Final Results

RNS Number : 3761A
Mountfield Group plc
07 June 2016
 

                                               

           

 

Mountfield Group Plc

 

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

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

 

Mountfield, the AIM listed construction company is pleased to announce its Final Results for the year ended 31 December 2015.

 

The Final Results will be posted to the Company's website on: www.mountfieldgroupplc.com .

 

Contacts:

 

Mountfield Group Plc

01245 237 527

Andy Collins, Chief Executive Officer




WH Ireland Limited (Nominated adviser)

0207 220 1666

Chris Fielding, Head of Corporate Finance


 

 

 

 

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2015

 

CHAIRMAN'S REPORT

 

Key Features 

 

·    Group moves back into profit

 

·      Connaught has another strong year

 

·      MBG shows the benefits of the overhaul of its business.

 

·      Both businesses looking strong for 2016.

    

§ Turnover: £13.033m (2014: £11.802m)

 

§ Operating profit: £203,895 (2014: £74,385)

 

§ EBITDA: £218,314 (2014: £89,557)

 

§ PBT: £177,117 (2014: PBT (Excluding impairment) £50,244)

 

§ Earnings per share: 0.046p (2014: (1.53p))

 

 

2015 was a year of major positive change for Mountfield Group Plc ("Group"). Connaught Access Flooring Limited ("CAF") continued to perform extremely well and further strengthened its position among the small number of companies able to compete for the largest commercial flooring contracts. The significantly rationalised Mountfield Building Group Limited (including its subsidiary MBG Construction Limited) ("MBG") showed that it is on a sustainable and profitable path to recovery in 2016 and onwards.

 

The Group's operating profit was increased from £74,385 in 2014 to £203,895 in 2015 with CAF continuing to be the principal driver of the Group's revenue and profits (with a PBT of £467,428 against £240,885 in 2014) and continues to be a leader in its field.

 

MBG's transformation, which followed the extensive rationalisation that was completed in April 2015, into a construction company with a substantially reduced cost structure and a business strategy that limited its choice of contracts to those where consistent margins are paired with low risk. It is now trading profitably and has excellent prospects and it was only the effect of two legacy contracts that were taken on in 2013 and 2014 under the previous strategy that prevented it from recording a profit in 2015. Excluding these two legacy contracts MBG would have produced an operating profit of £400,285 in 2015.

 

So far in 2016 MBG and secured works totaling £3m and is involved in negotiations on a number of other works including those for its long standing client base.

 

The Group's highlight was clearly CAF's contract to supply and install 70,000 m2 of flooring at a new City of London HQ. The contract has proceeded well and is likely on completion to have produced revenue of £4m in 2015, with an additional £1.5m expected in 2016. In addition the Company has complimented the larger contracts by further developing its special works division, which produces strong margins. Combined with its core business CAF produced a turnover of £7.5m in 2015.

 

 

Outlook

 

The outlook for CAF continues to be strong into 2016/17 and based on the volume of high quality tenders for large commercial flooring contracts combined with expected developments into the supply and installation of new products associated with CAF's core activities, the Board believes that the prospects for CAF are increasingly bright for a number of years. 

 

Due to the significant progress made by the Group Companies in 2015 and to date the Board is satisfied that both will perform strongly during the remainder of 2016 and in 2017. CAF is already involved in negotiations of large scale flooring contracts and MBG is trading profitably since the restructuring of its business.

 

AGM Resolutions - Loan Notes

 

At the AGM it is proposed that resolutions that provide for the conversion of outstanding Loan Notes (originally issued in October 2008 to Andy Collins and Graham Read) into Founder Shares. These Founder Shares will not be quoted on any exchange or carry a right to vote or to receive a dividend. The shares will carry the right to receive, collectively the first £2.3m of the amount by which the consideration arising on a sale by shareholders in Group attributable to CAF and/or MBG exceeds £20m.

 

 

 

 

Peter Jay

Executive Chairman

 

 

CEO's REPORT

 

 

The Group Board is currently comprised of:

 

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

 

Andy Collins - Group Chief Executive - Andy is responsible for managing the business of the Group and also that of its subsidiary, CAF, a specialist supplier and installer of flooring for commercial properties whose business and reputation he has developed significantly since appointment in 2004. Before joining the Group, Andy was a Divisional Financial Director at ISG Plc.

 

Graham Read - Managing Director of MBG - Graham founded the business of MBG in 1986 and has had over 20 years' experience in the construction industry.

 

Adrian Sainsbury - Non-Executive Director - Adrian is a senior banker in the City of London and had previously worked for a number of leading banks in various capacities.

 

The Board is supported by Andy May, a partner in the firm of Barnes Roffe LLP. Andy attends meetings of the Group's Board and oversees its accounting and finance functions.

 

 Group Companies

 

The Group is comprised of two principal trading companies, MBG and CAF.

 

CAF is a leading supplier and installer of raised access flooring systems to main contractors and corporate end users for office and data centre installations.

It 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, Henderson Global, Lockton and Unilever.

 

The current optimism in the fit-out sector which extends into 2018 plays to CAF'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.

 

Following requests from clients, efforts are under way to extend the range and nature of the products that the Company supplies and installs to others used in the fit-out process.

 

MBG comprises the construction division of the Group and in addition to its extensive experience of undertaking work for the data centre sector MBG also undertakes specialist construction work for end used clients in areas such as property fabric repair and maintenance, property renovation, fit-out of office, retail and leisure premises and construction management services for clients including architectural practices.

 

In addition, MBG is retained to undertake building fabric repair and maintenance works on a nationwide basis for a large proportion of the property portfolio of a leading telecoms operator.

Finance

 

The Group is financed from the cash it generates from its operations, with the support of a bank overdraft facility of £600,000. Post year end it has been agreed that it will be replaced by a mixture of term loan and overdraft, totalling £450,000.

 

The construction market

 

The Group continues to experience extremely strong levels of activity in terms of enquiries and tenders and the Board is confident as to the strength and sustainability of the current strong demand for services provided by the Group.

 

Group's strategy

 

The Board strategy is for the Group to become a highly profitable, mid-sized operation that provides specialist construction and flooring services in a number of diverse but related areas but with a particular focus on the fit-out sector. 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.

 

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 cash flow and subsequent performance of the Group.

 

The Group works with a well-established client base and the performance of individual projects is monitored on at least a monthly basis by board members to identify any issues with specific 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. The key performance indicators are disclosed in the Strategic Report.

 

Financial instruments

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

 

 

 

 

Andrew Collins

Chief Executive Officer

 

 

DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2015

 

The directors present their annual report and audited financial statements for the year ended 31 December 2015.

                                               

Principal activities

The principal activities of the Group are the supply of fit-out services (and, in particular the supply and installation of flooring systems) to data centres, office, retail and other commercial premises and of specialist construction services including those related to property fabric repair 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, which are included in the Strategic Report.

 

Results

The Group made a pre-tax operating profit from continuing operations of £177,117 (2014: Loss £3,839,828) for the year ended 31 December 2015 on turnover of £13,033,039 (2014: £11,802,018).

 

At 31 December 2015 the Group had net assets of £2,103,583 (2014: £1,984,407).

 

Dividends

The Directors do not propose payment of any dividends for the year ended 31 December 2015.

 

 

Directors

The Directors who served during the year were:

                                   

P H Jay            

G J Read          

A J Collins        

A J Sainsbury

 

Charitable Donations

During the year the Group made charitable donations totaling £nil (2014: £5,510).

 

 

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 31 December 2015 are as follows:

 

Number of shares issued

% Ordinary share capital

Peter Jay

24,738,520

9.73%

Graham Read

84,374,654

33.19%

Andy Collins

32,300,000

12.70%




 

In addition, the directors are aware of the following nominee shareholdings as at 31 December 2015:

 

Number of shares issued

% Ordinary share capital

Barclayshare Nominees Limited

11,708,176

4.61%

Hargreaves Lansdown (Nominees) Limited

8,621,046

3.39%

HBSC Global Custody Nominee (UK) Limited

8,411,728

3.31%

 

 

 

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 86 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 auditor's 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 auditor's are aware of such information.

 

 

Auditors

A resolution proposing the re-appointing of Adler Shine LLP as auditor will be put to the members at the next Annual General Meeting.

                                               

On behalf of the Board

 

 

 

 

Andrew Collins

Director

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. The Directors have chosen to prepare the financial statements for the Group and the Company in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

International Accounting Standards requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's "Framework for the preparation and presentation of financial statements". In virtually all circumstances a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires directors to:

 

•           consistently select and apply appropriate accounting policies;

•           present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and

•           provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Website publication

 

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

 

 

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MOUNTFIELD GROUP PLC

We have audited the financial statements of Mountfield Group plc for the year ended 31 December 2015 which comprise the Group and Parent Company Statement of Financial Position, the Group Statement of Comprehensive Income, the Group and Parent Company Statements of Cash Flow, the Group and Parent Company Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page 9, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report and financial statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements 

In our opinion the financial statements:

•           give a true and fair view of the state of the Group's and the Parent Company's affairs as at 31 December 2015 and of the Group's profit for the year then ended;

•           have been properly prepared in accordance with IFRSs as adopted by the European Union; and

•           have been prepared in accordance with the requirements of the Companies Act 2006.

 

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the group Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•           adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

•           the Parent Company financial statements are not in agreement with the accounting records and returns; or

•           certain disclosures of  directors' remuneration specified by law are not made; or

•           we have not received all the information and explanations we require for our audit.

 

 

 

 

 

 

Christopher Taylor FCA (Senior statutory auditor)                                            

for and on behalf of Adler Shine LLP                                                  Aston House, Cornwall Avenue

Chartered Accountants                                                                        London N3 1LF

Statutory Auditor                                                                                

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

                                                           





2015


2014

 



Note


 £


 £

 








 

 

 

Revenue


3


13,033,039


11,802,018

 








 

Cost of sales


4


(11,155,909)


(10,005,744)

 








 

Gross profit




1,877,130


1,796,274

 








 

Administrative expenses


5


(1,673,235)


(1,721,889)

 








 

Operating profit - before impairment




203,895


74,385

 








 

Impairment of Goodwill


8


-


   (3,914,213)

 








 

Operating profit/(loss)




203,895


(3,839,828)

 








 

Net finance costs


5


(26,778)


(24,141)

 








 

Profit/(loss) before income tax




177,117


(3,863,969)

 








 

Income tax expense


6


(60,728)


(35,605)

 








 

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




116,389


(3,899,574)


 

Earnings per share


7





 








 

 





Basic earnings/(loss) per share


0.046p


(1.534p)

Diluted earnings/(loss) per share     


0.046p


(1.534p)

 

 

 

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 2015 was £69,490 (2014: loss £5,793,810).

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

 




2015


2014



Note


 £


 £

ASSETS







Non-current assets







Intangible assets


8


6,874,308


6,874,308

Property, plant and equipment


9


102,213


108,966

Deferred income tax assets


16


346,304


407,032





7,322,825


7,390,306

Current assets







Inventories


10


72,835


82,299

Trade and other receivables


11


2,345,797


3,435,142

Cash and cash equivalents


12


350,232


185,064





2,768,864


3,702,505

TOTAL ASSETS




10,091,689


11,092,811








EQUITY AND LIABILITIES







Issued share capital


13


254,244


254,244

Share premium




1,490,682


1,490,682

Share based payments reserve




68,871


66,084

Capital redemption reserve




7,500


7,500

Merger reserve




12,951,180


12,951,180

Reverse acquisition reserve




(2,856,756)


(2,856,756)

Retained earnings




(9,812,138)


(9,928,527)

TOTAL EQUITY




2,103,583


1,984,407








Current liabilities







Trade and other payables


14


3,532,971


4,252,826

Short-term borrowings


15


1,403,568


1,783,833

Finance lease liabilities


15


4,147


6,635

Income tax




-


13,882





4,940,686


6,057,176

Non-current liabilities







Loan notes


15


3,047,420


3,046,947

Finance lease liabilities


15


-


4,281





7,988,106


9,108,404








TOTAL EQUITY AND LIABILITIES




10,091,689


11,092,811















The financial statements were approved by the board on 6 June 2016

 

 

Andrew Collins                                                                                               

Director

 

             

 

COMPANY REGISTRATION NO. 06374598

 

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2015

                                                                                                                                                                       





2015


2014

 



Note


 £


 £

 

Cash flows from operating activities







 

Operating profit




203,895


74,385

 

Adjusted for:







 

Depreciation




14,418


15,172

 

Share-based payment charge




2,787


30,325

 

Decrease/(increase) in inventories




9,464


(1,811)

 

Decrease/(increase) trade and other receivables




1,076,972


(191,229)

 

(Decrease) in trade and other payables




(707,481)


(79,564)

 








 

Cash generated in operations




600,055


(152,722)

 








 

Finance costs




(33,993)


(31,145)

 

Finance income




7,215


7,004

 

Taxation paid




(13,881)


(91,349)

 








 

Net cash inflow/(outflow) from operating activities




559,396


(268,212)

 








 

Cash flows from investing activities







 

Purchases of property, plant and equipment




(7,667)


(9,753)

 








 

Net cash used in investing activities




(7,667)


(9,753)

 








 

Cash flows from financing activities







 

Finance lease rentals




(6,768)


(5,730)

 

Repayment of non-convertible loan notes




  (305,790)


(325,582)

 

Repayment of short-term loans




(161,419)


(107,469)

 

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




(473,977)


(438,781)

 

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




77,752


(716,746)

 








 

Cash and cash equivalents brought forward




(502,740)


214,006

 









Cash and cash equivalents carried forward


12


(424,988)


(502,740)

 








 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

                                                                                                                                                                       


Share capital


Share premium


Share based payment reserve


Capital redemption  reserve


Merger reserve


Reverse acquisition reserve


Retained earnings


Total


 £


 £


 £


 £


 £


 £


 £


 £

















At 1 January 2014

254,244


1,490,682


329,781


7,500


12,951,180


(2,856,756)


(6,322,975)


     5,853,656

Total comprehensive income for the year

                    -  


                    -  


                    -  


                    -  


                    -  


                    -  


(3,899,574)


(3,899,574)

Share based payment charge

-


-


30,325


-


-


-


-


30,325

Cancelled share options

                    -  


                    -  


(294,022)


-


-


-


294,022


-

Lapsed Warrants
















At 31 December 2014

         254,244


     1,490,682


         66,084


         7,500


   12,951,180


(2,856,756)


(9,928,527)


1,984,407

















Total comprehensive income for the year

-


-


-


-


-


-


116,389


116,389

Share based payment charge

-


-


2,787


-


-


-


-


2,787

At 31 December 2015

254,244


1,490,682


68,871


7,500


12,951,180


(2,856,756)


(9,812,137)


2,103,583

















































 

 

 

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 1.5).

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015

 

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        Going concern

 

At 31 December 2015, the Group had a net overdraft balance of £424,988. 

 

The group has agreed facilities with its bank and the revised agreements should be executed shortly after the approval of these financial statements.  The new facility is made up of a three year fixed term loan of £350,000 and an overdraft of £100,000.  Based on the current working capital forecast, the Group is unlikely to need additional funds within twelve months of the date of approval of these financial statements in order to maintain its proposed work levels of expenditure providing contracts progress as planned, new contracts are secured and the Group is able to continue successfully managing its cash resources.  After making enquiries and considering the assumptions upon which the forecasts have been based, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

                                                                       

1.3        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 basis.

 

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. 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.

 

Significant judgements

 

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 behavioral 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.

 

1.4        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 5,7, IAS19,34

Amendments resulting from September 2014 Annual improvements to IFRSs

1 January 2016

IFRS 9

Finalised version, incorporating requirements for classification and measurement, impairment, general hedge accounting and de-recognition

1 January 2018

IFRS 10

Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture

1 January 2016

IFRS 10

Amendments regarding the application of the consolidation exception

1 January 2016

IFRS 11

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

 

1 January 2016

IFRS 12

Amendments regarding the application of the consolidation exception

1 January 2016

IFRS 15

Revenue and contracts with customers

1 January 2017

IAS 1

Amendments resulting from the disclosure initiative

1 January 2016

IAS 16

Amendments regarding the classification of acceptable methods of depreciation and amortisation

1 January 2016

IAS 16

Amendments bring bearer plants into scope of IAS 16

1 January 2016

IAS 27

Amendments reinstating the equity method as an accounting option for investments in subsidiaries, joint ventures and associated in an entity's separate financial statements

1 January 2016

IAS 28

Amendments regarding the sale or contribution of assets between an investor and its associate joint venture

1 January 2016

IAS 28

Amendments regarding the application of the consolidation exception

1 January 2016

IAS 38

Amendments regarding the clarification of acceptable methods of depreciation and amortisation

1 January 2016

IAS 41

Amendments to bring bearer plants into scope of IAS 16

1 January 2016

 

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.

1.5        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.

 

1.6        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.

 

1.7        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.

           

1.8        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.

 

1.9        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.

 

1.10      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.

 

1.11      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.

           

1.12      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

 

1.13      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.

 

1.14      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.

 

1.15      Financial instruments

Financial assets and financial liabilities are recognised in 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 overdrafts 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 year under review, the Group did not enter into derivative transactions and did not undertake trading in any financial instruments.

 

1.16      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.

 

1.17      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.

           

1.18      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.

 

1.19      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.

           

1.20      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.

 

1.21      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

 

Segmental 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 2015. 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 centralised 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                                                    




2015


2014




 Revenue


Profit /(loss) before tax


 Revenue


Profit  /(loss) before tax














£'000


£'000


 £'000


£'000











Construction



5,918


(420)


6,809


(4,490)











Fit-out



7,517


467


5,374


241




13,435


47


12,183


(4,249)

Inter-segmental revenue and unallocated



(402)


130


(381)


385




13,033


177


11,802


(3,864)

 

Business segments assets and liabilities



2015


2014




 Assets


 Liabilities


 Assets


 Liabilities














£'000


£'000


 £'000


 £'000











Construction



1,380


3,300


2,652


4,651

Fit-out



1,838


1,314


1,560


887














3,218


4,614


4,212


5,538

Goodwill - Construction



2,000


-


2,000


-

Goodwill - Fit-out



4,874


-


4,874


-

Other unallocated assets & liabilities



-


3,374


7


3,570




10,092


7,988


11,093


9,108

                                               

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

2015


2014


£'000


£'000

Depreciation included in segment results








Construction

6


7

Fit-out

8


8


14


15

 

Revenue by geographical destination

Revenue is attributable to the United Kingdom of £12,996,264 (2014 - £11,559,326) and other EU of £36,775   (2014 - £242,692) markets.

 

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

 

 

3          Construction contracts                                                            







2015


2014







 £


 £

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






13,033,039


11,802,018










For contracts in progress at the balance sheet date:









Aggregate cost incurred to date






8,413,522


6,377,341

Recognised profit to date






2,375,900


1,027,629

Retentions due






62,293


160,101

 

Major customers

 

Total group revenue to four customers all relating to construction and fit-out, totalled £9,111,870 split as follows:

 

Construction

2015


2014


 £


 £

Customer 1

1,528,038


1,904,986

Customer 2

1,828,443


1,144,580


3,356,481


3,049,566

 

Fit-out

2015


2014


 £


 £

Customer 1

1,533,962


4,281,525

Customer 2

-


389,336

Customer 3

4,221,427


-


5,755,389


4,670,861

 

4          Cost of sales

2015


2014


 £


 £

Direct costs

11,155,909


10,005,744

Adjustment to amount receivable on long term contracts

-


-

Total cost of sales

11,155,909


10,005,744

 

5           Other income and expenses






2015


2014







 £


 £

Finance expenses









Interest on finance leases






(913)


(784)

Other interest






(4,160)


(3,072)

Bank interest






(28,920)


(27,289)

Interest paid






(33,993)


(31,145)










Finance income









Bank interest received






-


-

Other interest received






7,215


7,004










Net finance costs






 (26,778)


          (24,141)










Administrative expenses include:






2015


2014







 £


 £










Depreciation of property, plant and equipment









- owned by the Group






11,697


11,066

- held under finance leases






2,722


4,106

Operating lease rentals - other






51,675


47,934

Auditors remuneration









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






37,000


35,750

           

Average number of employees                                                               

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







2015


2014







 No.


 No.










Administration






8


8

Cost of sales






17


18

Management






11


12
















36


38

 

  Wages and salaries






2015


2014







 £


 £










Wages and salaries






1,722,879


1,786,948

Social security costs






188,415


194,030

Post-employment benefits






43,424


58,775
















1,954,718


2,039,753

           

Key management personnel compensation                                                                                                







2015


2014








 £


 £

Short-term employee benefits







11,329


13,060

Post-employment benefits







42,000


58,775


















53,329


71,835

 

Directors' remuneration                                                              









2015


2014



 Salaries and fees


 Benefits in kind


Post-employment benefit


Total


Total



 £


 £


 £


 £


 £












G Read


-


-


-


-


15,827

A Collins


7,956


3,373


42,000


53,329


56,214

P Jay


50,000


-


-


50,000


50,000

A Sainsbury


12,000


-


-


12,000


8,000



69,956


3,373


42,000


115,329


130,041

                                          

The remuneration as disclosed for G Read includes £nil (2014: £4,350) 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 (2014:2).

 

6          Income tax expense   





2015


2014





£


 £

Current tax







UK corporation tax




-


13,881








Total current tax




-


13,881








Deferred tax







Deferred tax debit - continuing operations




60,728


21,724

Income tax expense




60,728


35,605








Factors affecting tax charge







Profit/(loss) before income tax -continuing operations




177,117


(3,863,969)

Profit before income tax multiplied by effective rate of UK corporation tax of 20.25% (2014: 21.49%)




35,866


(830,366)

Effects of:







Expenses not deductible for tax purposes




35,573


867,143

Depreciation for period in excess of capital allowances




(2,765)


283

Tax losses not utilised and carried forward




       (8,853)


      (18,721)

Other adjustments




(23,955)


(4,458)

Current tax charge




-


13,881

 

 

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. 

                                                                                   







2015


2014

Basic earnings per share






            £


           £

Profit/(loss) for the financial year






116,389


(3,899,574)

Weighted average number of shares






254,244,454


254,244,454

 

 






2015


2014

Diluted earnings per share






           £


            £

Profit/(loss) for the financial year






116,389


(3,899,574)

Number of shares






254,244,454


254,244,454










           

8          Intangible assets

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








Goodwill









     £

Cost









At 1 January 2014








   10,788,521

Additions








                -  

At 31 December 2014








   10,788,521

Additions








                -  

At 31 December 2015








   10,788,521










Amortisation and impairment









At 1 January 2014








3,914,213










Impairment








-

Balance at 31 December 2015








3,914,213



















Net book value









At 31 December 2015








6,874,308










At 31 December 2014








6,874,308




























 

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 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.

 

Based on the assumptions above, no impairment of goodwill is deemed necessary.

 

 

9          Property, plant and equipment



Freehold and leasehold


Fixtures and fittings


 Plant and equipment


 Motor vehicles


Total



 £


 £


 £


 £


 £

Cost











At 1 January 2014


      183,418


      47,705


      43,928


         63,565


      338,616

Additions


          -


                         2,367


           7,386


         -


        9,753












At 31 December 2014


      183,418


50,072


      51,314


         63,565


      348,369

Additions


          -


                                  6,483


                    1,185


         -


                 7,668












At 31 December 2015


      183,418


        56,555


         52,499


         63,565


      356,037












Depreciation











At 1 January 2014


      126,670


      41,673


         22,743


         33,146


      224,232

Charge for the year


1,657           


        3,345


           2,442


         7,729


        15,173












At 31 December 2014


      128,327


        45,018


         25,185


         40,875


      239,405

Charge for the year


1,657


                                 3,303


                    2,732


        6,727


                 14,419












At 31 December 2015


      129,984


48,321


         27,917


         47,602


      253,824












Net book value











At 31 December 2015


        53,434


        8,234


         24,582


         15,963


102,213

At 31 December 2014


        55,091


        5,054


         26,129


         22,690


      108,964

 

The net book value of property, plant and equipment includes an amount of £5,444 (2014: £12,319) in respect of assets held under finance leases.

 

The net book value of freehold and leasehold property includes an amount of £3,636 (2014: £4,693) in respect of leasehold improvements to a property leased by Connaught Access Flooring Limited.

 

10         Inventories                                                                              





2015


2014





 £


 £

Materials and finished goods




72,835


        82,299

                                                                                                           

The amount of inventories recognised as expense during the year was £9,464 (2014 - £80,489).

 

 

11         Trade and other receivables





2015


2014





 £


 £

Trade receivables




74,357


635,118

Contract retentions




570,214


590,790

Other receivables




27,357


147,171

Prepayments




33,163


54,776

Amounts recoverable on long term contracts




1,640,706


2,007,287








Total trade and other receivables




2,345,797


3,435,142








                                                                                   

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 3 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 £Nil (2014: £23,481).

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




2015


2014





 £


 £








Balance at 1 January




12,000


 12,000

Charge/(credit) to the statement of comprehensive income




-


            -








Balance at 31 December




12,000


       12,000

 

11         Trade and other receivables (continued)

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:




2015


2014





 £


 £

Trade receivables







Three to six months




9,271


21,358

Six to nine months




-


-

Nine to twelve months




11,000


181

More than twelve months




24,390


22,407





44,661


43,946

Contract retentions







Three to six months




10,109


10,934

Six to nine months




4,874


9,775

Nine to twelve months




6,758


5,435

More than twelve months




126,147


55,023





147,888


81,167

12         Cash and cash equivalents




2015


2014





 £


 £








Cash at bank and in hand




350,232


185,064

 

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. The directors have provided limited guarantees. Please see Note 21 for further details.

 

For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 December 2015:                                                           





2015


2014





 £


 £








Cash at bank and in hand




350,232


185,064

Bank overdraft




(775,220)


(687,804)





(424,988)


(502,740)

 

13         Share capital              





2015


2014





 Number


 £


 Number


 £












Allotted, called up and fully paid











Ordinary shares of 0.1p each




254,244,454


254,244


254,244,454


254,244

 

 

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 2014







1.8


10,000,000


           0.07

Granted







-


                -  


               -  

Lapsed







(1.8)


                (10,000,000)  


               (0.07)  













At 31 December 2014







-


                -  


               -  

 

Granted







-


                -  


               -  

Lapsed







-


                -  


               -  













At 31 December 2015







-


-


           -

           

 

 

Share Options

 

At 31 December 2015, 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

33,499,994


1.51


3.00







Granted

-





Cancelled

(12,333,332)











Carried forward

21,166,662


1.51


3.00

 

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

1 June 2014

 





 

Exercise period

May 2013 -  May 2016    

June 2013 -   June 2016

June 2015 - June 2018

 





 

Share price at date of grant

1.5p

1.5p

2.7p

 





 

Exercise price

3.0p

3.0p

3.0p

 





 

Shares under option

11,666,664

7,499,998

2,000,000

 





 

Expected volatility

57%

57%

69%

 





 

Expected life (years)

2.5

2.5

2.5

 





 

Risk free rate

1.02%

1.02%

1.02%

 





 

Expected dividend yield

0%

0%

0%

 





 

Fair value per option

0.13p

0.13p

0.84p

 






 

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 £2,787 (2014: £30,325).

 

14         Trade and other payables (current)                                        

           




2015


2014





 £


 £








Trade payables




2,641,238


3,378,199

Other payables




65,678


61,265

Accruals




417,408


418,333

Other taxes and social security costs




394,765


395,029





3,519,089


4,252,826

                                                                                               

The average credit taken for trade purchases is 86 days. The directors consider that the carrying amount of trade payables approximate their fair value.

 

 

15         Borrowings                                                                             

           




2015


2014





 £


 £

Current







Bank overdrafts




775,220


687,804

Net obligations under finance leases




4,147


6,635

Short-term unsecured loan




-


225,000

Short-term unsecured loan from Director




448,348


529,137

Unsecured non-convertible loan notes




180,000


341,892





1,407,715


1,790,468

                                                                       

Non - current







Unsecured non-convertible loan notes




3,047,420


3,046,947

Net obligations under finance leases




-


4,281





3,047,420


3,051,228








Total borrowings




4,455,135


4,841,696

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 £165,700 (2014: £325,582) 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.

 

During the year, interest of £30,121 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 2015 was waived.

 

 




2015


2014





 £


 £

Non-current borrowings







Analysis







Repayable between one and two years




     180,000


325,582

Repayable between two and five years




2,867,420


2,721,365





3,047,420


3,046,947

                                                                       

 




2015


2014





 £


 £

Net obligations under finance leases







Analysis







Repayable within one year




4,147


6,635

Repayable between one and five years




-


4,281





4,147


10,916

Included in current liabilities




(4,147)


(6,635)





-


4,281

 

16         Deferred taxation




2015


2014





 £


 £








Deferred tax analysis:







Deferred tax losses




(346,304)


(407,032)

Deferred tax expense relating to origination and reversal of temporary differences




-


-





(346,304)


(407,032)

                       

 




2015


2014





 £


 £

Movement in deferred tax during the year







At 1 January




(407,032)


(428,756)

Debit for the year




60,728


21,724

At 31 December




(346,304)


(407,032)








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 leases expiring:

           









2015


2014





 £


 £

Less than one year




4,400


4,400

Between two and five years




36,159


36,159





40,559


40,559

 

 

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

                                                                                                                       





2015


2014





 £


 £

Financial assets







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







Cash and cash equivalents




350,232


185,064

Trade and other receivables




2,447,938


3,435,142

Total




2,798,170


3,620,206

Financial liabilities







Trade and other payables




4,172,379


5,020,844

Unsecured non-convertible loan notes




3,227,420


3,388,839

Secured borrowings




779,367


698,720





8,179,166


9,108,403

Net




(5,380,996)


(5,488,197)








 

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 and amounts recoverable on contracts. 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 contact 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 2015 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 £43,424 (2014: £58,775).

           

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. Andrew Collins, Graham Read and Peter Jay have given a guarantee limited to £800,000 in respect of Mountfield Group Plc's overdraft facility.

           

22         Related party transactions

 

The Company made a loan of £24,892 (2014: £5,000) to Mountfield Building Group Limited, a subsidiary undertaking. The Company made sales of £nil (2014: £328,386) to Mountfield Building Group Limited. At 31 December 2015, £1,513,047 (2014: £1,405,734) was owed to Mountfield Building Group Limited in respect of these transactions and expenses of £132,205 (2014; £341,119) were paid on behalf of the Company by Mountfield Building Group Limited.

 

During the year Connaught Access Flooring Limited, a subsidiary undertaking, paid expenses of £556,246 (2014: £200,737) on behalf of the Company. The Company made sales of £331,388 (2014: £326,408) to Connaught Access Flooring Limited. At 31 December 2015, £947,620 (2014: £1,029,137) was owed to Connaught Access Flooring Limited.

 

At 31 December 2015, the Company owed £34,200 (2014: £34,200) to MBG Construction Limited.

 

As at 31 December 2015, balances remaining unpaid on the unsecured non-convertible loan notes to Graham Read and Andrew Collins amounted to £2,720,182 (2014: £2,730,182) and £492,238 (2014: £658,657) respectively. Interest for the year has been waived and interest in respect of prior periods has also been waived.

 

During the year, the Group repaid £80,789 to Graham Read (2014: £107,467). The balance outstanding at 31 December was £448,348 (2014: £529,137). Interest is charged at 6% per annum on this loan but has been waived for 2015.

 

During the year, Zeme Limited invoiced £33,333 (2014: £50,620) for the services of Peter Jay as a director of Mountfield Group Plc. As at 31 December 2015, £61,332 (2014: £25,859) was due to Zeme Limited, a company controlled by Peter Jay.

           

During the year, the Group was invoiced £1,210 (2014: £6,784) for accountancy and bookkeeping services by Read & Co, a Chartered accountancy practice controlled by Graham Read's brother. The group made sales of £nil (2014: £3,720) to them during the year. As at 31 December 2015 the balance owed by Read & Co was £8,028 (2014: £7,548).

During the year ended 31 December 2015 Connaught Access Flooring Limited made sales of £9,173 (2014 - £9,006) to and purchases of £4,738 (2014 - £26,958) from Corinthian Ceramics Limited, a company of which Andrew Collins is a director. At 31 December 2015, £2,415 (2014 - £2,702) was owed by Corinthian Ceramics Limited in respect of these transactions.

 

23         Control

 

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

 

24         Post Balance Sheet Event

 

There were no events after the balance sheet date to note.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

 

Company no. 06374598

                                                                                                           





2015


2014



Note


 £


 £

ASSETS







Non-current assets







Investments


2


6,874,000


6,874,000

Deferred income tax assets


8


-


-





6,874,000


6,874,000

Current assets







Other receivables


3


-


6,404

Cash and cash equivalents


4


-


-





-


6,404

TOTAL ASSETS




6,874,000


6,880,404








EQUITY AND LIABILITIES







Issued share capital


5


254,244


254,244

Share premium




1,490,682


1,490,682

Share based payments reserve




68,869


66,084

Capital redemption reserve




7,500


7,500

Merger reserve




12,951,180


12,951,180

Retained losses




(13,841,597)


(13,911,088)

TOTAL EQUITY




930,878


858,602








Current liabilities







Trade and other payables


6


2,692,361


2,609,633

Short-term borrowings


7


9,460


9,448

Loan notes


7


180,000


341,892

Income tax




13,881


13,881





2,895,702


2,974,854

Non-current liabilities







Loan notes


7


3,047,420


3,046,948





5,943,122


6,021,802








TOTAL EQUITY AND LIABILITIES




6,874,000


6,880,404








The financial statements were approved by the board on 6 June 2016.

 

 

Andrew Collins

Director

 

 

 

 

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2015

 

 

                                                                                                                                                                       



       Notes       


2015


2014





         £


         £

Cash flows from operating activities







Operating profit/(loss)




69,490


(5,793,811)

Adjusted for:







Impairment of investment in subsidiaries




-


6,147,629

Share-based payment charge




2,787


30,325

Decrease in trade and other receivables




6,404


24,018

Increase in trade and other payables




85,813


27,986

Net cash inflow from operating activities




164,494


437,647














Cash flows from financing activities







Loans (repaid) by subsidiary undertakings




(3,087)


(117,937)

Repayment of non-convertible loan notes




(161,419)


(325,582)

Net cash flows used in from financing activities




(164,506)


(443,519)

 

Net cash decrease in cash and cash equivalents




(12)


(5,872)







Cash and cash equivalents brought forward




(9,448)


(3,576)







Cash and cash equivalents carried forward


4


(9,460)


(9,448)

 

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

 

 Share capital


 Share premium


 Share based payment reserve


Capital redempt'n reserve


 Merger reserve


 Retained earnings


 Total

 


 £


 £


 £


 £


 £


 £


 £

 















At 1 January 2014

254,244


1,490,682


329,781


7,500


12,951,180


(8,411,299)


6,622,088

Total comprehensive income for the year

                     -  


                            -  


                      -  


                      -  


                      -  


(5,793,811)


(5,793,811)

 

Cost of shares issued

-


-


30,325


-


-


-


30,325

 

Lapsed Warrants

-


-


(294,022)


-


-


294,022


-

 

At 31 December 2014

         254,244


             1,490,682


           66,084


           7,500


     12,951,180


(13,911,088)


858,602   

 















 

Total comprehensive income for the year

                     -  


                            -  


                      -  


                      -  


                      -  


69,491


69,491

 

Cost of shares issued

                     -  


                            -  


                      2,785  


                      -  


                      -  


-


2,785

 















 

At 31 December 2015

         254,244


             1,490,682


           68,869


           7,500


     12,951,180


(13,841,597)


930,878   

 















 















 















 















 

 

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 2015

 

1          ACCOUNTING POLICIES                                                                     

The accounting policies of the Company are shown in the Consolidated Financial Statements on pages 16 to 21.

 

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 2014








   19,365,817

Additions








-

At 31 December 2014








   19,365,817

Additions








                -  

At 31 December 2015








    19,365,817

 

Accumulated Impairment provisions









At 1 January 2014








6,344,188

Impairment provision








6,147,629

At 31 December 2014








 12,491,817

Impairment provision








-

Balance at 31 December 2015








 12,491,817

 

Net book value









At 31 December 2015








   6,874,000

At 31 December 2014








 

6,874,000

                                   

The following companies are the principal subsidiary undertakings at 31 December 2015 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 2015 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






(£142,267)


(2,850)










 

3          Trade and other receivables

 

 






2015


2014







 £


 £










Prepayments






-


6,404

 

4          Cash and cash equivalents                                                     

 






2015


2014







 £


 £










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 (2014: £nil).

           

For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 December 2015:

 

           






2015


2014







 £


 £










Bank overdraft






(9,460)


(9,448)










                                                                                                           

 

 

5          Share capital                                                                                      

 



2015


2014




 Number


 £


 Number


 £











Allotted, called up and fully paid










Ordinary shares of 0.1p each



254,244,454


254,244       


254,244,454


      254,244

 

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

 

6          Trade and other payables      

                                                           







2015


2014

 







 £


 £

 










 

Trade payables






185,969


113,131

 

Amounts owed to subsidiary undertakings





2,465,987


2,469,072 


Accruals






34,668


25,150

 

Other tax and social security costs






5,736


2,281

 










 







2,692,360


2,609,634

 










 

 

7          Borrowings                                                                                         

           







2015


2014







 £


 £










Current liabilities









Bank overdraft






9,460


9,448

Unsecured non-convertible loan notes






180,000


341,892
















189,460


351,340










Non-current liabilities









Unsecured non-convertible loan notes






3,047,420


3,046,947
















3,236,880


3,398,287

 

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

                       

8          Deferred taxation                                                                                    






2015


2014







 £


 £

Deferred tax analysis:









Deferred tax losses






-


-










Movement in deferred tax during the year:









At 1 January 2015






-


(17,383)

Charge for the year






-


-










At 31 December 2015






-


-

 

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 due to the Group's bankers in respect of the guarantee was £424,988 (2014: net balance in Group's bank accounts was £502,740).

 

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 Statements.

 

14         Financial instruments

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

 

Categories of financial instruments

                                               







2015


2014







 £


 £










Financial assets









Loans and receivables at amortised cost






-


6,404
















-


6,404










Financial liabilities









Trade and other payables






2,692,360


2,623,514

Bank overdraft






9,460


9,448

Unsecured non-convertible loan notes






3,227,420


3,388,839







5,929,240


6,021,801







(5,929,240)


(6,015,397)

 

 


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