Final Results

RNS Number : 7546J
Mountfield Group plc
17 June 2014
 



Mountfield Group Plc

 

("Mountfield", the "Group" or the "Company")

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

 

Mountfield, the AIM listed construction company specializing in building and refurbishing data centres, is pleased to announce its final results for the year ended 31 December 2013.

 

Contacts:

 

Mountfield Group Plc

01268 561 516

Graham Read, Chief Executive Officer




WH Ireland Limited (Nominated adviser)

0207 220 1666

Chris Fielding, Head of Corporate Finance


 

 

CHAIRMAN'S REPORT

 

Group Highlights

 

I am delighted to be able to report that, having returned to profit in 2012, the Group's turnaround gathered real momentum in 2013 and the Board is optimistic that the improvement is sustainable.

 

The Group's strong performance was reflected in the substantial improvement in net profitability of £765,339 against £218,505 in 2012, an increase of 350%. That this was coupled with a reduction in revenue from £13.6m in 2012 to £12.3m (9.6%) reflected the ability of the Group to be more selective in the contracts that it took on and also delayed starts on a few contracts. As a result the Group achieved an operating margin of 6.9%, an improvement from the 1.4% achieved in 2012. Earnings per share increased from 0.04p in 2012 to 0.22p in 2013.

 

Trade receivables rose by £1.02m, trade and other payables increased by £1.11m. Cash generated from operations was £979k and cash flow improved by £972k.

 

Although the Board has indicated that, as a medium term objective, it wishes to begin paying dividends to shareholders, it will not be recommending the payment of a dividend this year as it is mindful of the demands on cash flow that will be made by an increase in the Group's trading at this stage.

 

The Group's recovery is the result of the hard work and expertise of the Group's Directors, senior management and staff. On behalf of the Board I would like to record our thanks to all of them.

 

The Board's confidence as to the Group's prospects is based upon the extent to which demand for construction services has recovered so strongly after the period during which the work that was available was usually offered at low or even negative margins. It is difficult to pinpoint the time when the change in demand became noticeable but with the benefit of hindsight we can see that the boost in business sentiment that accompanied the London Olympics in 2012 was transformed into a sense of confidence that has re-invigorated the construction sector as well as many other areas of business.

 

These increased levels of activity enabled the Group to produce a trading profit in 2012 after three years of losses and those profits were further increased in 2013 as investors and developers decided that the recovery had a secure base. This has been further evidenced during the first part of 2014 by a level of new business enquiries and invitations to tender in both of our divisions that has not been seen by the Board since the middle of 2008. The Board regards this as being a longer lasting improvement in sentiment and confidence.

 

 

CEO's REPORT

 

Summary of results for 2013

 

§ Turnover: £12.312m. (2012: £13.557m)

 

§ Operating profit: £844,512. (2012: 189,217)

 

§ Operating margin: 6.9% (2012: 1.4%)

 

§ PBT: £765,339. (2012: £218,505)

 

§ EBITDA: £862,554. (2012: £207,133)

 

§ Earnings per share: 0.22p (2012: 0.04p)

 

§ Net cashflow: £972,224. (2013 (£459,012))

 

In October 2008 the Directors of Mountfield arranged for the Company's shares to be listed on AIM, at a time when demand for construction services was high and prospects for future growth and profitability were extremely good. Although the Group's revenue exceeded £20m for that year with a net profit of £2m, the recession began within weeks of the listing and the Board's strategy for growth had to be abandoned.

 

Over the last 18 months and as a result of the substantial recovery both in the Group's performance and in the wider economy the Directors have revisited that strategy, have modified it to take account of changes that have occurred in the construction market and, as I describe below, have now begun to implement it for the Group.

 

The Group Board is currently comprised of:

 

Peter Jay - Executive Chairman - in addition to being Group Chairman Peter also manages Mountfield's relationships with its nomad, brokers and professional advisers.  Peter was formerly a corporate lawyer and a partner in DAC Beachcroft.

 

Graham Read - Group Chief Executive - Graham founded the business of Mountfield Building Group in 1986 and has had over 20 years experience in the design, project management and construction of data centres.

 

Andrew Collins - Executive Operations Director - Andrew is responsible for Connaught, a specialist supplier and installer of raised access flooring for data centres and offices. Before joining the Group, Andrew was a divisional finance director at ISG Plc.

 

Adrian Sainsbury - Non-Executive Director - Adrian (who joined the Board on 17 April 2014) is CEO of the Commercial Division of Close Brothers and prior to that worked for a number of leading banks in various capacities.

 

The Board is supported by the Chief Financial Officer, Conor O'Mahony, who has had extensive experience in the construction industry. Conor is responsible for overseeing the accounting and financial functions of the Group and attends all meetings of the Board.

 

 Mountfield Group Companies

 

The Group is comprised of three separate trading companies, Mountfield Building Group Limited ("Mountfield"), MBG Construction Limited ("Mountfield Construction") and Connaught Access Flooring Limited ("Connaught")

 

Mountfield carries out work as a main contractor with end user clients and has since 1996, specialised in the installation of data centres on a nationwide basis. Over the past 18 years Mountfield has successfully completed

more than forty data centres throughout the UK for clients including Vodafone, Cable and Wireless, Energis, Planet Online, ARK Continuity, DataCity Exchange, Level 3 Communications, Kingston Telecom and Colt Communications.

 

In addition to performing data centre works Mountfield is also active in both building fabric repair and maintenance works on a nationwide basis for a large proportion of the property portfolio of a leading telecoms operator.

Using the benefit of its experience, the Company has also offered a specialist service in fitting out and refurbishment projects for selected clients and also partner architects and building consultants; this new emphasis has resulted in a substantial increase in opportunities and contracts for Mountfield in this area, and this has been a noticeable factor in the first half of 2014.

Mountfield Construction undertakes trade contracting contracts for the UK's leading fitting out and refurbishment contractors, such as ISG, Balfour Beatty, Mansell and Bouygues. It also provides its own management and labour resources and offers trade packages, usually on a design and build basis, to meet demanding programmes on complex buildings projects, such as those relating to the alteration and refurbishment of office blocks, pharmaceutical/industrial premises and the fast track installation of schools during restricted close down periods.

Mountfield Construction also provides the labour and management for data centre projects carried out by Mountfield and supplements and supports it in its main contracting role.

Particular features of the year for the Mountfield companies were the successful completion of two large data centre projects in Birmingham and Farnborough and the winning of a large construction contract on a high profile building in Central London.

The business of Connaught, a provider of access flooring solutions to main contractors and corporate end users has, since it was acquired by the Group in 2004, supplied and installed in excess of 8 million square feet of flooring to commercial offices and data centre installations. It specializes in and has developed a strong reputation for providing and installing raised access flooring solutions designed to accommodate varying depths of floor void and finish specifications.

The increased confidence in the construction sector since 2012 has not only seen the rebirth of the fit out market, but also the return of the two-stage tender process which plays to Connaught's strengths as it enables the Company to present its professionalism and credentials and compete on quality of service, expertise and experience, rather than simply on price.

Efforts made to source work from new areas are proving successful and new relationships, particularly in the transport and leisure sectors are providing a regular stream of business, with work being gained at both Heathrow and Gatwick Airports.

A particular feature of 2013 for Connaught, was the contract won for the provision of raised access flooring at a substantial new data centre that was being constructed in Scandinavia. As a result of the success of this project for Connaught it is seeking similar overseas based data centre flooring contracts.

In 2013 Connaught also successfully completed flooring installations for two significant data centre installations for Mace and ISG Plc, respectively. 

In addition, Connaught has established itself as one of the few recognised specialists for the flooring elements of fitting out contracts in commercial office space for new build and refurbishment projects for corporate end users such as BP, HP, Linklaters, Merrill Lynch, Reed Smith, BBC, Standard Chartered Bank, UBS, Henderson Global, Lockton, Multiplex and Unilever. Currently Connaught in engaged on the installation of 40,000m2 of Flooring in a major new headquarters that is being built in the City of London.

Finance

 

The Group is financed from the cash it generates from its operations, with the support of a bank overdraft facility of £600,000. To help finance the rapid expansion of business activity as the recession came to an end the Group raised £450,000 in July 2013 through a share placing to EIS funds and professional investors.

 

The construction market

 

The recession that began at the end of 2008 had an immediate and dramatic impact on the Group's turnover and profitability and it was not until late 2012 that the Group noticed the first signs of recovery and an increase in construction demand.

 

The Group is now experiencing levels of activity in terms of work in hand, enquiries and tenders last seen in the middle of 2008, and it is from this that the Directors have concluded that the activity levels will be sustained and that their optimism for the Group's future is well based. The Board believes that the time spent marketing and developing new business during the recession will result in the award of contracts in addition to those that are currently being negotiated.

 

The data centre market

 

The data centre construction market in the UK has experienced rapid growth in demand over the last 15 years. Although the requirement for additional major data centres has lessened, that has not reduced the overall demand for construction services for the data center market as continued expansion has created and will continue to create demand for enhancements and additions to existing structures and for smaller centres.

 

However, an important recent development in the data centre construction market has been the demand for new centres (often of a substantial size) in the Scandinavian countries where climatic conditions help reduce the otherwise significant costs of cooling the centres. Following the construction of a large centre in Finland (for which Connaught supplied and installed the raised access flooring), further centres are now being planned in other Scandinavian countries.

 

The increased emphasis that will be placed on expanding the capacity of, and upgrading, existing centres means that the prospects for the data centre sector in terms of demand for specialist construction services (including raised access flooring) remains extremely good for the medium to long term.

Group's strategy

 

The Board has worked over the last eighteen months to ensure that the Group's profitability is not predominantly dependent on the demand from the data centre sector, notwithstanding its long established presence and reputation in it. It is for this reason that it has sought to widen the scope of the Group's activities so that, whilst working to increase the amount of income that it obtains from the data centre market, the Board has been aiming to ensure that the Group has a strong presence in other areas where the services of a company that offers high quality construction services and project management skills are likely to be in demand. The Directors are pleased to report that the success of this aspect of the strategy is demonstrated by the fact that around half of the Group's revenue is now earned from non-data centre related activities.

 

The Board intends to continue to grow the Group into a highly profitable, mid-sized operation that provides specialised construction services in a number of diverse but related areas. The Group's reputation has been built on its ability to undertake and to manage specialist construction services to a high level of quality and to deliver the completed project to the client on time. This will remain at the core of its strategy.

 

Although the Group was hit hard by the recession, it survived it without lasting damage. It did however have to put the strategy that it had developed at the time of its listing in October 2008 on hold for four years. The Directors are now keen to see the Group's revenue and profits increase through organic growth and through carefully selected acquisitions.

 

Organic growth will come not only from the upturn in the marketplace and from repeat business opportunities from existing clients, but also from the strong relationships being made with developers and construction professionals that will in turn create further and new opportunities.

 

Growth by acquisition will come from incorporating into the Group, companies that either can be integrated into it to help provide a commercially attractive, broader contract solution or which increase the Group's offering in areas which it currently has a strong track record.

 

Future prospects

 

The Board is extremely optimistic about the Group's future. Its excellent reputation in both data centre construction and in the provision of specialist construction services (such as office fitting out and refurbishment) has resulted in it being a favoured choice on projects as a main contractor or as a trade contractor on larger contracts. It is therefore well placed to benefit from the evident upturn in the construction market.

 

The Directors believe that the demand that the Group is experiencing in terms of enquiries, invitations to tender and, most importantly, secured orders is not of a short term nature and they are hopeful that the rates of growth of its business will, for the reasons mentioned in this Report, increase substantially over the next few years.

 

DIRECTORS' REPORT

 

The directors present their annual report and audited financial statements for the year ended 31 December 2013.

                                               

Principal activities

The principal activities of the Group are the construction and fit-out of Data Centres for the IT industry together with office fit-out and refurbishment.

 

Review of business

A detailed review of the development of the business is contained in the Chairman's and Chief Executive's Statement.

 

Results

The Group made a pre-tax operating profit from continuing operations of £844,512 (2012: £189,217) for the year ended 31 December 2013 on turnover of £12,312,140 (2012: £13,556,918).

 

At 31 December 2012 the Group had net assets of £5,853,656 (2012: £4,920,311).

 

Dividends

The Directors do not propose payment of any dividends for the year ended 31 December 2013.

 

Principal risks                                     

The principal risks and uncertainties facing the Group relate to:

 

Attraction and retention of key employees

The Group's future success is substantially dependent on the continued services and performance of its directors, senior management and other key personnel and its ability to continue to attract and retain highly skilled and qualified personnel. 

 

The senior executive directors of the business all have significant shareholdings in the parent company and are all permanent employees. The other senior management and key personnel, most of whom have been with the Company for a long time, are participating  in the Company's share option scheme which was introduced in 2012.

 

Economic downturn and other macroeconomic factors

The Group's success is substantially dependent on the general level of economic activity and economic conditions in the United Kingdom.

 

Many of the Group's contracts, including renewals or extensions of previous contracts, are awarded through competitive bidding processes. Any downturn in the economy, or any other macroeconomic factor, either in the UK or globally, may reduce the number of contracts coming up for bidding.

 

The competitive bidding processes present a number of additional risks, including the incurring of substantial cost and managerial time to prepare bids and proposals for contracts that the Group may not ultimately win.  The Group may face additional competition in the bidding process either from existing competitors or new market entrants.

 

The Company is seeking to mitigate its exposure to the sectors in which it currently operates by diversifying its client base and in particular expanding into closely aligned areas of activity. It is also seeking to diversify by modest investment in new businesses in the same sector.

 

Reliance on key customers and clients

The business of the Group is dependent upon the continuing contracts that it has, and relationships that it has developed, with certain customers.

 

Whilst signed contracts are in place with key customers, the successful completion and timing of contracted projects are not guaranteed and are susceptible to external factors outside of the control of the Group. Similarly, contracted projects may in some circumstances be susceptible to delays or variation by customers or be affected by unforeseen changes in circumstances relating to the market, technology, legislation, economic or other business factors. This may affect the cashflow and subsequent performance of the Group.

 

Whilst continuing to work with a well established client base, the Group is seeking to diversify through identifying other potential clients for its core Data Centre work. It is also attempting to exploit its core competencies by building links with developers which require contractors with similar skills to work on non Data Centre related projects.

 

Reliance on Subcontractors

The Group utilises subcontractors on a project-by-project basis to meet contractual obligations. Such projects will rely on the subcontractors performing their duties and obligations, not only in terms of timely delivery but also in terms of their performance obligations. Any such non-performance may result in time and cost over-runs on the Group's projects and reduce the value of its returns.

 

Subcontractors are vetted by senior management and normally engaged to work on closely defined and managed aspects of contracts. Most subcontractors have a long standing trading history with the Group.

 

Health and safety

The Group undertakes Construction activities, often working within difficult conditions and with heavy machinery which if improperly used could result in personal injury or in extreme cases, fatalities.

 

The Group takes the health and safety of its employees and clients very seriously and employs Health and Safety advisors on all significant contracts. It also has a firm of Health and Safety Advisors with whom it consults on a regular basis.

 

Key performance indicators

The Directors use a number of performance indicators which are used to manage the business but, as with most businesses the focus in the Statement of Comprehensive Income at the top level is on sales, margins, staff numbers and overheads compared to budget and the prior year. In the Statement of Financial Position the focus is on managing working capital.

 

Financial instruments

Details of the Group's financial risk management objectives and policies are included in note 19 to the financial statements.

 

Directors

The Directors who served during the year were:

                                   

P H Jay            

G J Read          

A J Collins        

T Spanner (resigned 1 August 2013)       

 

Charitable Donations

During the year the Group made charitable donations totalling £2,643 (2012: £1,642)

 

 

Substantial Shareholdings

So far as the Directors are aware the parties who are directly or indirectly interested in 3% or more of the nominal value of the company's share capital at 13 June 2014 are as follows:

 

Number of shares issued

% Ordinary share capital

Peter Jay

23,500,000

9.2%

Graham Read

84,203,031

33.2%

Andy Collins

32,300,000

12.7%

Commerzbank AG

 15,964,019

6.28%

 

Creditor payment policy

The Group's current policy concerning the payment of trade creditors is to:

a)  settle the terms of payment with suppliers when agreeing the terms of each transaction;

b)  ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and

c)  pay in accordance with the Group's contractual and other legal obligations.

 

At the year end trade creditors represented 108 days' expenses.

 

Going Concern

The Directors have prepared and reviewed financial forecasts and the cash flow requirements to meet the Group and the Company's financial objectives. The Directors are satisfied that, taking into account the current cash resources and facilities available to the business and its future cash requirements, it is appropriate to prepare accounts on a going concern basis.

 

Disclosure of information to auditors                                      

Each of the Directors who are in office at the date when this report is approved has confirmed that, as far as they are aware, there is no relevant audit information of which the auditors are unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the auditors are aware of such information.

 

 

Auditors

During the year Adler Shine LLP were appointed as auditors to the company. A resolution proposing the reappointment of Adler Shine LLP as auditors will be put to the members at the next Annual General Meeting.

                                               

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

                                                           





2013


2012



Note


 £


 £








 

 

Revenue


3


12,312,140


13,556,918








Cost of sales


4


(9,865,759)


(11,797,502)








Gross profit




2,446,381


1,759,416








Administrative expenses


5


(1,601,869)


(1,570,199)








Operating profit




844,512


189,217















Net finance (costs)/income


5


(79,173)


29,288








Profit before income tax




765,339


218,505








Income tax expense


6


(262,579)


 (135,554)








Profit/(loss) for the year and total comprehensive income




502,760


82,951

 

Earnings per share


7












 





Basic earnings per share


0.22p


0.04p

Diluted earnings per share      


0.18p


0.03p

 

 

 

There are no recognised gains and losses other than those passing through the Statement of Comprehensive Income.

 

As permitted by Section 408 of the Companies Act 2006, no separate Statement of Comprehensive Income is presented in respect of Mountfield Group Plc. Its profit for the year ended 31 December 2013 was £313,577 (2012: loss - £ 23,301).

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

 




2013


2012



Note


 £


 £

ASSETS







Non-current assets







Intangible assets


8


10,788,521


10,788,521

Property plant and equipment


9


114,384


116,432

Deferred income tax assets


16


428,756


599,986





11,331,661


11,504,939

Current assets







Inventories


10


80,489


82,005

Trade and other receivables


11


3,243,910


2,228,480

Cash and cash equivalents


12


313,675


223,337





3,638,074


2,533,822

TOTAL ASSETS




14,969,735


14,038,761








EQUITY AND LIABILITIES







Issued share capital


13


254,244


216,744

Share premium




1,490,682


1,120,432

Share based payments reserve




329,781


320,961

Capital redemption reserve




7,500


-

Merger reserve




12,951,180


12,951,180

Reverse acquisition reserve




(2,856,756)


    (2,856,756)

Retained earnings




(6,322,975)


    (6,832,250)

TOTAL EQUITY




5,853,656


4,920,311








Current liabilities







Trade and other payables


14


4,557,389


3,442,863

Short-term borrowings


15


1,087,665


1,934,147

Finance lease liabilities


15


6,917


8,496

Income tax




91,350


6,691





5,743,321


5,392,197

Non-current liabilities







Loan notes


15


3,363,029


3,718,921

Finance lease liabilities


15


9,729


7,332

Provision for deferred taxation


16




-





9,116,079


9,118,450








TOTAL EQUITY AND LIABILITIES




14,969,735


14,038,761








The financial statements were approved by the board on 16 June 2014

 

 

Graham Read                                                                                     

Director

 

 

COMPANY REGISTRATION NO. 06374598

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2013

                                                                                                                                                                       





2013


2012

 



Note


 £


 £

 

Cash flows from operating activities







 

Operating profit




844,512


189,217

 

Adjusted for:







 

Depreciation




18,042


17,916

 

Loss on disposal of property, plant and equipment




-


3,606

 

Share-based payment charge




15,335


26,939

 

Decrease/(increase) in inventories




1,517


          (6,438)

 

(Increase)/decrease  in trade and other receivables




(1,015,430)


64,144

 

Increase/(decrease) in trade and other payables




1,114,529


      (218,465)

 








 

Cash generated in operations




978,505


        76,919

 








 

Finance costs




(86,393)


25,407

 

Finance income




7,220


3,881

 

Taxation paid




(6,692)


-

 








 

Net cash inflow from operating activities




892,640


        106,207

 








 

Cash flows from investing activities







 

Purchases of property, plant and equipment




(15,994)


        (12,864)

 

Proceeds from sale of fixed assets




-


2,500

 








 

Net cash used in investing activities




(15,994)


       (10,364)

 








 

Cash flows from financing activities







 

Proceeds from issue of shares




450,000


-

 

Costs of shares issued




(34,750)


-

 

Finance lease rentals




816


           (7,963)

 

Repayment of non-convertible loan notes




(351,392)


       (346,892)

 

Proceeds/(repayment) from short-term loans




30,904


        (200,000)

 

Net cash flows generated from/(used in) financing activities




95,578


       (554,855)


Net cash increase/(decrease) in cash and cash equivalents




972,224


       (459,012)

 








 

Cash and cash equivalents brought forward




(758,218)


       (299,206)

 








 

Cash and cash equivalents carried forward


12


214,006


       (758,218)

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

                                                                                                                                                                       


Share capital


Share premium


Share based payment reserve


Capital redemption  reserve


Merger reserve


Reverse acquisition reserve


Retained earnings


Total


 £


 £


 £


 £


 £


 £


 £


 £

















At 1 January 2012

         216,744


         1,120,432


         294,022


         -


   12,951,180


(2,856,756)


(6,915,201)


   4,810,421

Total comprehensive income for the year

                    -  


                    -  


                    -  


                    -  


- 


                    -  


82,951


82,951

Movement in year

                    -  


-


                    26,939  


                    -  


                    -  


                    -  


                    -  


26,939

At 31 December 2012

         216,744


         1,120,432


         320,961


         -


   12,951,180


(2,856,756)


(6,832,250)


   4,920,311

















Total comprehensive income for the year

                    -  


                    -  


                    -  


                    -  


                    -  


                    -  


502,760


502,760

Shares issued in period

45,000


405,000


-


-


-


-


-


450,000

Cost of shares issued

-


(34,750)


-


-


-


-


-


(34,750)

Shares cancelled in period

(7,500)


-


-


7,500


-


-


-


-

Share based payment charge

-


-


15,335


-


-


-


-


15,335

Cancelled share options

                    -  


-


                    (6,515)  


                    -  


                    -  


                    -  


                    6,515  


-

















At 31 December 2013

         254,244


     1,490,682


         329,781


         7,500


   12,951,180


(2,856,756)


(6,322,975)


     5,853,656

 

Merger Reserve

 

The merger reserve exists as a result of the acquisitions of Mountfield Building Group Limited, MBG Construction Limited, Connaught Access Flooring Holdings Limited and Mountfield Land Limited where the consideration included the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006. The merger reserve represents the difference between the nominal value of the share capital issued by the Company and the fair value of those shares at the date of acquisition.

 

Reverse Acquisition Reserve

 

The reverse acquisition reserve exists as a result of the method of accounting for the acquisition of Mountfield Building Group Limited and MBG Construction Ltd (note 1.4).

 

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

 

1          Accounting policies                                                                

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.

 

1.1        General information                                                               

Mountfield Group plc is a company incorporated in England and Wales. The registered number of the Company is 06374598. The address of its registered office is 3C Sopwith Crescent, Wickford Business Park, Wickford, Essex SS11 8YU.

                                                                        

1.2        IFRS compliance and adoption

 

Statement of compliance with IFRS

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRIC Interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

The adoption of these standards has not resulted in any changes to the Group's accounting policies and has not affected amounts reported in prior years.

 

The financial statements have been prepared under the historical cost.

 

Sources of estimation uncertainty

The preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis and any revision to estimates or assumptions are recognised in the period in which they are revised and in future periods affected.

 

Significant judgements

The material areas in which estimates and judgements are applied are as follows:

 

Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires the Company to estimate future cashflows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £10.8 million. Details regarding the goodwill carrying value and assumptions used in carrying out the impairment reviews are provided in note 8.

 

Receivables

The Group reviews the net recoverable value of its accounts receivables on a periodic basis to provide assurance that recorded accounts receivables are stated net of any required provision for impairment. Factors that could impact recoverability include the financial propriety of customers and related economic trends. Changes in these factors that differ from managements estimates can result in an adjustment to the carrying value and amounts charged to income in specific periods. More details on gross balances and provisions made are included in note 11.

 

Accounting for construction contracts

In accordance with IAS 11 "Construction Contracts", management is required to estimate total expected contract costs and the percentage of contract completion in determining the appropriate revenue and profit to recognise in the period. The Group uses the work of expert professional Chartered Surveyors to determine accurately the level of work that has been completed by the year-end. The Group also has appropriate control procedures to ensure that all estimates are determined on a consistent basis and are subject to appropriate review and authorisation.

 

Share-based payments

The estimates of share-based payments costs require that management selects an appropriate valuation model and makes decisions on various inputs into the model, including the volatility of its own share price, the probable life of the options before exercise and behavioural consideration of employees.

 

Deferred taxation

The Group provides for deferred taxation using the liability method. Deferred tax assets are recognised in respect of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium term plans for each taxable entity within the Group. If the actual profits earned by the Group's taxable entities differ from the budgets and forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.

 

Presentation and functional currency

The financial statements are presented in pounds sterling, which is the Group's functional currency.

 

1.3        Standards and interpretations

At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:


Effective date (period beginning on or after)

IFRS 2,3,8, IAS 16,24,36

Amendments resulting from Annual Improvements 2010-2012 Cycle

1 July 2014

IFRS 3,13, IAS 40

Amendments resulting from Annual Improvements 2011-2013 Cycle

1 July 2014

IFRS 7

Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures

1 January 2015

IFRS 9

Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures

1 January 2015

IFRS 10

Amendments for investment entities

1 January 2014

IFRS 11

Amendments regarding the accounting of acquisition of an interest in a joint operation

 

 January 2016

IFRS 12

Amendments for investment entities

1 January 2014

IAS 16,36

Amendments regarding the classification of acceptable methods of depreciation and amortisation

 

1 January 2016

IAS 19

Employee Benefits - Amended to clarify the requirements that relate to how contributions from employees or third parties that re linked to service should be attributed to periods of service

1 July 2014

IAS 27

Amendments for investment entities

1 January 2014

IAS 32

Financial Instruments: Presentation - Amendments  to application guidance on the offsetting of financial assets and financial liabilities

1 January 2014

IAS 36

Amendments arising from recoverable amount disclosures for non-financial assets

 

1 January 2014

IAS 39

Financial Instruments: Recognition and Measurement- Amendments for novation of derivatives

1 January 2014

IFRIC 21

Levies

1 January 2014

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group's financial statements.

1.4        Basis of consolidation

Subsidiaries

The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. Subsidiaries include all entities over which the Group has the power to govern financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group transactions are eliminated in preparing the Consolidated Financial Statements.

 

A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 2 to the Company's separate financial statements.

 

Business combinations and goodwill

On 16 October 2008, Mountfield Group plc ("the Company") acquired the entire issued share capital of Mountfield Building Group Limited, which has one wholly owned subsidiary, MBG Construction Limited (the "MBG Group") acquired in August 2008. The consideration of £7,622,000 was satisfied by the issue of 51,220,000 Ordinary Shares of 0.1p each at a price of 10p per share and by the issue of £2,500,000 unsecured non-convertible loan notes.

 

As a result of these transactions, the former shareholders of MBG Group became the majority shareholders in the Company. Accordingly, the substance of the transaction was that MBG Group acquired the Company in a reverse acquisition.

 

Under IFRS 3 'Business Combinations', the acquisition of MBG Group has been accounted for as a reverse acquisition.

 

The acquisitions of Connaught Access Flooring Limited, MBG Construction Limited and Mountfield Land Limited are accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree plus any costs directly attributable to the business combination.

 

Goodwill

Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets and contingent liabilities acquired. Identifiable assets are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but tested annually for impairment or when trigger events occur, and is carried at cost less accumulated impairment losses.

 

1.5        Revenue recognition

Revenue is stated exclusive of VAT and consists of sales of services to third parties.

 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Retentions are recognised throughout the life of a contract and are deducted from the sales invoice.

 

Revenue relating to contracts includes the amount initially agreed in the contract plus any variations in contract work to the extent that it is probable they will result in revenue and can be reliably measured. As soon as the outcome of the contract can be measured reliably, revenue and expense is recognised in the statement of comprehensive income on a stage of completion basis. The stage of completion is determined by reference to a survey of work performed. Any losses are recognised immediately in the statement of comprehensive income as soon as they are foreseen.

 

 

1.6        Contract work in progress

Revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the percentage of contract costs incurred for work performed to date to the estimated total contract costs or the proportion of the value of work done to the total value of work under the contract, except where these would not be representative of the stage of completion. Full provision is made for all known or expected losses on individual contracts immediately once such losses are foreseen.

           

1.7        Amounts recoverable on long term contracts

Profit on long term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the year end, by recording turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs incurred to date bear to total expected costs for that contract. Revenues derived from variations on contracts are recognised only when they have been accepted by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen. Amounts which are recoverable on long-term contracts are shown within debtors under the heading 'Amounts Recoverable on Contracts' which have not yet been invoiced and are stated net of discounts allowed.

 

1.8        Share-based payments

The Group makes equity-settled share-based payments to its employees and directors. The fair value of options and warrants granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options and warrants granted is measured based on the Black-Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the Company revises its estimate of the number of options and warrants that are expected to become exercisable.

 

1.9        Retirement benefits: Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the statement of comprehensive income in the year to which they relate.

 

1.10      Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

           

1.11      Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation.

 

Property, plant and equipment is depreciated over the estimated useful life of the asset, as follows:

                       

Freehold land                                         Not depreciated

Freehold buildings                                  2% per annum straight line

Leasehold improvements                        Over the period of the lease

Fixtures, fittings and equipment               10% per annum reducing balance

Plant and equipment                              20% - 25% per annum straight line

Motor vehicles                                       20% - 25% per annum straight line

 

 

1.12      Leasing

A lease is classified as a finance lease if it transfers substantially all the risks and rewards of ownership. All other leases are classified as operating leases. Classification is made at the inception of the lease.

 

Assets obtained under finance leases are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such arrangements are included in payables net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the statement of comprehensive income so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

           

Rentals paid under operating leases are charged to the statement of comprehensive income as incurred on a straight line basis over the lease term.

 

1.13      Inventories

Inventories are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving items. Cost includes direct materials, direct labour and those overheads that have been incurred in bringing the inventory to its present location and condition.

 

1.14      Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

The financial instruments, which excludes current receivables and payables, comprise cash or overdraft and unsecured non-convertible loan notes. The Directors consider the fair value not to be materially different to the carrying value for the financial instruments. During the years under review, the Group did not enter into derivative transactions and did not undertake trading in any financial instruments.

           

1.15      Trade and other receivables

Trade receivables are recognised at fair value less any provision for impairment. A provision for impairment is made when collection of the full amount is no longer probable. Bad debts are written off when identified. The fair value of trade and other receivables are equivalent to their book values as set out in the financial information.

 

1.16      Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand, demand deposits and other short-term highly liquid investments that is readily convertible to a known amount of cash and is subject to an insignificant risk of change in value.

 

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents net of outstanding bank overdrafts.

           

1.17      Financial liabilities and equity

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

 

1.18      Share capital

The Company has one class of ordinary share, which carries no rights to fixed income. All ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

 

Ordinary shares issued by the Company are classified as equity and recorded at fair value on initial recognition received, net of direct issue costs.

           

 

1.19      Trade and other payables

Trade payables are initially recognised at fair value and subsequently at amortised cost. The fair value of the trade and other payables are equivalent to their book values as set out in the financial information.

 

1.20      Taxation

The taxation charge represents the sum of current tax and deferred tax.

 

The current tax charge is based on the taxable profit/loss for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

 

Deferred tax is provided using the liability method, in respect of temporary differences between the carrying amount of the assets and liabilities and their tax base. Deferred tax is recognised in the statement of comprehensive income, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity.

 

Deferred tax assets are recognised only when it can be regarded as probable that there will be suitable taxable profits in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

 

2          Segmental reporting

Segment information is presented in respect of the Group's business segments, which are based on the Group's management and internal reporting structure as at 31 December 2013.

 

The chief operating decision-maker has been identified as the Board of Directors (the Board). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports and on the internal report's structure.

 

Segment performance is evaluated by the Board based on revenue and profit before tax (PBT). Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, such as centrally managed costs relating to individual segments and costs relating to land used in more than one individual segment.

 

Given that income taxes and certain corporate costs are managed on a centralized basis, these items are not allocated between operating segments for the purposes of the information presented to the Board and are accordingly omitted from the analysis below.

 

The Group comprises the following segments:

 

Construction

Direct contracting and trade contracting services to both main contractors and corporate end users.

 

Fit-out

Providing raised flooring systems to both main contractors and corporate end users.

 

Segmental operating performance                                                    




2013


2012




 Revenue


Profit /(loss) before tax


 Revenue


Profit  /(loss) before tax














£'000


£'000


 £'000


£'000











Construction



6,681


(15)


9,916


 (8)

Fit-out



5,791


  365


3,736


            198




12,472


350


13,652


            190

Inter-segmental revenue and unallocated



(160)


415


             (95)


              29




12,312


765


13,557


             219

 

Business segments assets and liabilities



2013


2012




 Assets


 Liabilities


 Assets


 Liabilities














£'000


£'000


 £'000


 £'000











Construction



2,388


4,195


2,078


4,337

Fit-out



1,764


1,059


1,072


632














4,152


5,254


3,150


4,969

Goodwill - Construction



5,914


-


5,914


-

Goodwill - Fit-out



4,874


-


4,874


-

Other unallocated assets & liabilities



30


3,862


101


4,149




14,970


9,116


14,039


9,118

                                               

Unallocated assets consist of deferred tax, trade and other receivables and cash held by the Parent Company. Unallocated liabilities consist of trade and other payables and interest bearing loans owed by the Parent Company.

 

Other segment information

2013


2012


£'000


£'000

Depreciation included in segment results








Construction

8


10

Fit-out

10


8


18


18

 

Revenue by geographical destination

Revenue is attributable to the United Kingdom and other EU markets.

 

Total assets including property, plant and equipment and intangible assets are all held in the United Kingdom.

 

 

 

 

3          Construction contracts                                                            







2013


2012







 £


 £

Contract revenue recognised in relation to construction contracts in the year and retentions






12,312,140


13,556,918










For contracts in progress at the balance sheet date:









Aggregate cost incurred to date






7,405,951


4,570,953

Recognised profit to date






2,397,783


763,417

Retentions due






310,427


165,661

 

Major customers

 

Total group revenue to four customers all relating to construction and fit-out, totalled £8,358,158, split as follows:

 

Construction

2013


2012


 £


 £

Customer 1

2,916,021


5,115,977

Customer 2

1,140,600


1,210,000


4,056,620


6,325,977

 

Fit-out

2013


2012


 £


 £

Customer 1

3,608,997


2,186,586

Customer 2

692,541


151,459


4,301,538


2,338,045

 

4          Cost of sales

2013


2012


 £


 £

Direct costs

9,865,759


11,797,502

Adjustment to amount receivable on long term contracts

-


-

Total cost of sales

9,865,759


11,797,502

 

5           Other income and expenses






2013


2012







 £


 £

Finance income/(expense)









Loan interest






(16,000)


    (114,662)

Interest on finance leases






(1,888)


          (527)

Loan note interest (interest waived by loan note holders)






-


      189,774

Other interest






(21,381)


     (20,598)

Bank interest






(47,124)


     (28,580)

Interest paid






      (86,393)   


25,407










Finance income









Bank interest received






-


                  -

Other interest received






7,220


          3,881










Net finance (costs)/income






(79,173)


        29,288

 

 









Administrative expenses include:






2013


2012







 £


 £










Depreciation of property, plant and equipment









- owned by the Group






13,474


11,146

- held under finance leases






4,568


6,770

Operating lease rentals - other






48,997


56,605

Auditors remuneration









Fees payable to the company's auditor for the audits of the parent company, consolidated financial statements and the subsidiaries






35,000


40,000

           

Average number of employees                                                               

The average number of employees (including executive Directors) was:                                          

 






2013


2012







 No.


 No.










Administration






8


8

Cost of sales






22


23

Management






11


11
















41


42

 

  Wages and salaries






2013


2012







 £


 £










Wages and salaries






1,561,007


1,661,404

Social security costs






177,666


184,529

Post employment benefits






53,100


53,100
















1,791,773


1,899,033

           

Key management personnel compensation                                                                                                            






2013


2012







 £


 £










Short-term employee benefits






16,437


16,165

Post-employment benefits






53,100


53,100
















69,537


69,265

 

Directors' remuneration                                                              









2013


2012



 Salaries and fees


 Benefits in kind


Post employment benefit


Total


Total



 £


 £


 £


 £


 £












G Read


-


2,233


53,100


55,333


     55,415

A Collins


6,475


7,729


-


14,204


     13,850

P Jay


30,500


-


-


30,500


     24,000

T Spanner


-


-


-


-


              22,500  



36,975


9,962


53,100


100,037


   115,765

                                          

The remuneration as disclosed for G Read includes £17,400 (2012: £17,400) of pension contributions paid for his wife, J Read. The number of Directors for whom retirement benefits are accruing under money purchase pension schemes was 1 (2012:1)

 

 

 

6          Income tax expense   

           




2013


2012





£


 £

Current tax







UK corporation tax




91,350


6,691








Total current tax




91,350


6,691








Deferred tax







Deferred tax debit/(credit) - continuing operations




171,229


128,863

Income tax expense/(credit)




262,579


135,554








Factors affecting tax charge







Profit before income tax -continuing operations



765,339


218,505








Profit before income tax multiplied by effective rate of UK corporation tax of 23.25% (2012: 24.5%)




177,963


53,533

Effects of:







Expenses not deductible for tax purposes




24,991


25,347

Depreciation for period in excess of capital allowances




(597)


457

Tax losses not utilised and carried forward




(111,007)


      (76,492)

Other adjustments




-


3,846

Current tax charge




91,350


6,691

 

 

It has been announced that the UK tax rate will reduce by 1% per annum for each of the next 3 years to 20% for the tax year commencing 1st April 2015. The impact of these reductions will be reflected if the relevant legislation is enacted.

 

 

7          Earnings per share                 

                                                           

The basic earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average number of shares in issue. The diluted earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average number of shares in issue plus the number of warrants and share options. 

                                                                                   







2013


2012

Basic earnings per share






            £


           £

Profit for the financial year






502,760


82,951

Weighted average number of shares






231,169,112


216,744,454

 

 






2013


2012

Diluted earnings per share






            £


           £

Profit for the financial year






502,760


82,951

Number of shares






272,669,106


260,694,447










           

8          Intangible assets

The carrying amount of goodwill relates to the construction and fit-out segments of the business.








Goodwill









     £

Cost









At 1 January 2012








   10,788,521

Additions








                -  

At 31 December 2012








   10,788,521

Additions








                -  

At 31 December 2013








   10,788,521




























Impairment of goodwill                                                                                                          

Goodwill has been allocated for impairment testing to two groups of cash - generating units ('CGU') identified according to operating segments being Construction and Fit-out as disclosed in Note 2.

 

For the purposes of impairment testing of goodwill the carrying value of the CGUs (including goodwill) are compared to the recoverable amount of the CGUs and any deficits are provided. The carrying value of the CGUs includes only those assets that can be attributed directly, or allocated on a reasonable and consistent basis.

 

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on three year financial budgets approved by management. Cash flows beyond the three year period are extrapolated using the estimated growth rates stated below.

 

The key assumptions used in the value-in-use calculations for each CGU are as follows:

 

•           Terminal value based on between 2% future growth in cash flows

•           Discount rate of 7.37%

 

Revenue was based upon actual amounts measured in prior periods which were projected forward in accordance with expected trends.

 

A provision has been made against the Goodwill of Fit-out CGU. Although, the business continues to deliver significant profits, forecast growth has been reduced to reflect current market conditions, thereby reducing projected future cash flows.

 

9          Property, plant and equipment



Freehold and leasehold


Fixtures and fittings


 Plant and equipment


 Motor vehicles


Total



 £


 £


 £


 £


 £

Cost











At 1 January 2012


      183,418


      44,540


       61,896


      

        90,271


      380,125

Additions


               -  


          1,249


              6,620


               4,995  


          12,864

Disposals


               -  


-


                (25,056)  


(28,999)


(54,055)












At 31 December 2012


      183,418


      45,789


      43,460


         66,267


      338,934

Additions


          -


                         1,916


           468


         13,610


        15,994

Written back on disposals


               -  


-


-


(16,312)


(16,312)












At 31 December 2013


      183,418


        47,705


         43,928


         63,565


      338,616












Depreciation











At 1 January 2012


      123,356


      30,513


         36,897


         61,769


      252,535

Charge for the year


        1,657


        6,176


           2,459


        7,624


        17,916

Written back on disposals


               -  


-


                (18,950)  


(28,999)


(47,949)












At 31 December 2012


      125,013


      36,689


         20,406


         40,394


      222,502

Charge for the year


1,657           


        4,984


           2,337


         9,064


        18,042

Written back on disposals


               -  


-


-


(16,312)


(16,312)












At 31 December 2013


      126,670


        41,673


         22,743


         33,146


      224,232












Net book value











At 31 December 2013


        56,748


        6,032


         21,185


         30,419


      114,384












At 31 December 2012


        58,406


        9,099


         23,055


         25,872


      116,432

 

The net book value of property, plant and equipment includes an amount of £16,425 (2012: £20,309) in respect of assets held under finance leases.

 

The net book value of freehold and leasehold property includes an amount of £5,749 (2012: £6,806) in respect of leasehold improvements to a property leased by Connaught Access Flooring Limited.

 

 

10         Inventories                                                                              





2013


2012





 £


 £








Materials and finished goods




80,489       


        82,005

                                                                                                           

The amount of inventories recognised as expense during the year was £82,005 (2012 - £75,567).

 

 

11         Trade and other receivables





2013


2012





 £


 £

Trade receivables




622,159


595,993

Less: Provision for impairment of trade receivable




(12,000)


      (12,000)





610,159


583,993

Contract retentions




569,235


320,589

Other receivables




140,464


138,947

Prepayments




51,064


82,655

Amounts recoverable on long term contracts




1,872,988


1,102,296








Total trade and other receivables




3,243,910


2,228,480 








                                                                                   

Based on prior experience and an assessment of the current economic environment, management believes there is no further credit risk provision required in excess of the normal provision for impairment of trade receivables.

 

The average credit period taken on sales is 20 days. No interest is charged on overdue receivables. There is no material difference between the fair value of receivables and their book value.

 

Amounts recoverable on long-term contracts are stated net of discounts allowed of £9,567 (2012: £6,741).

The movement in the provision for impairment of trade receivables is as follows:




2013


2012





 £


 £








Balance at 1 January




12,000


        8,000

Charge/(credit) to the statement of comprehensive income




-


        4,000








Balance at 31 December




12,000


      12,000

 

 

The Group's trade and other receivables that were past due date but not impaired relate to a number of individual customers for whom there is no reason to believe that the debt is not recoverable. The ageing of these trade receivables and contract retentions is as follows:




2013


2012





 £


 £

Trade receivables







Three to six months




3,870


582

Six to nine months




2,443


-

Nine to twelve months




330


-

More than twelve months




15,582


15,000





22,225


15,582

Contract retentions







Three to six months




22,726


10,380

Six to nine months




4,383


21,935

Nine to twelve months




5,046


28,159

More than twelve months




94,150


22,606





126,305


83,080

12         Cash and cash equivalents




2013


2012





 £


 £








Cash at bank and in hand




313,675


223,337    

 

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.

 

At the balance sheet date the Group had a bank overdraft facility of £600,000 with Barclays Bank Plc, secured by a fixed charge over the book debts and property of the Group and a floating charge over all other assets of the Group and directors' limited guarantees for up to £600,000.

 

For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 December 2013:                                                           





2013


2012





 £


 £








Cash at bank and in hand




313,675


 223,337

Bank overdraft




(99,669)


  (981,555)





214,006


(758,218)

 

 

13         Share capital              





2013


2012





 Number


 £


 Number


 £












Allotted, called up and fully paid











Ordinary shares of 0.1p each




254,244,454


254,244


 216,744,454


      216,744

 

 

 

 

On 29 July 2013 the company issued 45,000,000 ordinary shares of 0.1p each at 1p per share. On 5 July 2013 the company cancelled 7,500,000 ordinary shares at 0.1p.

 

 

Warrants                     

Details of the warrants outstanding during the period are as follows:

           








Weighted average remaining contractual life (years)


 Number


 Weighted average exercise price












              £













At 1 January 2012









10,000,000


           0.07

Granted







-


                -  


               -  

Lapsed







-


                -  


               -  













At 31 December 2012







2.8


10,000,000


           0.07

 

Granted







-


                -  


               -  

Lapsed







-


                -  


               -  













At 31 December 2013







1.8


10,000,000


           0.07

           

 

As at 31 December 2013 the warrants outstanding were exercisable as follows:

 

Date of grant




 Exercise date




 Number


 Price











                               £












27 October 2008




 30 October 2009 and 29 October 2014




            4,000,000


           0.10

27 October 2008




 30 October 2009 and 29 October 2014




   6,000,000


           0.15




















 10,000,000



 

At the date of issue, the warrants were valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows:

           

           




Exercise price 10p


Exercise price 5p

Expected volatility




50.6%


50.6%

Expected life




3.5 years


3.5 years

Risk free interest rate




2.93%


2.93%

Expected dividend yield




-


-

Possibility of ceasing employment before vesting




-


-

Fair value per option




3.0p


4.0p

           

The charge to the statement of comprehensive income for share based payments during the year ended 31 December 2013 was £nil (2012: £nil).

 

Share Options

 

At 31 December 2013, outstanding awards to subscribe for ordinary shares of 0.10p each in the Company granted in accordance with the rules of the Mountfield EMI share option scheme were as follows:

 

 

Number


Weighted average remaining contractual life (years)


Weighted average exercise price (pence)







Brought forward

33,949,993


3.43


2.96







Granted

4,000,000





Cancelled

(6,449,999)











Carried forward

31,499,994


2.61


 

The fair value of the remaining share options has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:

 

Grant Date

22 May 2012

11 June 2012

10 Dec 2013

17 Dec 2013






Exercise period

May 2013 -  May 2016    

June 2013 -   June 2016

Dec 2014- Dec 2017

Dec 2014 - Dec  2017






Share price at date of grant

1.5p

1.5p

2.7p

2.5p






Exercise price

3.0p

3.0p

3.0p

3.0p






Shares under option

16,666,663

10,833,331

2,000,000

2,000,000






Expected volatility

57%

57%

70%

70%






Expected life (years)

2.5

2.5

2.5

2.5






Risk free rate

1.02%

1.02%

1.02%

1.02%






Expected dividend yield

0%

0%

0%

0%






Fair value per option

0.13p

0.13p

0.65p

0.56p






 

Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of monthly share prices over a 3 year period to grant date. All of the above options are equity settled and the charge for the year is £15,335 (2012: £26,939).

 

14         Trade and other payables (current)                                        

           




2013


2012





 £


 £








Trade payables




3,059,705


2,225,176

Other payables




43,704


44,415

Accruals




927,721


523,529

Other taxes and social security costs




526,259


649,743





4,557,389


3,442,863

                                                                                               

The average credit taken for trade purchases is 108 days. The directors consider that the carrying amount of trade payables approximate their fair value.

 

 

15         Borrowings                                                                             

           




2013


2012





 £


 £

Current







Bank overdrafts




99,669


981,555

Net obligations under finance leases




6,917


8,496

Short-term unsecured loan




-


175,000

Short-term unsecured loan from Director




636,604


430,700

Unsecured non-convertible loan notes




351,392


346,892





1,094,582


1,942,643

                                                                       

Non - current







Unsecured non-convertible loan notes




3,363,029


3,718,921

Net obligations under finance leases




9,729


7,332





3,372,758


3,726,253








Total borrowings




4,467,340


5,668,896

On 16 October 2008 the Company issued £2,500,000 unsecured non-convertible loan notes to the vendors of Mountfield Building Group Limited and £3,000,000 unsecured non-convertible loan notes to the vendors of Connaught Access Flooring Holdings Limited as part of the consideration for the acquisition of the entire share capital of each company. Repayments of £351,392 (2012: £346,892) were made against the loan notes in the period.

                                                                                   

The loan notes are non-transferrable and carry interest at a rate of 2 per cent above the base rate of Barclays Bank plc per annum. The non-current portion of the unsecured loan notes is redeemable on 30 June 2016. The current portion of the unsecured loan notes is due for repayment during 2014.

 

During the year, interest of £97,010 on the loan notes was waived.

 

The short-term unsecured loan from a Director accrues interest at 6% pa but all interest to 31 December 2013 was waived.

 

 




2013


2012





 £


 £

Non-current borrowings







Analysis







Repayable between one and two years




351,392


346,892

Repayable between two and five years




3,011,637


3,372,029





3,363,029


3,718,921

                                                                       

 




2013


2012





 £


 £

Net obligations under finance leases







Analysis







Repayable within one year




6,917


8,496

Repayable between one and five years




9,729


7,332





16,646


15,828

Included in current liabilities




(6,917)


   (8,496)





9,729


7,332

 

16         Deferred taxation




2013


2012





 £


 £








Deferred tax analysis:







Deferred tax losses




(428,756)


(599,986)

Deferred tax expense relating to origination and reversal of temporary differences




-


-





(428,756)


(599,986)

                       

 




2013


2012





 £


 £

Movement in deferred tax during the year







At 1 January 2012




(599,986)


     (728,849)

Debit for the year




171,230


     128,863

At 31 December 2012




(428,756)


     (599,986)








Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the tax benefit through future taxable profits is probable.

 

17         Capital commitments

There were no capital commitments at the year-end date.

           

 

18         Operating lease commitments

Commitments under non-cancellable operating leases in respect of property expiring:

           









2013


2012





 £


 £

Less than one year




4,400


4,400

Between two and five years




36,159


37,568





40,559


41,968

 

 

19         Financial instruments

 

Capital risk management

The Group manages its capital to ensure its ability to continue as a going concern and to maintain an optimal capital structure to reduce cost of capital. The capital structure of the Group comprises equity attributable to equity holders of the Company consisting of issued ordinary share capital, reserves and retained earnings as disclosed in Consolidated Statement of Changes in Equity and cash and cash equivalents as disclosed in Note 12.

 

The Group maintains or adjusts its capital structure through the payment of dividends to shareholders, issue of new shares and buy-back of existing shares.

           

Categories of financial instruments

                                                                                                                       





2013


2012





 £


 £

Financial assets







Loans and receivables at amortised cost including cash and cash equivalents:







Cash and cash equivalents




313,675


223,337

Trade and other receivables




3,243,910


2,228,480

Total




3,557,585


2,451,817

Financial liabilities







Trade and other payables




5,285,343


4,055,254

Unsecured non-convertible loan notes




3,714,421


4,065,813

Secured borrowings




116,315


997,383





9,116,079


9,118,450

Net




(5,558,494)


 (6,666,634)








 

Cash and cash equivalents

This comprises cash and short-term deposits held by the Group. The carrying amount of these assets approximates their fair value.

 

General risk management principles

The Group's activities expose it to a variety of risks including market risk (interest rate risk), credit risk and liquidity risk. The Group manages these risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on the Group's financial performance. The Directors have an overall responsibility for the establishment of the Group's risk management framework. A formal risk assessment and management framework for assessing, monitoring and managing the strategic operational and financial risks of the Group is in place to ensure appropriate risk management of its operations.

 

The following represent the key financial risks that the Group faces:

           

Market risk

The Group's activities expose it primarily to the financial risk of interest rates.

 

Interest rate risk

The Group's interest rate exposure arises mainly from its interest bearing borrowings. Contractual agreements entered into at floating rates expose the entity to cash flow risk. Interest rate risk also arises on the Group's cash and cash equivalents. The Group does not enter into derivative transactions in order to hedge against its exposure to interest rate fluctuations.

           

 

Credit risk

The Group's principal financial assets are trade and other receivables and bank balances and cash.

 

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

 

The Group's credit risk is primarily attributable to trade receivables. The Group has a policy of assessing credit worthiness of potential and existing customers before entering into transactions. There is ongoing credit evaluation on the financial condition of accounts receivable using independent ratings where available or by assessment of the customer's credit quality based on its financial position, past experience and other factors. The Group manages the collection of its receivables through its post completion project monitoring procedures and ongoing contract with customers so as to ensure that any potential issues that could result in non-payment of the amounts due are addressed as soon as identified.

 

The maximum exposure to credit risk in respect of the above at 31 December 2013 is the carrying value of financial assets recorded in the financial statements.

           

Liquidity risk

The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet the obligations of the Group as they fall due.

 

The Board receives regular forecasts which estimate cash flows over the next eighteen months, so that management can ensure that sufficient funding is in place as it is required.

           

Fair value of financial assets and liabilities

The Directors consider that there is no significant difference between the book value and fair value of the Group's financial assets and liabilities.

 

20         Pension costs

The Group operates a defined contribution pension scheme in respect of the directors and employees. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £53,100 (2012: £53,100).

           

21         Directors' guarantees

Andrew Collins and Graham Read have given a guarantee limited to £100,000 in respect of the overdraft facility for Connaught Access Flooring Limited. Graham Read, Peter Jay and Andrew Collins have given a guarantee limited to £600,000 in respect of the overdraft facility of Mountfield Building Group Limited.

           

22         Related party transactions

The Company made a loan of £395,227 (2012: £11,969) to Mountfield Building Group Limited, a subsidiary undertaking. The Company made sales of £273,655 (2012: £120,639) to Mountfield Building Group Limited. At 31 December 2013, £1,398,001 (2012: £1,743,655) was owed to Mountfield Building Group Limited in respect of these transactions and expenses of £323,228 (2012; £331,419) paid on behalf of the Company by Mountfield Building

Group Limited, net of £nil (2012: £nil) in respect of liabilities discharged by the Company on behalf of Mountfield Building Group Ltd.

 

During the year Connaught Access Flooring Limited, a subsidiary undertaking, paid expenses of £247,841 (2012: £291,001) on behalf of the Company. The Company made sales of £428,988 (2012: £98,705) to Connaught Access Flooring Limited. At 31 December 2013, £1,154,808 (2012: £1,335,955) was owed to Connaught Access Flooring Limited in respect of these transactions.

 

During the year the Company received advances totalling £450 (2012: £2,100) from MBG Construction Limited, a subsidiary undertaking. At 31 December 2013, the Company owed £34,200 (2012: £33,750) in respect of these transactions

 

As at 31 December 2013, balances remaining unpaid on the unsecured non-convertible loan notes to Graham Read and Andrew Collins amounted to £2,893,872 (2012: £3,083,372) and £820,549 (2012: £982,441) respectively. Interest for the year of £74,650 and £22,360 respectively has been waived and interest in respect of prior periods has also been waived.

 

During the year, Zeme Limited invoiced £30,500 (2012: £24,000) for the services of Peter Jay as a director of Mountfield Group Plc. As at 31 December 2013 £12,917, £ (2012: £4,000) was due to Zeme Limited.

           

During the year, the Group was invoiced £33,276 (2012: £33,275) for accountancy and bookkeeping services by Read & Co, a Chartered accountancy practice controlled by Graham Read's brother. The group made sales of £5,670 (2012: £nil) to them during the year. As at 31 December 2013 the balance owed by Read & Co was £3,678 (2012: £2,412 owed to them).

 

During the year the Group was advanced £205,904 by Graham Read (2012: £150,000). The balance outstanding at 31 December was £636,604 (2012: £430,700). Interest is chargeable at 6% per annum on this loan but has been waived for 2013.

 

During the year the Group repaid £175,000 to Seabrook Limited, a company controlled by a shareholder of the Company. Interest charged to the Consolidated Statement of Comprehensive Income was £16,000.

 

 

23         Control

In the opinion of the directors, Graham Read, director and shareholder, is the ultimate controlling party.

           

           

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

 

Company no. 06374598

                                                                                                           





2013


2012



Note


 £


 £

ASSETS







Non-current assets







Investments


2


13,021,629


13,021,629

Deferred income tax assets


8


17,383


119,075





13,039,012


 13,140,704

Current assets







Other receivables


3


13,038


55,593

Cash and cash equivalents


4


-


-





13,038


55,593

TOTAL ASSETS




13,052,050


   13,196,297








EQUITY AND LIABILITIES







Issued share capital


5


254,244


     216,744

Share premium




1,490,682


1,120,432

Share based payments reserve




329,781


320,961

Capital redemption reserve




7,500


-

Merger reserve




12,951,180


12,951,180

Retained losses




(8,411,299)


 (8,731,391)

TOTAL EQUITY




6,622,088


5,877,926








Current liabilities







Trade and other payables


6


2,711,966


3,250,454

Short-term borrowings


7


3,576


2,104

Loan notes


7


351,392


346,892

Income tax




-


-





3,066,934


3,599,450

Non-current liabilities







Loan notes


7


3,363,029


3,718,921





6,429,963


7,318,371








TOTAL EQUITY AND LIABILITIES




13,052,050


13,196,297








The financial statements were approved by the board on 16 June 2014

 

 

Graham Read

Director

 

 

 

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2013

 

 

                                                                                                                                                                       



       Notes       


2013


2012





         £


         £

Cash flows from operating activities







Operating profit




415,269


 28,609

Adjusted for:







Share-based payment charge




15,335


26,939

Decrease in trade and other receivables




42,553


50,930

Increase in trade and other payables




(12,136)


    (146,684)

Net cash inflow/(outflow) from operating activities




461,021


      (40,206)















Cash flows from financing activities







Proceeds from issue of shares




450,000


-

Cost of shares issued




(34,750)


-

Loans (repaid)/received from subsidiary undertakings




(526,351)


393,207

Repayment of non-convertible loan notes




(351,392)


    (346,892)

Net cash flows (used in)/generated from financing activities




(462,493)


      46,315

 

Net cash (decrease)/increase in cash and cash equivalents




(1,472)


      6,109








Cash and cash equivalents brought forward




(2,104)


        (8,213)








Cash and cash equivalents carried forward


4


(3,576)


       (2,104)

 

 

 

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

 

 Share capital


 Share premium


 Share based payment reserve


 Capital redemption reserve


 Merger reserve


 Retained earnings


 Total

 


 £


 £


 £


 £


 £


 £


 £

 















At 1 January 2012

     216,744


    1,120,432


    294,022


    -


12,951,180


(8,708,090)


5,874,288

Total comprehensive income for the year

                    -  


                            -  


                      -  


                      -  


-


(23,301)


(23,301)

 

Shares issued in period

-


-


-


-


-


-


-

 

Cost of shares issued

            -


                -


                      26,939   


                      -  


                      -  


                     -  


         26,939

 

At 31 December 2012

     216,744


    1,120,432


    320,961


  -


12,951,180


(8,731,391)


5,877,926

 















 

Total comprehensive income for the year

                     -  


                            -  


                      -  


                      -  


                      -  


313,577


313,577

 

Shares issued in period

           45,000


                405,000


                      -  


                      -  


                      -  


                     -  


        450,000

 

Shares cancelled in period

(7,500)


-


-


7,500


-


-


-

 

Cost of shares issued

-


(34,750)


-


-


-


-


(34,750)

 

Share based payment charge

-


-


15,335


-


-


-


15,335

 

Cancelled share options

                     -  


-


                      (6,515)  


                      -  


                      -  


                    6,515  


-

 















 

At 31 December 2013

         254,244


             1,490,682


           329,781


           7,500


     12,951,180


(8,411,299)


6,622,088   

 

 

Merger reserve

The merger reserve exists as a result of the acquisitions of Mountfield Building Group Limited, MBG Construction Limited, Connaught Access Flooring Holdings Limited and Mountfield Land Limited where the consideration included the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006. The merger reserve represents the difference between the nominal value of the share capital issued by the Company and the fair value of those shares at the date of acquisition.

 

 

NOTES TO THE COMPANY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

 

1          ACCOUNTING POLICIES                                                                     

The accounting policies of the Company are shown in the Consolidated Financial Statements.

 

1.1        Investment in subsidiaries

Investments in subsidiaries are stated at cost less any provision for impairment.

 

2          Investment in subsidiary undertakings

 

 

 








Shares in subsidiary undertakings

Cost








        £

At 1 January 2012








   19,365,817

Additions








-

At 31 December 2012








   19,365,817

Additions








                -  

At 31 December 2013








    19,365,817

 

Accumulated Impairment provisions









At 1 January 2012








6,344,188

Impairment provision








-

At 31 December 2012








6,344,188

Impairment provision








-

Balance at 31 December 2013








 6,344,188

 

Net book value









At 31 December 2013








   13,021,629

At 31 December 2012








 

13,021,629

                                   

The following companies are the principal subsidiary undertakings at 31 December 2013 and are all consolidated:

 

Subsidiary undertakings


Country of incorporation


Class of share


Percentage of shares held








Mountfield Building Group Limited


England and Wales


Ordinary


100%

MBG Construction Limited *


England and Wales


Ordinary


100%

Connaught Access Flooring Holdings Limited


England and Wales


Ordinary


100%

Connaught Access Flooring Limited **


England and Wales


Ordinary


100%

Mountfield Land Limited


England and Wales


Ordinary


100%

           

*  Interest held indirectly by Mountfield Building Group Limited.

** Interest held indirectly by Connaught Access Flooring Holdings Limited. 

           

  The principal activity of these undertakings for the last relevant financial year was as follows:

           

Subsidiary undertakings


Principal activity




Mountfield Building Group Limited


Refurbishment and fitting out contracting services

MBG Construction Limited


Construction and refurbishment contractors

Connaught Access Flooring Holdings Limited


Intermediate holding company

Connaught Access Flooring Limited


Specialist flooring contractor

Mountfield Land Limited


Dormant




 

 

The following was an associate of the group at the year end and its results for the year ended 31 May 2013 are shown below.

 

Associates


Country of incorporation


Class of share


Percentage of shares held








Hub (UK) Limited


England and Wales


Ordinary


20%

 

 

The principal activity of Hub (UK) Limited is general construction consultant and contractor.

 

Associates

           






Aggregate of capitalised reserves


  Loss for the Year    







 £


 £










Hub (UK) Limited






(27,086)


(15,377)










 

3          Trade and other receivables

 

 






2013


2012







 £


 £










Prepayments






13,088    


55,593

 

4          Cash and cash equivalents                                                     

 






2013


2012







 £


 £










Cash at bank






                -  


                 -  

 

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is £nil (2012: £nil).

           

For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 December 2013:

 

           






2013


2012







 £


 £










Bank overdraft






(3,576)


(2,104)










                                                                                                           

 

5          Share capital                                                                                      

 



2013


2012




 Number


 £


 Number


 £











Allotted, called up and fully paid










Ordinary shares of 0.1p each



254,244,454


        254,244


 216,744,354


      216,744

 

Details of changes in share capital are included at note 13 to the Consolidated Financial Statements.

 

6          Trade and other payables      

                                                           







2013


2012

 







 £


 £

 










 

Trade payables






78,400       


        96,260

 

Amounts owed to subsidiary undertakings





2,587,010  


  3,113,360

   0,153

Other payables






48,373


          39,137

 

Other tax and social security costs






(1,817)         


          1,697

 










 







2,711,966  


   3,250,454

 

 

7          Borrowings                                                                                         

           







2013


2012







 £


 £










Current liabilities









Bank overdraft






3,576


         2,104

Unsecured non-convertible loan notes






351,392


     346,892
















354,968


 348,996     










Non-current liabilities









Unsecured non-convertible loan notes






3,363,029


  3,718,921
















3,717,997


  4,067,917

 

Details of the loan notes are included at Note 15 to the Consolidated Financial Statements.

                       

8          Deferred taxation

                                                                                        






2013


2012







 £


 £

Deferred tax analysis:









Deferred tax losses






(17,383)


(119,075)










Movement in deferred tax during the year:









At 1 January 2013






(119,075)


(170,985)

Charge for the year






101,692


51,910










At 31 December 2013






(17,383)


(119,075)

 

 

9          Capital Commitments

There were no capital commitments at the year end.

           

10         Contingent liabilities

Under the terms of the Group's banking facilities, the Company has provided a cross guarantee to the Group's bankers. At the year end, the net balance in the Group's bank accounts in respect of the guarantee was £214,006 (2012: -£758,218).

 

11         Key management personnel compensation

Key management personnel expenses are disclosed in Note 5 to the Consolidated Financial Statements.

           

12         Directors' guarantees

Directors' benefits - advances, credits and guarantees are disclosed at Note 21 to the Consolidated Financial Statements.

           

13         Related party disclosures

Related party disclosures are detailed at Note 22 to the Consolidated Financial Statement.

 

14         Financial instruments

Details of key risks are included at Note 19 to the Consolidated Financial Statements.

 

Categories of financial instruments

                                               







2013


2012







 £


 £










Financial assets









Loans and receivables at amortised cost






13,038


      55,593
















13,038


      55,593










Financial liabilities









Trade and other payables






2,711,966


   3,250,454

Bank overdraft






3,576


          2,104

Unsecured non-convertible loan notes






3,714,421


   4,065,813
















6,429,963


7,318,371   







(6,416,925)


   (7,262,778)

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR EAXKKFSPLEFF

Companies

Hellenic Dynamics (HELD)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today