customers and the planet, and reduce the system cost
∙Continue to build and grow professional and efficient company functions and systems
Business strategy
For our clients we provide appropriate bespoke heating, cooling and hot water solutions. The company focuses on three core markets: New Build development; Social Housing Retrofit and Non-Domestic buildings; with the aim to deliver in each sector at increasing scale. We provide tailored solutions primarily through ground source, closed loop borehole, but will integrate additional sources of energy where appropriate to provide the best outcome for our customers and the environment.
Our business model is one of investment for continued growth and build capacity for the expected future growth of heat pumps. The UK places heat pumps at the heart of its plan for the decarbonisation of heat by 2030. The market is expected to grow from current levels of c.40,000 per year to around 600,000 heat pumps per year by 2028 and over 1 million heat pumps per year in the early 2030s.
Kensa Contracting is the UK market leader for GSHPs and we aim to maintain that position whilst helping to grow the wider market. We will achieve this through the formation of key strategic partnerships with customers, such as our partnership with the market leader in the provision of ‘last mile’ utilities to new homes, GTC Infrastructure Limited, other GSHP industry players and by building the case for an increasing contribution of GSHPs towards the UK's overall decarbonisation of heat with key stakeholders.
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KENSA CONTRACTING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2024
The company delivered turnover of £17.4m in year, a reduction compared to the previous year, where turnover was £23.4m. The company delivers large scale projects across New Build, Social Housing retrofit, and Non-Domestic markets. Whilst the Non-Domestic market is comparatively new to the business and is an area of further development, historically the business has worked primarily in New Build and Social Housing. Both of these markets have been impacted by the regulatory environment highlighted above, specifically due to the Future Homes Standard and Social Housing Decarbonisation Fund respectively.
Within the financial year the key projects the company worked on included; the Department for Education ‘Decarbonisation Pilot’ scheme at West End Academy and Richmond Hill Primary Academy, social housing tower block retrofit for Thurrock Council, and new build affordable homes at the Toot Lane development in Boston, Lincolnshire.
Post year end the business agreed a partnership with GTC Infrastructure Limited, which will provide a new ‘route to market’ in the New Build space. GTC already have a significant market presence in the provision of last mile utilities, including gas networks, to developers. With the expected, albeit delayed, implementation of the Future Homes Standard, the partnership will enable GTC to have a competitive offering to developers to replace the gas network, whilst Kensa Contracting expect to benefit from an increase in market opportunities and scale.
In addition to this, there is an expectation that the third round of the Social Housing Decarbonisation Funds (now called Warm Homes: Social Housing Fund) will have more dedicated funding available, which presents a significant market opportunity to the company.
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KENSA CONTRACTING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2024
General
The company has the necessary control procedures in place which enables it to act quickly and effectively to risks and take appropriate action. Continuous improvement programmes are in place for the operating construction sites we work on, as well as for our own business processes. At a Group level, Kensa has established an Audit and Risk Committee, lead by Non-Executive Directors, to provide further assurance over risk management across all the businesses.
Compliance with legislation and financial intervention
In a developing and rapidly growing market which has seen, and continues to see, significant legislative and financial intervention, the company has dedicated resources to manage these compliance activities. The company has developed appropriate policies and controls to manage these risks.
Commercial
Our strategy of continued investment in business development, operational capacity, new technology and business systems is underpinned by the UK Government's published strategy of the decarbonisation of heat in buildings. Any watering down, delay or cancellation of the UK's decarbonisation strategy could significantly impact Kensa Group's strategy. The risk is primarily one of timing, given the broad political consensus on the need to decarbonise heating in the UK. Our strategy is to invest early enough to take advantage of the significant growth expected but if that growth is delayed the company has plans to adjust our business operations accordingly.
Competitors
Kensa Group has seen growing competition, with several organisations entering the market for large scale decarbonised heat installation. While this could pose short-term commercial risk, the longer-term view is positive as competition confirms the Group view of the strong prospects for growth.
Staff
Staff is the key resource in the business and the largest component of our operating costs. The planned growth of the business will require additional staff, as well as the implementation of more advanced operational technology. The ability to secure new members of staff, across a wide geography, and ensure they are supported and trained remains a challenge. Good training, competitive rates of pay and a wide range of benefits are seen as key, as is the maintenance of a great working environment and culture.
Financial
As a result of planned continued investment into the business, access to finance is key. In addition to the new investment in the financial year from Legal & General Capital Investment Limited and also OETF Ground Heat Limited and Sky Ground Heat Limited, post year end, the Group also received additional investment from PMB Invest. The Company recognises that there is a material uncertainty around a contingent component of the investment detailed above, which is due to be received in 2025. In the event that some of the investment is reduced, the Directors would take mitigating action. This is further detailed in note 2.3.
Maintenance of margins while managing operating costs is a major risk as the business grows. Exposure to a small number of large contracts also increases credit risk.
All risks are constantly monitored and appropriate action is taken where necessary.
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KENSA CONTRACTING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2024
Financial: Turnover, gross margin and gross margin by project.
Clients: Satisfaction and project scope delivery.
Products: Quality of installation, system reliability and efficiency.
Staff: Number, retention, reward and staff feedback.
All these performance indicators are regularly reported and reviewed by the board of directors.
This report was approved by the board and signed on its behalf.
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KENSA CONTRACTING LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 APRIL 2024
The directors present their report and the financial statements for the year ended 30 April 2024.
The loss for the year, after taxation, amounted to £5,943,959 (2023: loss £4,359,863).
No dividend is recommended.
The directors who served during the year were:
Disclosed in the strategic report.
There have been no significant events affecting the Company since the year end.
The auditors, Bishop Fleming LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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KENSA CONTRACTING LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 APRIL 2024
The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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KENSA CONTRACTING LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENSA CONTRACTING LIMITED
We have audited the financial statements of Kensa Contracting Limited (the 'Company') for the year ended 30 April 2024, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of changes in equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We draw attention to note 2.3 in the financial statements, which indicates that the Company incurred a net loss of £5,943,959 (2023: £4,359,863) during the year ended 30 April 2024 and, as of that date, the Company had net assets of £1,198,373 (2023: £111,628) and net current assets of £1,195,623 (2023: £91,118).
The Company's ability to continue as a going concern under its current business operations is dependent on its parent company receiving contingent funding from existing investors in the short-term. As stated in note 2.3, these events or conditions, along with the other matters as set forth in note 2.3, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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KENSA CONTRACTING LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENSA CONTRACTING LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
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.
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KENSA CONTRACTING LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENSA CONTRACTING LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙We have considered the nature of the industry and sector, control environment and business performance;
∙We have considered the results of our enquiries of management about their own identification and assessment of the risks of irregularities;
∙Any matters identified having obtained and reviewed the Company's documentation of their policies and procedures relating to:
°Identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
°Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
°The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
∙We have considered the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements, and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in revenue recognition cut-off. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override of controls.
We have also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the Companies Act 2006, Financial Reporting Standard 102 and UK tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements, but compliance with which may be fundamental to the company's ability to operate or avoid a material penalty. These included health and safety, data protection regulations, ISO9001 regulations, and employment legislation.
Our procedures to respond to the risks identified included the following:
∙Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
∙Reviewing the financial statement disclosures and testing to supporting documentation to assess the recognition of revenue;
∙Reviewing board meeting minutes
∙Enquiring of management concerning actual and potential litigation and claims;
∙Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
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KENSA CONTRACTING LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENSA CONTRACTING LIMITED (CONTINUED)
∙In addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessment whether the judgements made in making accounting estimates are indicative of potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risk to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
Chy Nyverow
Newham Road
Cornwall
TR1 2DP
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KENSA CONTRACTING LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2024
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KENSA CONTRACTING LIMITED
REGISTERED NUMBER:08166502
STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 28 form part of these financial statements.
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