Statement of Financial Position

				30 September 2022	30 September 2021
	Note			£	£
Non-current assets
Property, plant and equipment	15			14,642,398	9,236,223
				14,642,398	9,236,223
Current assets
Inventories				51,772	1,973
Trade and other receivables	17			17,906,957	8,292,227
Current tax receivable				82,891	82,890
Assets at fair value through profit or loss	16			-	271,450
Cash and cash equivalents				1,211,554	1,465,292
Total current assets				19,253,174	10,113,832
TOTAL ASSETS				33,895,572	19,350,055
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital	24			58,650	50,000
Share premium				3,417,068	-
Share based payment reserve				39,774	-
Retained earnings				3,322,600	3,386,950
Total equity				6,838,092	3,436,950
Non-current liabilities
Deferred tax liabilities	14			287,420	447,587
Lease liabilities	21			10,878,950	6,718,458
Total non-current liabilities				11,166,370	7,166,045
Current liabilities
Trade and other payables	18			7,005,102	4,520,533
Provisions	19			304,951	259,537
Loans and borrowings	20			6,528,750	3,139,463
Lease liabilities	21			2,052,307	827,527
Total current liabilities				15,891,110	8,747,060
TOTAL LIABILITIES				27,057,480	15,913,105
TOTAL EQUITY AND LIABILITIES				33,895,572	19,350,055

 

 

Statement of Changes in Equity

 

	Share capital		Share premium		Share based payment reserve		Retained earnings		Total equity
	£		£		£		£		£
Balance at 1 October 2020	2		-		-		6,787,342		6,787,344
Loss for the year	-		-		-		(56,203)		(56,203)
Bonus issue of shares	49,998		-		-		(49,998)		-
Dividends paid	-		-		-		(3,294,191)		(3,294,191)
Balance at 30 September 2021	50,000		-		-		3,386,950		3,436,950
Profit for the year	-		-		-		320,852		320,852
Proceeds from issue of shares	8,650		4,359,70		-		-		4,359,704
Share issue costs	-		(942,636)		-		-		(942,636)
Share based payment	-		-		39,774		-		39,774
Dividends paid	-		-		-		(385,202)		(385,202)
Balance at 30 September 2022	58,650		3,417,068		39,774		3,322,600		6,838,092

Share premium represents the amount raised on the proceeds of share issues in excess of the par value of those shares, net of issue costs.

The share based payment reserve represents the accumulated entries to equity arising from the recognition of share-based payments in accordance with IFRS 2.

Retained earnings represent the accumulated profits and losses of the Company, less distributions and similar items, since its incorporation.

Dividends of £385,202 were paid during the year in 2 instalments, a full dividend for the year ended 30 September 2021 of £284,715, 1.7p per share (FY 2020, Nil), and an interim dividend for the year ended 30 September 2022 of £100,487, 0.6p per share (interim 2021 Nil).

Statement of Cash Flows 

		Year ended 30 September
			2022	2021
	Note		£	£
Cash flows from operating activities:
Profit/(loss) after taxation			320,852	(56,203)
Taxation charge	13		(160,167)	571,720
Finance income			(4,634)	(27)
Finance costs	12		550,338	232,500
Fair value movements(gain)/loss	16		(691)	38,116
Share based payment charge			39,774	-
Depreciation of property plant and equipment	15		1,034,071	724,844
Loss on disposal of property, plant and equipment			21,218	11,297
(Increase)/decrease in inventories			(49,799)	3,625
Increase in trade and other receivables			(9,614,731)	(2,981,835)
Increase/(decrease) in trade and other payables and provisions			2,529,984	(116,529)
Cash generated from operations			(5,333,785)	(1,572,492)
Tax paid			-	(28,688)
Net cash used in from operating activities			(5,333,785)	(1,601,180)
Cash flows from investing activities:
Purchase of tangible assets	15		(228,184)	(358,146)
Proceeds from disposal of tangible assets			240,755	20,001
Proceeds from disposal of other assets	16		272,141	-
Interest received			4,634	27
Net cash generated from/(used in) investing activities			289,346	(338,118)
Cash flows from financing activities:
Payment of lease liabilities	21		(1,406,611)	(1,282,403)
Interest paid			(232,491)	(123,383)
Bank loan advances			3,389,287	2,794,824
Dividends paid			(385,202)	-
Net proceeds of share issues			3,425,718	-
Net cash from financing activities			4,790,701	1,389,038
Net decrease in cash and cash equivalents			(253,738)	(550,260)
Cash and cash equivalents at start of year			1,465,292	2,015,552
Cash and cash equivalents at end of year			1,211,554	1,465,292

 

NOTES TO THE FINANCIAL STATEMENTS

Net debt

	At 30 September 2021	Cash flow	Non-cash movement	At 30 September 2022
Cash and cash equivalents
Cash	1,465,292	(253,738)	-	1,211,554
Debt
Bank loans	(3,139,463)	(3,389,287)	-	(6,528,750)
Lease liabilities	(7,545,985)	1,406,611	(6,791,883)	(12,931,257)
	(10,685,448)	(1,982,676)	(6,791,883)	(19,460,007)
Net debt	(9,220,156)	(2,236,414)	(6,791,883)	(18,248,453)

 

Non-cash movements represent new liabilities and interest recognised under IFRS 16 in respect of leases

1        General Information

 

The Company is a public company limited by share capital incorporated and domiciled in England and Wales. The principal activity of the Company is that of general construction and civil engineering.

The address of its registered office and principal place of business is:

Hercules Court

Lakeside Business Park

South Cerney

Cirencester

GL7 5XL

The immediate and ultimate parent undertaking of the Company is Hercules Real Estate Limited, the financial statements of which can be obtained from the above address.

2        Summary of significant accounting policies

 

Statement of compliance

The financial statements have been prepared in accordance with UK-adopted international accounting standards and applicable law.

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

Basis of preparation

The financial statements have been prepared on the following basis:

·    The financial information for the Company for the years ended 30 September 2021 and 30 September 2022;

·    Using the historical cost convention except for, where disclosed in the accounting policies, certain items shown at fair value.

 

The financial statements are presented in Pounds Sterling, being the functional currency of the Company.

 

The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.  These are disclosed in note 3.

 

Changes in accounting policy and disclosures

(a)  New and amended accounting standards

New Standards applicable for the year were as follows:

-     Interest Rate Benchmark Reform - Phase 2 (1 January 2021)

-     Amendment to IFRS 16 : Covid-19 Related Rent Concessions beyond 30 June 2021 (1 April 2021)

Neither of these Standards had a material impact on the Company's results for the year.

(b)  Future standards

At the date of authorisation of the financial statements, the Company has not early adopted the following amendments to Standards and Interpretations that have been issued but are not yet effective:

-     Amendments to IAS 1 : Classification of Liabilities as Current or Non-Current (1 January 2023)

-     Amendments to IFRS 3 : Reference to the Conceptual Framework (1 January 2022)

-     Amendments to IAS 16 : Proceeds before Intended Use (1 January 2022)

-     Amendments to IAS 37 : Onerous Contracts - Cost of Fulfilling a Contract (1 January 2022)

-     Annual Improvements to IFRS Standards 2018-2020 (1 January 2022)

-     Amendments to IFRS 17 (1 January 2023)

-     Amendments to IAS 1 and IFRS Practice Statement 2 : Disclosure of Accounting Policies (1 January 2023)

-     Amendments to IAS 8 : Definition of Accounting Estimates (1 January 2023)

-     Amendments to IAS 12 : Deferred Tax related to Assets and Liabilities arising from a Single Transaction (1 January 2023)

-     Amendments to IAS 1 : Classification of liabilities as current or non-current (1 January 2024)

-     Amendments to IFRS 16 : Lease Liability in a Sale and Leaseback (1 January 2024)

-     Amendments to IAS 1 : Non-current Liabilities with Covenants (1 January 2024)

These Standards and amendments are effective from accounting periods beginning on or after the dates shown above. The directors do not expect any material impact as a result of adopting the standards and amendments listed above in the financial year they become effective.

 

Going concern

The directors have prepared forecast information. The financial information has been prepared assuming the Company will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future. In assessing whether the going concern assumption is appropriate, management has considered the Company's existing working capital and management are of the opinion that the Company has adequate resources to undertake its planned programme of activities for a period of at least 12 months from the date of approval of these financial statements. The Company's working capital facility is currently capped at £10m (but the directors believe could be extended if required), and is on a 3 month notice period on either side. The facility operates well and a good relationship exists between the Company and the provider, therefore the Directors do not believe the facility will be terminated within the going concern assessment period. However the facility will be kept under review as other offerings appear in the market.

 

The directors have taken a view of the Company as a whole over the 12 months January 2023 to January 2024. Assessments have been made of revenue streams from key contracts, growth in a number of areas, overheads, cash levels, cash facilities where required, tax projections etc. A further scenario test with lower sales, margins, and worse debt collection days has been undertaken, without reducing planned headcount increases, and sufficient (but reduced) cash levels are forecast in the 12 months ahead.

The Company increased its turnover by 51% in the year, and exceeded its forecast turnover and EBITDA (before extraordinary items). The Company is one of six labour suppliers selected for the Northern Section of HS2, which is currently the largest construction project in Europe. This will continue to underpin and grow turnover over the next few years. In addition, the Company raised funds to purchase another seven suction excavators, which further boosted turnover. Civil projects are expected to be similarly busy, due to the requirements of AMP7 being squeezed into three years rather than five.

Admission to AIM on 4 February 2022 raised circa £2.7m (net) to aid working capital, and together with external asset funding, further expand the suction excavator fleet and provide minibuses to aid transport of operatives to the eight HS2 Northern section locations. Based on the current status, the Directors have a reasonable expectation that the Company will               be able to execute its plans in the medium term such that the Company will have adequate resources to continue in operational existence for the foreseeable future. This provides the Directors with assurance on the Company's ability  to continue as a going concern, and therefore adopt the going concern basis of accounting in preparing the annual financial statements.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors that make strategic decisions. The Company operates from one location but, in the Directors' opinion, has four reportable segments: Labour supply, civil projects, the hire of suction excavators and other activities.

 

Revenue

Revenue arises from the provision of construction and civil engineering services under fixed price contracts, as well as the hire of suction excavators under hire contracts. Contract duration can vary and can range from the supply of labour only to the provision of fully managed construction and engineering projects. Where variations are requested, prices are agreed as soon as practically possible. Variations are exactly that - changes or additions to initial requests. Discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties are rarely encountered, but if any of them are, they are not material.

To determine whether to recognise revenue, the Company follows the 5-step process as set out within IFRS 15:

1.   Identifying the contract with a customer

2.   Identifying the performance obligations

3.   Determining the transaction price

4.   Allocating the transaction price to the performance obligations

5.   Recognising revenue when/as performance obligation(s) are satisfied

 

Certain fixed price contracts span more than one accounting period and can have a duration of more than one year. The Company's accounting policies for these projects require revenue and costs to be allocated to individual accounting periods and the consequent recognition at period-end of contract assets or liabilities for projects still in progress. Management apply judgement in estimating the total revenue and total costs expected on each project. Such estimates are revised as a project progresses to reflect the current status of the project and the latest information available to management. The project teams regularly review contract progress to ensure the latest estimates are appropriate. The carrying amounts of contract assets and liabilities are stated in Note 17.

 

The key judgements and policies in respect of revenue from the Company's various activities are described further below.

 

Labour Supply

 

This represents the provision of labour to customers. The amount of revenue is based on agreed contractual hourly rates with customers. The customer simultaneously receives and consumes the benefits provided by the Company's performance under these contracts and the performance obligation (being the provision of labour) is therefore satisfied over time. In the majority of cases, the Company invoices customers monthly in arrears for the hours of labour supplied during that month. Amounts invoiced but unpaid at the balance sheet date are included within trade receivables.

 

In some cases, the monthly invoice will not correspond with a calendar month, and the Company is therefore required to include an amount within contract assets in the Statement of Financial Position, for revenue relating to periods for which labour has been provided but not yet invoiced.

 

Civil Projects

 

This represents work performed under contracts with customers to undertake construction and/or civil engineering works. These contracts contain a number of individually identified services. However, the directors consider that the services being provided are highly interdependent and interrelated and therefore should not be considered to be separate performance obligations under IFRS 15. Furthermore, the services provided by the Company either enhance an asset that the customer controls and/or do not create an asset with alternative use to the Company and there is an enforceable right to payment for performance completed to date. The Company therefore considers the delivery under these contracts to be a single performance obligation that is satisfied over time.

 

Each contract has its own assessed view. If for instance a variation has been agreed in principle but not fully signed off pending provision of all costed substantiation a balanced view of revenue is then taken in the accounts. Also this is often backed up by the Clients QS certifying an interim on account contribution in the meantime. Where variations are more complicated such as delay and disruption claims, as opposed to measuring drawing revisions, a more pessimistic view is taken. Where variations have been consolidated and formalised (signed off) these are fully accounted for.

Under these contracts, the Company produces a monthly 'application' to the customer detailing the work performed to date and requesting payment accordingly. Within a period of one to two months (in the majority of cases) the customer will confirm agreement to the 'application' and remit the necessary funds to the Company. Historically, the Company's experience is that instances of customers materially disagreeing with the 'application' are rare and that this is therefore a reliable method by which to recognise revenue earned ("output method"). There have been

no new 'output' method projects started since March 2021, and internal valuations made under this method in the year ending 30 September 2022 would not change the position in any material way.

 

At the balance sheet date, the Company includes a balance in receivables for the amount of revenue receivable on contracts based on the work performed. The Company used the output method for all projects still in operation at the end of March 2021 (until those projects are completed), but all new projects since then use the input method, based on costs incurred to date, to estimate the amount of revenue earned and includes an amount in contract assets within receivables. The input method is based on costs incurred at the balance sheet date compared to expected costs to be incurred throughout the life of the contract.

 

Suction excavators

 

Revenue from the provision of suction excavators services is recognised in line with the income received over time under the relevant contracts/sale agreements. Labour & material costs are recognised as they occur.

 

Other

 

Revenue from the sale of software products is recognised at a point in time, being when the software is delivered to the end customer. Likewise, the revenue from the sale of vehicle investments is recognised, at a point in time, when the investment vehicle is delivered to the end customer.

 

Other operating income - Government grants

Government grants relate to amounts receivable under the Construction Industry Training Board scheme. Grants are recognised in the income statement on a systematic basis over the periods in which the entity recognises the related expenditure for which the grant is intended to compensate.

 

Taxation

The tax expense or credit for the period comprises current and deferred tax. Tax is recognised in the income statement, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.

The current tax charge or credit is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the United Kingdom, where the Company operates and generates taxable income.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits available to the Company. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply in the period when the liability is settled or the asset realised.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amounts of deferred tax assets are reviewed at each reporting date and a valuation allowance is set up against deferred  tax assets so that the net  carrying  amount  equals  the highest amount that is more likely than not to be recovered based on current or future taxable profit.

Deferred tax assets and liabilities are only offset against each other when there is a legally enforceable right to set off current taxation assets against current taxation liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same tax authority on either (a) the same taxable entity, or (b) different taxable entities which intend to settle these on a net basis, or to realise the assets and settle the liabilities simultaneously.  In the Company's accounts all taxes are levied by H M Revenue and Customs.  Management review the offset of deferred tax assets and liabilities to ensure such an offset is appropriate. 

Research and Development tax claims

Where the Company has made Research and Development tax claims under the Small and Medium Enterprise scheme and tax losses have been surrendered for a repayable tax credit, a current tax credit is reflected in the income statement based on the best estimate of the submission to be made in relation to that financial year.

Property, plant and equipment

Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment  losses.

 

The cost of property, plant and equipment includes directly attributable incremental costs incurred in its acquisition and installation.

 

Depreciation

Depreciation is charged so as to write off the cost of assets over their estimated useful lives, as follows:

 

 

Asset class                            Depreciation method and rate

Plant and machinery               10% reducing balance

Fixtures, fittings and equipment          20% reducing balance

Right-of-use assets                 Straight line over the term of the lease or the asset's useful life if shorter                

Impairment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately independent cash inflows (CGU). Those intangible assets including goodwill are tested for impairment at least annually.  All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment charge is recognised for the amount by which the asset's or CGUs carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use.  All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

 

Financial instruments

The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the underlying contractual arrangement. Financial instruments are recognised on the date when the Company becomes a party to the contractual provisions of the instrument. Financial instruments are initially recognised at fair value. Financial

instruments cease to be recognised at the date when the Company ceases to be party to the contractual provisions of the instrument.

 

Financial assets are included on the balance sheet as trade and other receivables or cash and cash equivalents. Financial liabilities include borrowings, trade payables and accruals.

 

 

(a)  Trade receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are recognised initially at the amount of consideration that is unconditional. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established based on the expected credit loss. The Group applies the IFRS 9 simplified approach to measure expected credit losses that uses a lifetime expected loss allowance for all trade receivables, which are grouped based on shared credit risk characteristics and the days past due. The amount of the provision is recognised in the balance sheet within trade receivables. Movements in the provision are recognised in the profit and loss account in administrative expenses. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Default is defined as non-payment - there is no specific write off policy, but disputes are settled by discussion as is common in the industry.

 

(b)  Borrowings

All borrowings are initially recorded at fair value. Borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing. Interest expense is recognised on the basis of the effective interest method and is included in finance costs.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

 

(c)  Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and all are repayable within one year and hence are included at the undiscounted amount of cash expected to be paid.

 

(d) Contract assets

A contract asset is recognised within receivables where the Company has earned the right to revenue through performance under contracts. Contract assets are also potentially subject to credit losses and are therefore subject to a provision for expected credit losses in the same way as trade receivables as described above.

 

Assets at fair value through profit or loss

The Company owned a number of gold bars which were held for the purposes of their potential appreciation in value. These were therefore accounted for as an asset at fair value through profit or loss. This was considered a Level 1 fair value asset as the value is determined by reference to readily available market information, with the movement in fair value in each accounting period being accounted for through the income statement.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that have a maturity date of 3 months or less, are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

 

Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) 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.

 

Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material.

 

Leases

 

The Company as lessee

 

Short term leases or leases of low value are recognised as an expense on a straight-line basis over the term of the lease.

 

The Company recognises right-of-use assets under lease agreements in which it is the lessee.  The underlying assets comprise property, plant and machinery and motor vehicles,  and are used in the normal course of business.  The right-of-use assets comprise the initial measurement of the corresponding lease liability payments made at or before the commencement day as well as any initial direct costs and an estimate of costs to be incurred in dismantling the asset.  Lease incentives are deducted from the cost of the right-of-use asset.  The corresponding lease liability is included in the statement of financial position as a lease liability.

 

The right-of-use asset is depreciated on a straight line basis over shorter of the asset's useful life and the lease term and if necessary impaired in accordance with applicable standards.  The lease liability shall initially be measured at the present value of the lease payments that are not paid at that date, discounted using the rate implicit in the lease or, where this cannot be determined, the Company's incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (application of the effective interest method) and by reducing the carrying amount to reflect the lease payments made.  No lease modification or reassessment changes have been made during the reporting period from changes in any lease terms or rent charges.

 

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

 

Defined contribution pension obligation

A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the Company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.  

 

Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.

 

Share-based payment

The Company applies IFRS 2 to share-based payments. The Company operates a share-based payment compensation plan, under which the entity grants key employees the option to purchase shares in the Company at a specified price maintained for a certain duration. The Company has also issued warrants to certain key suppliers with similar characteristics which are accounted for in the same way as the options.

 

The fair value of the services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

•      including any market performance conditions (e.g. an entity's share price);

•      excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and

•      including the impact of any non-vesting conditions (e.g. the requirement for employees to save).

 

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each financial period, the Group revises its estimates

of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Consolidated Statement of Comprehensive Income, with a corresponding adjustment to equity. When the options are exercised, and the Group issues new shares to meet that obligation, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

 

3        Critical accounting judgements and key sources of estimation uncertainty

In the application of the Company's accounting policies, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the Financial statements are described below.

 

Key judgements

 

Lease discount rate

IFRS 16 requires the carrying value lease liabilities and the corresponding right of use assets to be calculated using the net present value of future lease payments. This calculation inherently requires a discount rate to be applied, which requires judgement. The Directors have used the Company's incremental borrowing rate for property leases where the rate implicit in the lease cannot be determined. The incremental borrowing rate applied is based on the interest rate applied to the bank loan disclosed in note 20.

Key sources of estimation uncertainty

Revenue recognition (Civil projects)

Certain fixed price contracts span more than one accounting period and can have a duration of more than one year. The Company's accounting policies for these projects require revenue and costs to be allocated to individual accounting periods and the consequent recognition at period-end of contract assets or liabilities for projects still in progress. Management apply judgement in estimating the total costs expected on each project. Such estimates are revised as a project progresses to reflect the current status of the project and the latest information available to

management. The project teams regularly review contract progress to ensure the latest estimates are appropriate. Further information is disclosed in note 2 under 'Revenue' and the carrying amounts of contract assets are stated in Note 6.

Provision

As disclosed in note 19, a provision is included in this Financial statements relating to the potential underpayment of National Insurance Contributions under the Construction Industry Scheme. There is a level of uncertainty in the quantum and timing of future payments related to this liability. Further information is included in note 19.

 

Listing and fundraising costs.

Incremental costs that are directly attributable to issuing new shares have been deducted from the share premium account, whilst costs that relate to the stock market listing, or are otherwise not incremental and directly attributable to issuing new shares have been expensed. The Company has allocated costs that relate to both share issuance and listing on a rational and consistent basis which requires judgement. These cost have been allocated on the basis of 75% to the P&L and 25% to the share premium.

 

4        Earnings per share

	Year ended 30 September
		2022		2021
Basic		£		£
Earnings used in calculation of earnings per share:
Total profits/(losses) attributable to equity holders		320,852		(56,203)
Weighted average number of shares in issue		55,640,408		21,097,000

Earnings/(loss) per share

On total profits attributable to equity holders

0.58p

(0.27p)

 

 

The Company has share options and warrants in issue as disclosed in note 25. However, the average share price during the period since issue was lower than the exercise price, therefore the potential shares arising are not dilutive.

 

Earnings per share for the year ended 30 September 2021 above have been restated to reflect the revised par value of the shares following a sub-division on 20 January 2022. Each £1 share was converted to 1,000 ordinary shares of 0.1p each.

 

 

5        Segmental reporting

 

The Company's management have identified four operating segments : labour supply, civil projects, suction excavator services; and other services. The segments are monitored by the Company's chief operating decision maker and strategic decisions are made based on the segments' operating results.

 

In total, at 30 September 2022 suction excavators accounted for £6,040,600 (2021 : £3,339,920) of right-of-use assets, and £5,364,237 (2021 : £2,896,058) of lease liabilities. All other assets and liabilities relate to construction services.

 

Segment information for the year ended 30 September 2022 is as follows:

 

 

	Labour supply	Civil projects	Suction excavator	Other	Total
			services
	£	£	£	£	£
Revenue (all from external customers)	33,250,617	12,370,937	3,645,934	281,999	49,549,487
Cost of sales	-27,719,436	-10,355,715	-1,517,541	-177,682	-39,770,374
Gross profit	5,531,181	2,015,222	2,128,393	104,317	9,779,113
Administrative expenses	-1,284,275	-810,482	-1,085,008	0	-3,179,765
Operating profit from segments	4,246,906	1,204,739	1,043,385	104,317	6,599,348
Administrative expenses
not attributable to segments					-5,893,650
Profit from operations					705,698
Fair value gains					691
Finance income					4,634
Finance costs					-550,338
Profit before tax					160,685

 

Other services include digital product revenue, and vehicle investment sales.

 

 

 

 

Segment information for the year ended 30 September 2021 is as follows:

 

	Labour supply	Civil projects	Suction excavator	Other	Total
			services
	£	£	£	£	£
Revenue (all from external customers)	22,890,070	7,696,102	2,168,296	0	32,754,468
Cost of sales	-18,583,114	-6,696,798	-787,087		-26,066,999
Gross profit	4,306,956	999,304	1,381,209	0	6,687,469
Administrative expenses	-615,972	-483,355	-422,711	0	-1,522,038
Other operating Income	217,195	0	0	0	217,195
Operating profit from segments	3,908,179	515,949	958,498	0	5,382,626
Administrative expenses
not attributable to segments					-4,596,520
Profit from operations					786,106
Fair value losses					-38,116
Finance income					27
Finance costs					-232,500
Profit before tax					515,517

 

 

6        Revenue

 

The total turnover of the Company has been derived from activities wholly undertaken in the United Kingdom, being the provision of service through supply of labour and the operation of construction and engineering contracts, the hire of suction excavators and other services.

 

The Company's revenue from each activity is shown below and is all derived in the United Kingdom.

 

 

 

		Year ended 30 September
		2022		2021
		£		£
Labour Supply		33,250,617		22,890,070
Civil projects		12,370,937		7,696,102
Suction excavator services		3,645,934		2,168,296
Other		281,999		-
		49,549,487		32,754,468

 

Other than suction excavator and other services, the Company derives its income from two main activities, both of which are linked to the principal activity of the delivery of construction and civil engineering services, being the provision of labour and services provided under construction and/or civil engineering contracts. These are referred to internally as 'labour supply' and 'civil projects' respectively.

 

Significant customers

 

In the year ended 30 September 2022 one customer represented 17% (£8,437,682) of revenue (2021 one customer 25% £7,601,708), and another customer represented 11% (£5,404,125) of revenue (2021 one customer 16% £5,119,878). These customers were primarily labour supply customers. No other customers represented more than 10% of revenue in either year.

 

Contracts with customers

 

The Company has contract assets relating to revenue earned from the supply of labour and construction services. Due to the nature of this revenue, balances defined as contract assets will vary and depend on the number, timing and nature of the contracts in progress at the balance sheet date. The relevant balances are shown as contract

assets in note 17. The increase in contract assets compared to the prior year represents the increased level of activity at the year end.

 

Revenue from contract assets

 

Revenue in the year relating to previously recognised contract assets was £3,362,862 (2021 : £2,168,062)

Contract balances

 

The nature of the Company's revenue recognition is such that the only contract balances arising relate to accrued income, which is shown as a contract asset. The balance at 30 September 2022 was £6,739,637 (2021 : £3,362,862).

 

Significant changes in contract assets

 

The Company has many contracts for services and underway at any point in time, and these are a mix of large and small contracts, generally with monthly invoicing. The level of contract assets therefore fluctuates depending on the mix of contracts and the stage of contract completion at the balance sheet date by reference to costs incurred to date.

 

7        Other operating income

 

	Year ended 30 September
			2022		2021
			£		£
Construction Industry Training Board grants			-		164,631
Coronavirus Job Retention Scheme grants			-		52,564
			-		217,195

Other operating income arises mainly from the receipt of government grants.  Since this is not considered to be part of the main revenue generating activities, the Company presents this income separately from revenue.

 

 

There are no unfulfilled conditions or other contingencies attaching to these grants. The Company did not benefit directly from any other forms of government assistance.

 

8        Profit from operations

 

  Operating profit is stated in the income statement after charging:

 

	Year ended 30 September
			2022		2021
			,£		£
Depreciation - owned assets			146,472		126,280
Deprecation - right-of-use assets			887,599		598,564
Loss on disposal of fixed assets			21,218		11,297
Research and development costs			36,555		17,505

 

9        Auditors' remuneration

 

No non-audit services have been provided since the listing was completed.

 

 

 

	Year ended 30 September
			2022		2021
			£		£
For audit of the financial statements			66,340		62,000
Non-audit services :
Review of interim financial information			-		15,000

 

 

10      Staff costs

 

The aggregate employee benefit expenses were as follows:

	Year ended 30 September
			2022		2021
			£		£
Wages and salaries			13,375,145		7,183,515
Social security costs			1,506,878		787,729
Pension costs			265,586		178,891
			15,147,609		8,150,135

 

The average monthly number of employees during the year was as follows:

	Year ended 30 September
			2022		2021
Site based operatives			212		99
Administrative and Managerial			63		54
			275		153

 

11      Directors' remuneration

 

Key management of the Company are the members of the board of directors.  Key management personnel remuneration includes the following expenses:

 

	Year ended 30 September
			2022		2021
			£		£
Salaries			517,646		515,734
Benefits			14,331		19,540
Pension contributions			70,500		95,951
			602,477		631,225

 

During the year retirement benefits were accruing to 4 directors (2021: 3) in respect of defined contribution pension schemes.

 

Amounts paid to the highest paid director were as follows:

 

	Year ended 30 September
			2022		2021
			£		£
Salary and benefits			164,861		151,091
Pension contributions			40,000		40,000
			204,861		191,091

 

12      Finance costs

 

	Year ended 30 September
			2022		2021
			£		£
Lease finance costs			317,847		215,278
Interest on loans measured at amortised cost			230,552		3,676
Other interest			1,939		13,546
			550,338		232,500

 

13      Income taxes

 

	Year ended 30 September
			2022		2021
			£		£
Current tax:
UK corporation tax			-		-
Adjustments to prior periods			-		-
Total current tax charge			-		-
Deferred tax:
Origination and reversal of timing differences			(114,925)		(1,584)
Adjustments in respect of prior periods			(45,242)		465,503
Effect of tax rate change on opening balance			-		107,801
			(160,167)		571,720
Tax on profit on ordinary activities			(160,167)		571,720

 

Tax on loss on ordinary activities for the year is lower than the standard rate of corporate tax in the UK of 19%, (2021: 19%).

 

The differences are reconciled below:

	Year ended 30 September
Continuing operations				2022		2021
				£		£
Profit on ordinary activities before taxation				160,685		515,517
Tax at the UK rate of 19% (2021: 19%)				30,530		97,948
Effect of:
Expenses not deductible for tax purposes				112,796		68,819
Fixed asset differences				(230,669)		(163,193)
Adjustments in respect of prior periods				(45,242)		465,503
Remeasurement of deferred tax for change in tax rates				(27,582)		107,801
Other differences affecting tax charge				-		(5,158)
Total tax charge				(160,167)		571,720

 

At 30 September 2020, the Company anticipated that it would be making a Research and Development tax claim that would lead to an increased level of tax losses being available. The relevant claim has not yet been submitted and the directors do not consider there was sufficient certainty at 30 September 2021 to be able to continue to recognise the corresponding deferred tax asset. As a result, the deferred tax charge in the year ended 30 September 2021 includes an amount of £465,503 relating to the reversal of the previously recognised asset.

 

14      Deferred tax

 

Deferred tax balances are analysed as follows:

 

Deferred tax balances before offset				30 September 2022		30 September  2021
				£		£
Deferred tax liability				(1,998,219)		(1,093,676)
Deferred tax asset				1,710,799		646,089
Total deferred tax liability				(287,420)		(447,587)
Deferred tax balances after offset				30 September 2022		30 September  2021
				£		£
Deferred tax asset				-		-
Deferred tax liability				(287,420)		(447,587)
Total deferred tax liability				(287,420)		(447,587)

 

 

The amounts reflect the differences between the carrying and tax amounts of the following balance sheet headings as at each year end.

 

Credits/(charges) during each year are as follows:

 

		Tax losses		Short term temporary differences		Fixed asset temporary differences	Total
		£		£		£	£
At 1 October 2020 - asset/(liability)		465,503		2,932		(344,302)	124,133
Tax credit/(charge) in respect of current year		180,443		(2,789)		(749,374)	(571,720)
At 30 September 2021 - asset/(liability)		645,946		143		(1,093,676)	(447,587)
Tax credit/(charge) in respect of current year		1,063,412		1,298		(904,543)	160,167
At 30 September 2022 - asset/(liability)		1,709,358		1,441		(1,998,219)	(287,420)

 

In May 2021 an increase in the main corporation tax rate to 25% was enacted, and has been applied to the deferred tax provisions and assets shown above.

 

15      Property, Plant and Equipment

 

				Plant and machinery			Fixtures & office equipment		Right-of-use assets		Total
					£		£		£		£
Cost
At 1 October 2020					1,071,740		393,059		6,110,998		7,575,797
Additions					325,007		33,139		3,020,493		3,378,639
Disposals					(49,245)		-		-		(49,245)
At 30 September 2021					1,347,502		426,198		9,131,491		10,905,191
Additions					67,710		160,475		6,474,034		6,702,219
Disposals					(438,917)		-		-		(438,917)
At 30 September 2022					976,295		586,673		15,605,525		17,168,493
Depreciation
At 1 October 2020					296,068		231,966		434,037		962,071
Charge					92,648		33,632		598,564		724,844
Disposals					(17,947)		-		-		(17,947)
At 30 September 2021					370,769		265,598		1,032,601		1,668,968
Charge					85,724		60,748		887,599		1,034,071
Disposals					(176,944)		-		-		(176,944)
At 30 September 2022					279,508		326,346		1,920,241		2,526,095
Net book value
At 30 September 2022					696,787		260,327		13,685,284		14,642,398
At 30 September 2021					976,733		160,600		8,098,890		9,236,223
At 30 September 2020					775,672		161,093		5,676,961		6,613,726

 

Certain right-of-use assets are pledged as security on the lease agreements to which they relate.

 

16      Assets at fair value through profit or loss

			2022
			£
At 1 October 2020			309,566
Change in fair value			(38,116)
At 30 September 2021			271,450
Change in fair value			691
Disposal			(272,141)
At 30 September 2022			-

 

The asset above comprised 6kg of gold bars held by the Company and were disposed of in April 2022. Whilst gold bars were not strictly speaking a financial asset, given their nature as an investment with high liquidity and readily ascertainable value, the Directors developed an accounting policy in accordance with the guidance in IAS 8 to treat them as a financial asset at fair value through profit or loss.

 

The fair value of the gold bars were based on 'Level 1' inputs as the fair value is readily available from market sources.

 

17      Trade and other receivables

 

				As at 30 September 2022		As at 30 September  2021
Amounts falling due within one year:				£		£
Trade receivables				9,395,331		4,132,819
Other receivables				812,251		343,742
Contract assets				6,739,637		3,362,862
Prepayments				959,738		452,804
				17,906,957		8,292,227

 

Trade and other receivables and contract assets above are stated net of expected credit loss ('ECL') provisions where necessary, which are calculated using the simplified approach grouping trade receivables and contract assets on the basis of their shared credit risk characteristics.

Trade receivables are regularly reviewed for bad and doubtful debts. The Company's policy is to include a provision for impairment based on estimated credit losses. This includes an assessment where relevant of forward-looking information on macroeconomic factors that may affect the ability of customers to settle receivables. Trade receivables are written off where there is no reasonable expectation or recovery, for example where the customer has entered insolvency proceedings or where a customer has failed to make contractual payments for an extended period. As part of this assessment, the Company also considers the likelihood of any credit losses occurring in future based on previous experience and knowledge of the respective customers.

Trade and other receivables are all current and any fair value difference is not material. Trade and other receivables are assessed for impairment based upon the expected credit losses model. In order to manage credit risk, the Directors set limits for customers based on a combination of payment history and third party credit references. Credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history.

At 30 September 2021 an amount of £600,930 was included as an ECL provision. This was in respect of a single customer, which had gone into administration, and was considered by the Directors to be an exceptional event. It was therefore excluded when considering any further provision required under the expected credit loss model. The company believe the credit risk attached to its customer base is minimal, as such have taken the ECL percentage as nil.

In addition to any provisions required for ECL, the Company also includes a provision against trade receivables and contract assets for disputed items. During the year ended 30 September 2022 the Company recorded a credit to the income statement of £17,377 in respect of changes in the dispute provision.

As at 30 September 2022 the balance of the dispute provision was £41,289 (2021 : £148,753).

 

The maturity analysis of trade receivables is:

 

		< 1 month		1-2 months		2-3 months		> 3 months		Total
		£		£		£		£		£
30 September 2022		4,920,487		1,013,039		1,509,228		1,993,866		9,436,620
30 September 2021		2,616,935		1,318,166		528,436		418,965		4,882,502

 

The expected credit loss rate on all ageing columns above is 0%.

 

18      Trade and other payables

 

				As at 30 September 2022		As at 30 September 2021
Amounts falling due within one year:				£		£
Trade payables				2,257,614		1,307,541
Social security and other taxes				2,353,042		1,503,300
Other payables				2,216,235		1,423,852
Accrued expenses				178,211		285,840
				7,005,102		4,520,533

 

Trade payables are all current and any fair value difference is not material.

 

19      Provisions

 

				2022		2021
				£		£
At 1 October				259,537		143,312
Additional provision for year				45,414		116,225
At 30 September				304,951		259,537

 

The Directors have identified a potential underpayment of National Insurance contributions in respect of payments made to subcontractors. Following extensive professional consultation and advice, the Directors considered the roles for all subcontractors provided by the Company. Whilst the Directors consider that many of the roles were outside the scope of the Agency legislation, there were several that were potentially considered within the scope of the rules. 

 

The Company has commenced the process of voluntary disclosure to HM Revenue & Customs in this regard. The provision of £304,951 (2021 : £259,357), based on those roles that the Directors deemed were inside the scope of the Agency legislation, was recognised as at 30 September 2022, although the timing of any resulting payment and the quantum thereof, currently remains uncertain.  The directors have not provided for a penalty which may be between 0% and 30% of any liability arising from the disclosure, on the basis that they are making a voluntary disclosure to HM Revenue & Customs.  The Directors have used their best estimate based on the advice provided and their analysis of the potential underpayments.

 

The provision stated above is subject to uncertainty in both amount and timing of cash flows due to the fact that the Company has submitted voluntary disclosure to HM Revenue & Customs but is yet to receive any substantive response. It is possible that, following the voluntary disclosure exercise, HM Revenue & Customs may challenge that more of the roles should be caught by the Agency rules and therefore the final liability may be higher. The amounts stated above are, in the Directors opinion, reflective of the best estimate and are confident of having a robust position to defend their judgements to which the Company is exposed.

20      Loans and borrowings

 

				As at 30 September 2022		As at 30 September 2021
				£		£
Included within current liabilities
Bank loans				6,528,750		3,139,463

 

The bank loan is secured by guarantees from the Company's major shareholder, Hercules Real Estate Limited. The loan is a revolving facility with a rolling 12 month notice period, is secured on trade receivables and attracts interest at a rate of 2.25% over base rate. The facility is currently capped at £10m, but can be increased as the business grows.

21      Leases

 

The Company leases properties and certain items of plant and machinery. With the exception of short-term leases and leases of low value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset (Note 15) and a lease liability.

 

The Company had recognised 4 property leases in 2022 (2021 - 2), 65 vehicle leases (2021 - 16) and 17 plant and machinery leases (2021 - 7).

 

All future cashflows are included. The property leases are subject to rent reviews every five years. The nature of the rent reviews is such that annual rentals are adjusted to prevailing market rates, unless that would lead to a reduction. In accordance with IFRS 16, any future increases in annual rentals arising from rent reviews are not included in the calculation of the lease liabilities. Any future increases in annual rentals will result in prospective adjustments to the lease liabilities at the point of the rent review.

 

Amounts recognised in the Statement of Financial Position relating to leases, categorised by underlying type of asset, are:

 

		Leasehold property £		Plant and machinery £		Motor vehicles £		Total   £
Net book value
At 1 October 2020		4,460,009		1,079,068		137,884		5,676,961
New leases recognised in the year		-		2,920,076		100,417		3,020,493
Depreciation charge for the year		(228,662)		(286,083)		(83,819)		(598,564)
At 30 September 2021		4,231,347		3,713,061		154,482		8,098,890
New leases recognised in the year		1,251,157		3,840,541		1,382,337		6,474,035
Depreciation charge for the year		(234,968)		(444,072)		(208,559)		(887,599)
At 30 September 2022		5,247,536		7,109,530		1,328,260		13,685,326

 

 

Maturity analysis

				2022		2021
				£		£
Due within one year				2,483,527		1,042,939
Due within two to five years				7,045,096		3,377,289
Due after five years				5,784,982		4,581,294
Future finance charges				(2,382,359)		(1,455,537)
				12,931,257		7,545,985

 

 

 

Amounts recognised in the Statement of Comprehensive Income

 

The statement of comprehensive income shows the following amounts relating to leases:

 

						2022		2021
						£		£
Depreciation charge of right of use asset						887,599		598,564
Interest expenses (within finance costs)						317,848		215,278
						1,205,447		813,842

 

Amounts recognised in the Statement of Cash Flows

 

The statement of cash flows shows the following amounts relating to leases:

						2022			2021
						£			£
Cash outflows						1,406,611			1,282,403

 

Low value leases and short-term leases

 

The Company has no leases for which the low value or short-term exemptions of IFRS 16 has been applied.

22      Financial instruments

				As at 30 September 2022		As at 30 September  2021
Financial assets held at amortised cost:				£		£
Trade receivables				9,395,331		4,132,819
Other receivables				812,251		343,742
Cash and cash equivalents				1,211,554		974,148
				11,904,503		5,450,709

 

				As at 30 September 2022		As at 30 September 2021
Assets held at fair value through profit or loss:						£
Gold bars				-		271,450

 

				As at 30 September 2022		As at 30 September  2021
Financial liabilities held at amortised cost:				£		£
Bank borrowings				6,528,750		3,139,463
Trade payables				2,742,981		1,307,541
Other payables				2,216,235		1,423,852
Accrued expenses				178,211		285,840
Lease liabilities				12,931,257		7,545,985
				24,597,434		13,702,781

 

23      Financial Risk management

 

The Company uses various financial instruments. These primarily include bank borrowings, cash and various items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to finance the Company's operations.

The existence of these financial instruments exposes the Company to a number of financial risks, which are described in more detail below.

a)   Market risk

 

Market risk encompasses three types of risk, being currency risk, interest rate risk and price risk. The Company was previously exposed to price risk on the value of its gold bars. These were purchased by the Company some years ago as a long-term investment with the expectation of future capital appreciation and were not actively managed. The gold bars were disposed of in the year and there is therefore no longer any exposure in this respect.

Exposure to interest rate risk is considered further below. There is no exposure to currency risk as the Company operates entirely with the United Kingdom and all transactions are denominated in Pounds Sterling.

b)   Liquidity risk

The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs by closely managing its cash balance. The Company has significant levels of cash reserves available and continues to generate profit before taxation (the loss after taxation in the year was due to a large deferred tax charge on the reversal of a previously recognised asset). In this context, liquidity risk is therefore considered to be low.

The Company's borrowing facilities are continually monitored against forecast requirements and timely action is taken to put in place, renew or replace credit lines. The Company acquires items of property, plant and equipment on lease agreements where appropriate to assist in managing liquidity risk by avoiding the depletion of cash on large capital purchases. The Company also manages its liquidity needs by carefully monitoring cash outflows due on a day-to-day basis.

The Company's financial liabilities comprise bank borrowings, trade payables, other payables, accruals, amounts due to related parties and lease liabilities. The maturity of lease liabilities is disclosed in note 21 above. All other financial liabilities are expected to be settled within 12 months of the balance sheet date.

c)   Interest rate risk

Interest rate risk is limited to interest paid on the Company's variable rate bank borrowings and interest received on cash deposits. Due to the relatively low level of borrowings and the low rates of interest on cash deposits, the impact of any changes in interest rate is not considered significant.

d)   Credit risk

The Company's principal financial assets are cash and trade receivables. Credit risk is also attached to contract assets that represent accrued income. The credit risk associated with cash is limited, as the counterparties have high credit ratings assigned by international credit-rating agencies. The credit risk associated with trade receivables is minimal as invoices are based on contractual agreements with long-standing customers. Credit losses historically incurred by the Company have consequently been immaterial, other than a single bad debt incurred in the year ended 30 September 2021 of approximately £600,000 that the directors consider to be exceptional. This arose due to the unexpected business failure of a major customer.

Notwithstanding the lack of historical credit losses, the Company maintains a credit note provision against receivables. However, this is not necessarily linked to credit risk and the ageing of receivables is not the most relevant indicator to determine the potential impairment of a receivable. The nature of the Company's operations is such that misunderstandings or minor disagreements may arise during the course of contracts, which may sometimes require an adjustment to be made to achieve settlement.

The Company's provision is broadly on the basis of any receivables that remain outstanding after 6 months. The Company had no material individual receivables past due or impaired at 30 September 2022 or 30 September 2021, other than the exceptional amount referred to above.

Further details regarding expected credit losses can be found in note 17.

Capital management

The Company's capital comprises total equity and net debt. The Company's capital management objectives are:

-     To ensure its ability to trade as a going concern; and

-     To provide an adequate return to shareholders.

The Company monitors capital based on the carrying amount of equity and net debt. Adjustments are made as necessary based on the Directors' assessment of the needs of the business and external factors such as the Company's industry and the wider economy. The Company has traded profitably and therefore generally levels of debt have been low. More recently a revolving credit facility has been utilised to assist with working capital, and debt has also been increased by the leasing of a number of capital items, particularly suction excavators which are expected to be a significant future source of income and profitability.

 

Therefore, whilst the Company appears to be relatively highly geared, this is in line with the Directors' strategy to grow the business. The Company also raised further equity after the balance sheet date following its successful flotation on the Alternative Investment Market.

The Directors are able to maintain and adjust the capital structure by adjusting dividends, issuing new shares or selling assets to reduce debt.

A summary of the Company's gearing is shown below.

 

				30 September 2022		30 September 2021
						£
Total equity				6,838,092		3,436,950
Net debt				18,248,453		9,711,300
Total capital				25,086,545		13,148,250
Gearing ratio (net debt / capital)				73%		74%

 

24      Share capital

 

 

Issued capital
				As at 30 September 2022		As at 30 September  2021
Allotted, called up and fully paid				Number		Number
Ordinary shares of 0.1p each (2021 : £1 each)				58,650,206		50,000
				As at 30 September 2022		As at 30 September  2021
Allotted, called up and fully paid				£		£
Ordinary shares of 0.1p each (2021 : £1 each)				58,650		50,000

 

Share rights

The ordinary shares have attached to them full voting, dividend and capital distribution rights (including on winding up). They do not confer any right of redemption.

Share redesignation and issues

On 20 January 2022, the 50,000 existing shares of £1 each were subdivided into 50,000,000 shares of 0.1p each.

On 4 February 2022, following the Company's successful admission to the AIM Market, the Company issued 8,650,206 ordinary shares of 0.1p each for total consideration of £4,368,354.

 

25      Share based payments

As part of its flotation on the AIM Market of the London Stock Exchange on 4 February 2022, the Company issued a number of share options and warrants to key employees and suppliers. No further options were granted during the year.

The number of options and warrants granted is shown in the table below.

 

		Options		Warrants
		Number	Weighted average exercise price	Number	Weighted average exercise price
At 1 October 2021		-	-	-	-
Issued on 4 February 2022		2,932,504	50.5p	716,379	50.5p
At 30 September 2022		2,932,504	50.5p	716,379	50.5p

 

Options

The weighted average remaining contractual life of the share options outstanding at 30 September 2022 was 6 years and 4 months. The options have a fixed exercise price based on the market price at the time of grant.

The options may be exercised between 4 February 2027 and 3 February 2029. No specific criteria is involved other than to be on the payroll for the period up to the start of the expected life of the options (see below).Any option holder leaving the employment of the Company before then forfeits the options. The issue of these options is not part of the remuneration package for the individuals concerned.

The fair value of the options is estimated at the grant date using a Black-Scholes option-pricing model that uses assumptions noted in the table below. All options were granted on 4 February 2022 and were valued using the following assumptions:

 

Expected life of options (years)				6 years
Exercise price				50.5p
Market value of share at date of grant				50.5p
Risk free rate				1.43%
Expected share price volatility				20%
Expected dividend yield				3.36%
Fair value per option				5.18p

 

 

 

Expected life of options

The expected life of the options was estimated based on the average of the minimum and maximum life under the option agreements of 5 and 7 years respectively.

Risk-free rate

A risk free rate of 1.43% was assumed in the option pricing model, based on the yield from dividend strip government bonds with a similar life to the options issued as close as possible to date of grant.

Dividend yield

This is based on the level of dividends paid by the Company in the year.

Exercise price

The exercise price was fixed at the market price at the date of grant, being 50.5p.

Volatility

Volatility was assumed to be 20% on average. The directors based this assumption on the share price of the Company throughout the year. The Directors consider this the most appropriate method of assessing expected volatility as there is no comparable listed company from which to draw data. Taking into account factors such as liquidity and performance, this is expected to be a reasonable reflection of the expected volatility throughout the expected life of the options.

The cost that has been charged to profit and loss in respect of share options was £16,199. The charge was included in staff costs. The total fair value of the options was calculated as £121,489, which is being spread over the vesting period of 5 years.

Warrants

The weighted average remaining contractual life of the warrants outstanding at 30 September 2022 was 2 years and 4 months. The options have a fixed exercise price based on the market price at the time of grant.

The warrants may be exercised at any time from the date of grant (31 January 2022) to 31 January 2025 at the option of the warrant holder.

The fair value of the warrants is estimated at the grant date using a Black-Scholes option-pricing model that uses assumptions noted in the table below. All options were granted on 4 February 2022 and were valued using the following assumptions:

 

Expected life of warrants (years)				3 years
Exercise price				50.5p
Market value of share at date of grant				50.5p
Risk free rate				1.43%
Expected share price volatility				20%
Expected dividend yield				3.36%
Fair value per option				4.11p

 

Expected life of warrants

The estimate for the expected life of the warrants is based on the warrant's contractual life.

Risk-free rate

A risk free rate of 1.43% was assumed in the option pricing model, based on the yield from dividend strip government bonds with a similar life to the options issued as close as possible to date of grant.

Dividend yield

This is based on the level of dividends paid by the Company in the year.

Exercise price

The exercise price was fixed at the market price at the date of grant, being 50.5p.

Volatility

Volatility was assumed to be 20% on average. The directors based this assumption on the share price of the Company throughout the year. Taking into account factors such as liquidity and performance, this is expected to be a reasonable reflection of the expected volatility throughout the expected life of the options.

The cost that has been charged to profit and loss in respect of share options was £23,575. The charge was included within administrative expenses. The warrants vested immediately, therefore this charge represents the full calculated fair value of the instruments and no further charge to profit and loss will be required.

26      Defined contribution pension scheme

The Company operates a defined contribution pension scheme. The pension cost charge for the year represented contributions payable by the Company to the scheme and amounted to £265,586 (2021 - £178,891). Contributions totalling £5,766 (2021 - £1,336) were payable to the scheme at the end of the year and are included in other payables.

27      Related party transactions

 

Ultimate controlling party

During the historical financial period, the Company was controlled by B K Korkmaz and Mrs N Korkmaz by virtue of their shareholding in the parent undertaking, Hercules Real Estate Limited.

 

Key management personnel compensation

Key management personnel remuneration has been set out in note 11 to the financial statements.  

Transactions with parent entity

The following transactions occurred with the Company's ultimate controlling party, Hercules Real Estate Limited:

			2022		2021
			£		£
Rental payments			379,156		313,562
Provision of building services (income)			-		(257,831)

 

 

Outstanding balances arising from sales/purchases of goods and services

There were no outstanding balances due to or from relation parties at 30 September 2022 or 30 September 2021.

 

28      Capital commitments

 

At 30 September 2022, the Company had orders committed on the lease purchase of suction excavators to a value of £6,506,472 (2021 : £4,785,000).

29      Post Balance Sheet Events

 

Following the Company's admission to the AIM Market, the Board is pleased to propose a final dividend of 1.12 pence per share for the year ended 30 September 2022. Hercules Real Estate Limited, the Company's 71.7% shareholder, has again waived its entitlement to this payment. The dividend will be paid on 24 March 2023 to shareholders on the register at close of business on 23 February 2023. The shares will go ex-dividend on 24 February 2023.