The directors present the strategic report for the year ended 31 July 2024.
This Financial year turnover is slightly reduced to £18.8m, with an improved pre-tax profit figure of £936,000. (2023: £480,000). At the beginning of the year, Cheetham Hill Construction suffered with delayed projects and poor weather, in what would usually be a strong first quarter to the year. However, as these projects began, and frameworks got awarded, the company has been able to produce some respectable financial accounts.
With many competitors leaving the market, and the constraints placed upon new start ups to enter, the expertise and stability of the business has enabled us to retain clients and continue to work with them to provide civil engineering solutions. This year’s projects have included the installation of 285m of sheet piles and pre-cast capping beam as a replacement canal wall. Another completed project was a surface water and foul water drainage solution to service a new housing development.
With our comprehensive plant fleet, we undertook a complete bulk earthworks contract with 1,400,000m3 cut/fill reprofiling on a brownfield commercial site. On completion of the works, we secured the second phase of the development, which will be feature in next year’s turnover.
Framework agreements were secured by the business in Spring 2024, however the delay in most projects commencing meant that we secured work via tier 1 contractors. These involved a floodwall installation including floodgates, flood bund and a headwall outfall. We also have an ongoing 2-year project on the M60 with Temporary works installation and the excavation of an existing bridge.
As we go into 24/25 the construction industry continues to face challenges. The recent increase in National Insurance costs imposed in the Election, will lead to increased costs in labour. Alongside this a shortage of labour in the industry is a risk, and we are working with youngsters to attract them into the industry. Adverse weather has always been a factor to be considered, but with such extreme rainfall we have been experiencing, the business attempts to mitigate as much risk when selecting types of projects to work on.
Other Information
We were proud to receive a visit from Andy Burnham, Mayor of Greater Mancheter where some of the Directors discussed the challenges we face as a local SME in Civil Engineering including procurement and recruitment.
We employed one new Groundworker apprentice who is studying at Hopwood Hall College and another of our Groundworker Apprentices qualified and now has a permanent contract with the company. We still have two Degree Level Apprentices at Salford University; one studying Civil Engineering and the other studying Quantity Surveying. We have continued to offer work experience to local school children in Year 10 and learners studying T Levels.
We continue to work closely with the charity Project Recce to offer permanent employment to military service leavers and veterans and assist with their construction programmes on a monthly basis offering advice, interviews and mentorship. We have employed two recent service leaders this year and also two others have returned to our employment. We were also invited to Buckingham Palace as a thank you for our support with assisting veterans. We were delighted to be awarded the Project of the Year Award for projects from £ 1m to £ 5m at the annual CECA North West dinner for one of our Environment Agency contracts in East Yorkshire.
Again we have continued with our charitable support and commitment to local organisations;we sponsor a local netball team; several boys and girls football teams and fund two pupils through a Bursary Scheme at Bury Grammar school.
We also continue to donate annually to Cancer Research UK and some of the team took part in the Shine Night Walk in Manchester to raise money for Cancer Research in memory of one of our employees and we also held a Coffee Morning to raise funds for Macmillan. At Christmas, our employees and suppliers collected a large amount of toys for the Salvation Army gift appeal in both Barrow in Furness and Sale, both close to where we had contracts at the time. We also donated a laptop to a charity in Merseyside which works with homeless people.
Investment this financial year has been in the rebuilding of 2 of our existing Caterpillar 70 tonne excavators. We have chosen to completely rebuild the machines, to provide several more years working life in them rather than invest in 2 new excavators. Working alongside the manufacturers this has been a worthwhile project as we are breathing new life into the plant and recycling machinery for the future use in the business. This also reduces our Carbon footprint significantly.
Maintaining this strategy into the next cycle of investment we are rebuilding several of our Bulldozers and investing in new GPS Systems to assist the drivers and project managers in their schemes.
Also, as we have secured long term contracts we shall be investing in new cabins and site setups, in order to provide a good working environment for our staff and clients. This will involve providing solar energy to run our site setups utilising solartainers, again helping the environment, as an alternative to diesel generators.
Liquidity ratio remains high at 2.68 providing comfort to our creditors and clients that we can fund projects and provide bonds when necessary. Payback periods for investment in capital purchases are calculated through cost benefit analysis, and we have had to halt our investment in brand new plant until the prices reduce. Consequently, we have invested in rebuilds with a shorter payback period.
The business has maintained our accreditations for Safe Contractor, Construction Line Gold, CHAS, CQMS, Achilles UVDB Silver and maintain ISO standards for, 45001, 9001, 14001.
In July 2024 we were awarded the order of distinction RoSPA gold for 17 years for maintaining our Health and Safety record.
We achieved gold accreditation from the Supply Chain Sustainability School, demonstrating a commitment to sustainability by working with others in the supply chain.
During the reporting period of August 2023 to July 2024, we completed 385 training days which is an increase on last year (303)
We maintain 100% positive feedback from our clients with zero customer complaints
Accidents - Incidents occurred from 1 August 2023 to 31 July 2024.
1 Riddor incident – Fracture to a machine operator’s RH wrist, injury occurred while assisting a contracted plant fitter in removing a pin from the machine.
0 Pollution incidents
0 HSE / EA interventions
0 Customer complaints
End of year position
It has been a steady performance from our team to produce these results from such a slow start to the year. The Business has secured workload from both Frameworks and repeat customers into 24/25 and is optimistic for next year’s financial results. The Board maintains its cautious approach to which contracts we should work on, and with the backing of the strong balance sheet built up over 50 years of trading provides comfort to all our stakeholders.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 July 2024.
The results for the year are set out on page 10.
No ordinary dividends were paid. 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, PM+M Solutions for Business LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Drillwave Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2024 which comprise the group statement of income and retained earnings, the group balance sheet, the company balance sheet, the group 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).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the 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
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, 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 identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we have considered the following:
the nature of the industry and sector, control environment and business performance including the design of the Group's remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management about their own identification and assessment of the risks of irregularities;
the matters discussed among the audit engagement team including significant component audit teams and involving relevant specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud;
any matters we identified having obtained and reviewed the Group'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.
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 the following areas: timing of recognition of commercial income, posting of unusual journals and complex transactions; and manipulating the Group's performance profit measures and other key performance indicators to meet remuneration targets and externally communicated targets. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had 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 UK Companies Act, employment law, health and safety regulations, pensions legislation and tax legislation.
Audit response to risks identified
Our procedures to respond to 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;
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;
reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and
in addressing the identified risks of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
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.
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 £515,454 (2023 - £693,852 profit).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
Drillwave Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is , Woodhill Road, Bury, Lancashire, BL8 1AR.
The group consists of Drillwave 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. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Drillwave Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 July 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the directors have a reasonable expectation that the group 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.
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.
As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised in the profit and loss in proportion to the stage of completion of the contract. The stage of completion is assessed by reference to surveys of work performed.
Revenue relating to equipment rentals are recognised on a straight line basis over the period of rental.
Revenue from the rendering of services is measured by reference to the stage of completion of the service transaction at the end of the reporting period provided that the outcome can be reliably estimated. When the outcome cannot be reliably estimated, revenue is recognised only to the extent that it is probable the expenses recognised will be recovered.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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.
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.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, 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.
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.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense 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. 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 if, and only if, there is 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.
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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
In producing the financial statements, the directors have taken judgement over the profit to be taken on long term contracts. Profit is taken as the work is carried out where the final outcome can be assessed with reasonable certainty. The stage of completion is assessed by reference to surveys of work performed, Full provision is made for losses on all contracts in the year in which they are foreseen.
Tangible assets are depreciated over their useful lives taking into account residual values, where appropriate. When assessing asset lives, factors such as technological innovations and maintenance are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and the projected disposal values.
Determination of whether there are indicators of impairment on the group's tangible fixed assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset.
Determination of whether leases entered into by the company as lessee are operating or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis.
The whole of the turnover is attributable to the principal activity of the group wholly undertaken in the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors who accrued benefits under a defined contribution scheme were 3 (2023: 3).
The actual charge/(credit) 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 net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 July 2024 are as follows:
The principal activity of Cheetham Hill Construction is that of civil engineering contractors and plant hire.
The amounts owed by group undertakings are interest free and have no fixed repayment terms.
The finance lease and hire purchase contracts are secured over the assets they relate to.
The amounts owed to group undertakings are interest free and have no fixed repayment terms.
The finance lease and hire purchase contracts are secured over the assets they relate to.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
Included within other creditors at the year end are unpaid pension contributions of £32,308 (2023:£nil).
Profit and loss account - This reserve records retained earnings and accumulated losses.
Other reserve - The capital reserve arising on consolidation represents the excess of the consideration value ascribed to the shares acquired in the Company over their nominal value and is to be carried forward as a capital reserve.
The group had performance bonds amounting to £160,000 as at 31 July 2024 (2023: £160,000).
During the year, the group paid operating rent on land and buildings owned by the directors amounting to £70,000 (2023 : £60,000).