The directors present the strategic report for the year ended 31 March 2024.
The company has managed to grow its turnover with an increase of 19.5% to £70.0 million (2023: £58.6 million) whilst essentially maintaining gross margin which has decreased slightly from 11.9% to 11.1% as a direct result of the continuing challenging trading conditions as mentioned in the 'business environment' section.
The directors are further pleased to announce achieving a growth in the profit before taxation to £4.6 million (2023: £3.2 million), a rise of 40.4%.
The directors are pleased to note that the Statement of Financial Position continues to show impressive figures for both net current assets of £26.3 million (2023: £24.0 million) and Net Asset Value of £25.3 million (2023: £23.0 million).
Business environment
The UK economy continues to be a challenging environment for businesses. The combined impact of significant rises in global raw materials costs, rising subcontractor costs as a result of post-Brexit shortages of labour, and the war in Ukraine have created significant upward pressures on costs, inflation, and interest rates.
As a result new markets have been sought and in the year profitable contracts were commenced in France, contributing a significant sum to turnover to offset the UK decline.
We have been able to and will continue to navigate these turbulent times by our strong leadership, established and experienced management teams and strong financial position.
All projects undertaken by Knight Build Limited are thoroughly checked by the financial management team for relevant risk factors.
Management perceive the principal risks and uncertainties of the company to be the exposure of the company to credit risk, liquidity risk & market risk.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Management of credit control is a priority of the company and credit control is an ongoing focus and is undertaken in the form of regular periodic reviews to immediately identify overdue debts and establish the reason for non-payment. Where rectifications are needed, these are implemented quickly and if amounts due are still not forthcoming then legal remedies are sought.
Liquidity risk
Liquidity risk is the risk that the company will encounter difficulty in meeting its obligations associated with its financial liabilities.
The company regularly reviews its working capital requirements and responds quickly and appropriately where any potential shortfall is identified.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks: currency risk, interest rate risk and price risk however Knight Build do not consider interest rate risk to be a current issue as the company has no external financing and the day to day operations are financed through working capital.
Interest rate risk
Knight Build implements strategies to closely monitor FX exposure they encounter and have a periodic review to ensure their effectiveness in minimising the adverse impact of currency fluctuations on their financial performance and liquidity. Effective credit control risk management in the context of FX market risks is essential for safeguarding the company's financial stability and profitability in an increasingly globalism business environment.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Knight Build identify and quantify potential risks associated with price fluctuations in raw materials, labour and other market variables and develop strategies to mitigate these risks.
Looking ahead, we believe that we are making substantial progress in transforming the shape of the business to deliver long term value to our clients. We have a very strong statement of financial position and the resources to invest in growth areas and people to continually strengthen our services.
The orders for the forthcoming year remain strong with contracts already being secured. The directors believe that the core value and strategy will deliver the highest standards to our clients.
The directors consider that the key financial performance indicators are the turnover, gross margin and pre-tax results which are detailed in the trading results earlier in this Report.
Non-financial key performance indicators are considered to be:
Customer satisfaction
Customer retention
New customer development
Product and service quality
Company and brand reputation
Whilst these are difficult to quantify numerically, the areas are continually being monitored by the directors to ensure previous standards are being met
When making decisions, the Board of directors of Knight Build Limited must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s 172(1)(a f) of the Companies Act 2006).
The Company has a clearly defined strategy, and the Board considers the long-term consequences of its decisions in the context of this. When making decisions the Board considers several factors including:
1. The requirement to maintain a reputation of high standards of business conduct
2. The need to act fairly between the members of the Company
3. The translation of the strategy into both longer-term goals and annual plans with regular updates reviewed by the Board throughout the period
4. How the Company's objectives influence its employees, customers, suppliers, and shareholders together with the Company's wider impact on the environment.
As a Board, our intention is to behave responsibly towards our stakeholders and treat them fairly and equitably, so that they all benefit from the successful delivery of our strategy. The Board of Directors has overall responsibility for determining the Company's purpose, values, and strategy and for ensuring high standards.
The Board considers relationships with, and the engagement of, our stakeholders to be a critical success factor for our business.
Employees
Knight Build recognises that our employees are key assets of the business and as such invests in training courses for employees as well as mandatory short courses and long-term professional qualifications and apprenticeships, ensuring that our employees continue to grow and develop to enable the business to deliver its strategic objectives.
We rely on our employees to ensure the best relationships with our suppliers and customers. This in turn means that we can offer the best possible services and are renowned for our customer service which requires us to be able to adapt to our customers' requirements. This is only possible through the hard work of our employees and in this regard we provide a support network that they can rely upon, a remuneration package that rewards high performing individual.
Knight Build continues to invest in our renowned apprentice schemes and training programmes which ensures that we are developing our staff skills, keeping our knowledge in-house, and future proofing our project requirements.
Our directors and management teams are long established, experienced and actively involved in all aspects of the business which leads to our ongoing stability and success.
Knight Build Limited continues to devote itself to be the very best in our field. We have gained, improved and retained many quality & safety accreditations including, Considerate Constructors Scheme, FORS Gold, ROSPA, The British Safety Council, CHAS, ISO9001, ISO14001 and ISO 45001.
The Community
All Knight Build Limited sites are registered with the Considerate Constructors Scheme as we take our neighbourly responsibilities very seriously which has been suitably acknowledged by the industry with numerous awards received in the last few years. We always critically assess the impact our contracting works have on the local community from both an environmental point of view and having a positive impact on the local economy through the utilisation of local labour and suppliers where possible
Long-term considerations
Knight Build continues to take a long-term strategy in respect of its business activities and has diversified its business into France this year to mitigate the risks associated with the UK market. Plans are in hand to add undertaken similar joint ventures in additional European countries to enhance the company's portfolio in the coming year.
Customers
Knight Build Limited continues to foster strong relationships with our client base to whom we have become a trusted long-term partner. We continue to secure a considerable number of our projects on a negotiated basis as repeat business and referrals thanks to our successful project delivery. As a result of developing and expanding our full fit-out service offering, we have also been able to attract the interest of new clients providing us with a larger project pipeline with higher value contracts.
Many of Knight Build's customers have been in partnership with us for several years and part of our success is its ability to maintain positive working relationships with its customers. This has attracted other large clients through our positive reputation and repeat work. Knight Build places a high importance on working closely with our customers to help them deliver their projects safely, to the highest safety and quality standards.
Suppliers
Our supply chain is a key part of our business and Knight Build ensures that it selects suppliers that can help us provide our clients with a quality service. We adopt long term, mutually rewarding, ongoing relationships with our suppliers and subcontractors. We value the huge contribution that the supply chain makes and we work very hard to ensure that our supply chain partners are treated fairly. We appreciate the key role our suppliers play in the delivery of our goods on time, as such we aim to pay all suppliers on time and to ensure we have an open and honest dialogue with our suppliers on our ongoing requirements.
Knight Build Limited also continues to work closely with its supply chain and is able to rely on trusted supplier partners to deliver projects with tight timelines and quality expectations
Bankers
We appreciate the key role our bankers play in our commercial operations and operate at all times within the limits that they have set providing them with any information they require on a timely basis. The company is committed to acting ethically and with integrity in all of our business relations. We work closely with our business partners, suppliers and supply chains to ensure these principals are maintained throughout our operations.
Shareholders
The company recognises the requirement to keep members informed with regards to the company and all necessary documentation is provided as required. The company has a policy of considering the needs of members in its decision making process and aims to act fairly with regards to their needs.
Environment and survivability
The directors understand that as well as their legal responsibility to protect the environment, there is an overriding moral responsibility for the Company to have as little negative impact on the environment. Our aspiration is to leave a sustainable and lasting positive impact on the areas surrounding our projects.
The foundation for the Company's environmental management is our BS:EN: ISO14001:2015 accredited environmental management system. We utilise an online reporting tool to measure waste volumes, energy usage and carbon footprint, which is owned and administered by the Building Research Establishment (BRE) Group to measure our waste volumes, energy usage and carbon footprint. Using these measurements, we are then able to establish targets at a Project and Company level and subsequently identify realistic measures to reduce the environmental impact of the business's operations.
We are committed to the reduction of Greenhouse Gas (GHG) emissions related to operations across our business. To successfully deliver on this commitment, we have chosen to expand our scope of reporting, in turn, expanding our reduction targets and communicate these commitments publicly. We have partnered with Bre:Smartwaste, allowing us to engage their expertise and resources, and will utilise them as our third-party verification, ensuring that assessments are rigorous and avoid greenwashing at each opportunity. Our assessment completed for March 2023 calculated a carbon footprint per employee of 5.35 tCO2e (2022 5.65 tCO2e)
• The assessment enables us to confirm our target to Achieve Carbon Neutral Certification across Scopes 1 & 2 by the end of 2040.
• The assessment also enables us to commence baseline reporting for scope 3 allowing us to target Net Zero Certification across Scopes 1, 2 & 3 - target for completion: 2050.
We are implementing changes across the business to reduce our carbon footprint, for example, we introduced an electric car scheme in 2022, electric charging points are installed across construction sites, we use a green energy supplier for our electricity supply at Head Office, we promote a cycle to work scheme and encourage car sharing and online meetings to reduce business travel to sites & offices.
We use The Planet Mark Code of Practice and 2021 UK Government's conversion factors based on BEIS (previously Defra) Greenhouse Gas Conversion Factors for Company Reporting.Customers - Our employees are constantly interacting with our customers to fulfil our customers' requirements. We focus on customer service and this enables us to act as an extension of our customers' operations. All our staff uphold our key values in our dealing with customers.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2024.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £1,000,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The principal risks to the company are the costing of projects prior to tender. In this respect experienced Surveyors are constantly monitored by the Directors prior to any formal submissions. Furthermore projects are constantly monitored through their progress to ensure projected costs are adhered to.
The uncertainties facing the company are the general economic climate which affects existing clients and future potential opportunities.
The current credit crunch has inevitably made the trading environment challenging but the sound financial position and management expertise should enable the company to continue successfully through the current
turmoil and into better times.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
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:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
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 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.
We have audited the financial statements of Knight Build Limited (the 'company') for the year ended 31 March 2024 which comprise the statement of income and retained earnings, the balance sheet, 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).
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 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The objectives of our audit are to identify and assess the risks of material misstatement of the financial statements due to fraud or error; to obtain sufficient appropriate evidence regarding the assessed risks of material misstatement due to fraud or error, and to respond appropriately to those risks.
Based on our understanding of the company and industry, and through discussions with the directors and other management (as required by auditing standards), we identified that the principal risks of non-compliance with laws and regulations related to the construction industry, health and safety, employment law, data protection, and anti-bribery laws. We considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, UK GAAP and taxation. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. We evaluated management's incentive and opportunities for fraudulent manipulation of the financial statements (including the risk of management override of controls) and determined that the principal risks were related to the positing of inappropriate journal entries. Audit procedures performed by the engagement team included:
Discussions with management and assessment of known or suspected instances of non-compliance with laws and regulations and fraud, and review of the reports made by management.
Performing analytical procedures to identify any unusual or unexpected relationships, including related party transactions, that may indicate risks of material misstatement due to fraud.
Auditing the risk of management override of controls, including through testing journal entries at the year end and post year end, and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.
Testing was undertaken on random items in the balance sheet and the performance statement to avoid predictability in our testing.
Challenging assumptions and judgements made by management in its significant accounting estimates.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with laws and regulations. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting form error, as fraud may involve collusion, forgery, internal omissions, misrepresentation, or the override of internal controls.
Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the director' use of the going concern basis of accounting and, based on the evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention to our Auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during the audit.
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.
Knight Build Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 22 Childerditch Industrial Park, Childerditch Hall Drive, Brentwood, CM13 3HD.
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 pound.
As part of its risk assessment, the directors prepared both base case scenarios using £55m of turnover and worse case scenarios using only secured work of £40m to determine the effect to cash.
These forecasts take into consideration a prudent approach to changes as a result of recent inflation, and show that the Company has sufficient working capital to continue to operate within its current level of cash.
The directors are therefore able to make a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and for a period of no less than twelve months from the date of approving the financial statements
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.
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 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.
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.
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, including creditors, 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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The company is called as required to assess claims against it in respect of contracts still under a warrant provision or a defects rectification period. The policy is to reflect the loss in the current year for all such contracts where the likelihood is that the company is liable for the settlement of the costs.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Trade and other debtors are recognised to the extent that they are judged recoverable. Reviews are performed to estimate the level of reserves required for potentially irrecoverable debt. Provisions are made specifically against invoices where recoverability is uncertain. The carrying amount is shown in note 3 to the financial statements.
Management makes allowance for doubtful debts based on an assessment of debtors. Allowances are applied to debtors where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analyses historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the provision for doubtful debts. Where the expectation is different from the original estimate, such difference will impact the carrying value of debtors and the charge in the profit and loss account.
Management is required to makes estimates in respect of the recoverability of retentions on contracts at the year-end date. Each contract is considered on an individual basis and a review of the progress of each job together with future expected costs undertaken to establish the likelihood of a counter claim for remedial work being made against the retention held.
For the carrying value please see note 15 to the financial statements.
Management reviews the asset lives and associated residual values of all fixed asset classes and concludes that asset lives and residual values are appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing lives, factors such as future market conditions, the nature of the asset and asset maintenance are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and disposal values.
See note 12 to the financial statements for details of the carrying amounts.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The rectifications provision is in relation to management's expectation of the potential remediation or reimbursement of costs following a review of issues and defects within historic contracts.
Due to the level of uncertainties surrounding the final value of any claims and the length of time taken for negotiations, these could occur either within one year, after more than one year, or both.
The onerous contracts provision is in relation to loss making contracts where the outflow of these projects are expected to occur within a year. At the year-end the directors assessed that there were no such amounts which were material.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to relates to accelerated capital allowances and other timing differences that are expected to mature within the same period.
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.
At the year-end there were amounts payable of £6,382 (2023: £6,199) in respect of contributions due to the scheme.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Included within debtors are amounts owed to a related party which is owned by the directors of the company. These are £nil (2023: £5,750,000) in trade debtors and £4,355,000 (2023: £2,000,000) shown under amounts recoverable on contracts. These transactions are conducted under normal market conditions.
There is also a balance with this related party of £653,483 (2023: £811,248) which is a non-interest bearing loan included within other debtors.
Dividends totalling £1,000,000 (2023 - £1,000,000) were paid in the year in respect of shares held by the company's directors.