ANNUAL REPORT
AND
STATEMENT OF ACCOUNTS
TO
31
s t
JULY 2023
1
1
DIRECTORS
DaviD W Smart, Chairman and Joint Managing Director
John r Smart, Joint Managing Director
alaSDair h roSS
Patricia Sweeney
COMPANY SECRETARY
Patricia Sweeney
REGISTERED OFFICE
SUBSIDIARY COMPANIES
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J. Smart & Co. (Contractors) PLC
2 3
J. Smart & Co. (Contractors) PLC
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will be held at the Registered
Office, 28 Cramond Road South, Edinburgh on 18th January 2024 at 12 noon, for the following purposes:
1. To receive and consider the Statement of Accounts for the year ended 31st July 2023 and the Report of the Directors
and the Independent Auditor’s Report.
2. To approve the Directors’ Remuneration Report for the financial year ended 31st July 2023 as set out on pages 42 to
47 in the Annual Report.
3. To declare a Final Dividend of 2.27p per share.
4. To re-elect John R Smart as a Director, who retires in accordance with provision 18 of the UK Corporate Governance
Code.
5. To re-elect Alasdair H Ross as a Director, who retires in accordance with provision 18 of the UK Corporate Governance
Code.
6. To re-elect Patricia Sweeney as a Director, who retires in accordance with provision 18 of the UK Corporate Governance
Code.
7. To re-appoint BDO LLP as the Company’s auditor.
8. To authorise the Directors to determine the remuneration of the Auditor.
9. To authorise in accordance with sections 366 and 367 of Companies Act 2006, the Company and any company which is
or becomes its subsidiary at any time during the period for which this Resolution has effect to:
(a) make political donations to political parties, other political organisations and/or independent election candidates; and
(b) incur other political expenditure
providing such expenditure does not exceed £5,000 in aggregate for paragraphs (a) and (b) above.
10. To authorise the Company, via a special resolution, for the purposes of section 701 of the Companies Act 2006 to make
market purchases (as defined in section 693(4) of the Companies Act 2006) of its ordinary shares of 2p each (ordinary
shares) provided that:
(a) the Company does not purchase under this authority more than 10% of the nominal value of the Company’s issued
share capital at the date of this notice;
(b) the minimum price which the Company may pay for each ordinary share is 2p (exclusive of expenses); and
(c) the maximum price which the Company may pay for each ordinary share is the higher of:
(i) 105% (exclusive of expenses) of the average market value of the Company’s equity shares for the five
business days prior to the day the purchase is made according to the Daily Official List of the London
Stock Exchange; and
(ii) the higher of the price of the last independent trade and the highest current independent bid for an ordinary
share on the trading venue where the purchase is carried out.
This authority will expire at the earlier of 15 months from the date of passing of this resolution and the conclusion of the
next Annual General Meeting, except that the Company may enter into a contract to purchase ordinary shares which will
or may be completed or executed wholly or partly after this authority ends, the Company may purchase these ordinary
shares pursuant to any contract as if the authority had not ended. Under this authority any shares purchased by the
Company will be cancelled.
11. To transact any other business of an Annual General Meeting.
Explanatory notes providing information in relation to each of the proposed resolutions in this Notice of Meeting can be
found on the Company’s website www.jsmart.co.uk.
A member entitled to attend and vote at this Meeting is entitled to appoint one or more proxies to attend
and vote on a poll instead of him/her. A proxy need not be a member. Forms of proxy, if used, must be
lodged with the Registrars of the Company at least 48 hours before the time fixed for the Meeting. Forms of
proxy may also be lodged electronically by submitting a duly completed scanned copy of the proxy card to
proxyvotes@equiniti.com. You may not use the electronic address provided either in this Notice of Meeting or any
related documents (including the Form of Proxy) to communicate with the Company for any purpose other than that
expressly stated.
2 3
J. Smart & Co. (Contractors) PLC
In accordance with section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of the total
number of shares in respect of which members are entitled to exercise voting rights at the Annual General Meeting
and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the
Company after the date of this Notice will be available on the Company’s website.
Pursuant to section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General
Meeting any question relating to the business being dealt with at the Annual General Meeting which is put by a member
attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or
the good order of the Meeting that the question be answered or if to do so would involve the disclosure of confidential
information.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
28 Cramond Road South,
Edinburgh
EH4 6AB
16th November 2023
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J. Smart & Co. (Contractors) PLC
CHAIRMAN’S REVIEW
ACCOUNTS
Headline Group profit for the year before tax, including an unrealised deficit in revalued property and a deficit in
revalued financial assets was £105,000 compared with £8,192,000 last year.
As in previous years, our view is that disregarding the movement in the revaluation of the commercial property
provides a truer reflection of the Group’s performance, which we refer to as underlying profit. The underlying profit
before tax for the year was £2,288,000, compared with last year’s figure of £7,840,000, as detailed in note 10 of the
financial statements.
The Board is recommending a Final Dividend of 2.27p, making a total of 3.23p, which compares with 3.23p for the
previous year. The Final Dividend will cost the company no more than £904,000.
TRADING ACTIVITIES
Group construction activities, including private residential sales, decreased by 20%. Headline Group profit on
continuing operations decreased substantially this financial year, which was mainly due to the decrease in the value of
the commercial property portfolio and the absence of profit from investment sales of commercial property, as was the
case in the previous year. Underlying profit before tax on continuing operations decreased substantially this year, the
previous year having benefitted from an exceptional profit on the investment sale of commercial property.
Trading margins continued to be affected by the rise in the price of construction materials and the prolonged process
in obtaining not only statutory approvals, but also simple approvals for utilities and associated infrastructure. This has
resulted in all our construction sites experiencing delays and thereby longer programmes.
All of the above has caused an increase in aborted site acquisitions and a lack of contract work being acquired in the
Housing Association sector. Overall costs have therefore out-stripped original budgets, which has led to an erosion of
profits of recently completed and soon to be completed projects.
The private housing development at Winchburgh, Canal Quarter, is mainly complete. Reservations were encouraging
until the end of 2022, but have significantly reduced in 2023. As previously reported, the current economic issues
of high interest rates and inflation and the cost of living crisis continues to have an impact on consumer confidence
in the private housing sector. The majority of reservations at Winchburgh have converted into sales, but sales have
been substantially less than expected. The resultant prolonged sales period and accompanying holding costs, coupled
with higher construction costs, partly due to a longer than expected build period, has and will continue to lead to a
deterioration in the profitability of this development.
The residential development at Clovenstone Gardens has commenced and construction is progressing well. As
previously reported, the first completions are not due until late 2024, so no marketing has yet taken place. As with the
development at Winchburgh, the rise in construction costs and the longer than expected programme may result in a
decrease in profit levels. It remains to be seen if this will be counter-balanced by positive house sales.
As predicted, commercial property values have fallen due to the decrease in investment yields. However, lettings of
both our industrial stock and office stock remain robust. Rental levels in both sectors have not fallen yet and we are
still seeing rental growth, but more so in the industrial sector than the office sector.
The second phase of Gartcosh Industrial Park, developed through the joint venture company, Gartcosh Estates LLP,
comprising two medium sized industrial units, is now fully let.
The second phase at Belgrave Point, Bellshill, a large speculative single user industrial unit, is nearly complete and
interest is promising. The increased programme, due to delays in utility infrastructure, and increased construction
costs, will again impact on profit margins
As reported in the interim statement, we have not secured any new external contracts with housing associations. A
contract has been agreed with a manufacturing company for a new office facility and an industrial unit extension. This
contract, just outside Stirling, did commence just prior to the end of the financial year, and is progressing well.
4 5
J. Smart & Co. (Contractors) PLC
CHAIRMAN’S REVIEW (continued)
FUTURE PROSPECTS
We have less work in hand in our own private housing at this time than we did last year. We do not have any real
prospects of further contract work at present.
We have finally made progress with several planning applications previously stuck in the Scottish planning system,
albeit it has taken longer than is necessary. Planning consent was obtained for an industrial development in Bathgate.
We have just received approval for a residential development in Fife. We anticipate planning permission being granted
for a substantial flatted development in Edinburgh this financial year.
The continuing increases in construction costs, interest rates and inflation and the cost of living crisis all contribute to
a high degree of uncertainty as to when any of these sites will commence due to simple viability issues. The lack of
urgency in local authorities in processing statutory approvals will undoubtedly delay commencement on site, should
we choose to progress these developments. As mentioned above, there will be private housing sales this year, but
substantially less than anticipated.
We expect to maintain letting levels in our commercial property portfolio. It is already evident that investment yields
have decreased, but rental levels have held steady. Therefore, it remains to be seen whether commercial property values
will fall this current financial year.
At this stage it is difficult to assess what the headline profit will be for the year to 31st July 2024. If commercial
property values fall further, we may make a headline loss. Profits will continue to be eroded by the lack of external
contracting work, the lack of recovery of overhead costs, the increase in material costs and prolonged programmes due
to statutory approval delays.
Mr Roy Anderson, Managing Director of our subsidiary Thomas Menzies (Builders) Limited, retires at the end of 2023.
He served your company diligently for 34 years and I wish him a long and happy retirement.
This is the first full reporting year for the new Task Force Climate-Related Financial Disclosures (TCFD) standards.
It has taken a significant amount of time, effort and work with our consultant, Beyond Green, to develop an updated
Sustainability Policy incorporating the required TCFD Reporting. I would like to thank all our employees involved
in the process. Special mention must be made of the efforts of Head of HR, Lynsey Mackenzie, Head of Commercial
Development, Jane Oliver and our Chief Buyer, John Sharp in this regard.
DaviD W Smart
16th November 2023 Chairman
6 7
The Directors present their Annual Report and Statement of Accounts of the Group for the year ended 31st July 2023.
CORPORATE GOVERNANCE
The Company is required, as a premium listed company on the London Stock Exchange, to prepare a report on Corporate
Governance in accordance with the Financial Reporting Council’s UK Corporate Governance Code (the Code). A copy of
the Code can by reviewed on the Financial Reporting Council’s website at www.frc.org.uk. The information required by
the Code and also the Disclosure and Transparency Rules and the Listing Rules can be found on pages 22 to 28.
RESULTS AND DIVIDENDS
The profit of the Group after tax for the year ended 31st July 2023 amounted to £200,000 (2022, £6,621,000).
During the year the Company paid on 30th January 2023 a final dividend for the year to 31st July 2022 of 2.27p per share
(2022, 2.27p) and paid on 5th June 2023 an interim dividend for the year to 31st July 2023 of 0.96p per share (2022,
0.96p).
The Directors recommend a proposed final dividend for the year of 2.27p per share, making a total for the year of 3.23p.
This final dividend is subject to approval by the shareholders at the Annual General Meeting in January 2024 and has
not been included as a liability in these financial statements. If this dividend is approved it will be paid to the members
on the share register of the Company at the close of business on 22nd December 2023. Dividend warrants will be posted
on 26th January 2024.
DIRECTORS
The following were Directors of the Company during the financial year ended 31st July 2023:
− David W Smart
− John R Smart
− Alasdair H Ross
− Patricia Sweeney
Details of the Directors are given on page 34 of the financial statements.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
The Company’s Articles of Association (the Company’s Articles) give the Directors the power to appoint or remove any
Director. Initial appointments must be approved by the Board of Directors but anyone so appointed must be re-elected by
ordinary resolution at the next Annual General Meeting of the Company. In accordance with the Company’s Articles, all
Directors, but excluding the Chairman, must retire annually and offer themselves for re-election at the Annual General
Meeting. Annual retirement of the Directors is also in accordance with provision 18 of the UK Corporate Governance
Code which is followed for all the Company’s Directors except for the Chairman..
DIRECTORS’ INTERESTS
Details of Directors’ interests in the ordinary share capital of the Company are given in the Directors’ Remuneration
Report. Details of changes in Directors’ interests between 31st July 2023 and 16th November 2023 are given on page 45
of the financial statements.
Other than the original employment contract received on joining the company, no Director has been issued with a
Director’s Service Contract on appointment as a director. No Director has a material interest in any contract to which the
Company or any Subsidiary Company was a party to during the year.
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS 31st JULY 2023
6 7
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
DIRECTORS’ POWERS
The Company’s Articles state that the Directors may exercise all of the powers of the Company which also includes the
right of the Directors to buy back the Company’s shares based on the authority given by the shareholders following the
passing of a special resolution at the Company’s 2022 Annual General Meeting.
INDEMNIFICATION OF DIRECTORS
In accordance with the Company’s Articles and to the extent permitted by law, Directors are granted an indemnity by the
Company in respect of liabilities incurred as a result of their office. The Directors are also indemnified against the cost
of defending any proceedings whether criminal or civil in which judgement is given in favour of the Director or in which
the Director is acquitted or the charge is found not proven. The Company has maintained Directors’ and Officers’ liability
insurance cover throughout the financial year.
CAPITAL MANAGEMENT AND SHAREHOLDER INFORMATION
The capital structure of the Company consists of issued share capital, reserves and retained earnings represented
predominantly by investment properties, working capital and cash.
The Company’s issued ordinary share capital as at 31st July 2023 comprises a single class of ordinary share of 2p each.
Details of the issued share capital are shown in note 26 to the financial statements.
At the 2022 Annual General Meeting the Company was authorised by the shareholders to purchase, in the market, up to
10% of the Company’s issued share capital, as permitted under the Company’s Articles. This authority will expire at the
earlier of 15 months from the date of passing of the resolution granting the authority and the conclusion of the next Annual
General Meeting. The purpose of the market purchase is to enhance the earnings per share and/or the equity shareholders’
funds per share. The Directors are seeking renewal of this authority at the 2023 Annual General Meeting.
During the year the Company made market purchases of 803,213 ordinary shares of 2p under the existing authority, for a
total consideration of £1,345,000. The shares purchased were subsequently cancelled, and represented less than 1.97% of
the Company’s issued share capital at the start of the financial year. There were no purchases of shares in the year made
otherwise than through market purchases.
All members who hold ordinary shares are entitled to attend and vote at a General Meeting. On a show of hands at a
General Meeting every member present in person and every duly appointed proxy shall have one vote and on a poll, every
member present in person or by proxy shall have one vote for every ordinary share held or represented. The Company is
not aware of any agreements between shareholders that may result in restrictions on voting rights of shareholders. Rights
attached to ordinary shares may only be varied by special resolution at a General Meeting.
There are no specific restrictions on the transfer of securities in the Company, other than those imposed by prevailing
legislation and the requirements of the Listing Rules in respect of Company Directors. The Company is not aware of any
agreements between shareholders that may result in restrictions on the transfer of securities.
Details of substantial shareholders can be found in the Company’s Corporate Governance Report.
FINANCIAL INSTRUMENTS
The Group’s financial instruments consist of bank balances and cash, financial assets, trade receivables and trade payables.
The main purpose of the financial instruments are to provide working capital for the Group’s continuing activities and
provide funding for future activities whether in construction or property investment.
Given the nature of the Group’s financial instruments the main risk associated with these is credit risk, it is not exposed
to liquidity or interest rate risk as it does not have any net debt but it does suffer from low interest rates on the amount we
can earn on monies on deposit.
8 9
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
FINANCIAL INSTRUMENTS (continued)
Credit risk
The Group’s credit risk is mainly mitigated due to the fact the majority of the Group’s revenue relates to private house
sales which are made on completion of a legal contract for the transfer of title and are to numerous customers. Other
construction contract sales are mainly to social housing providers and government local authorities who undertake projects
knowing funds are available to fulfil payment of contracts. With regards to rental income there is no concentration of
credit risk as exposure is spread over a number of tenants.
Regarding trade and other receivables, these amounts are accounted for at cost less a loss allowance for expected credit
losses which are assessed based on past default experience and debtors’ current financial position, as detailed in note 20
of the financial statements.
Liquidity risk
As the Group finances its operations through equity and reinvested profits and does not have any bank borrowings it has
no exposure to liquidity risk.
Interest rate risk
As the Group has no debt it has no exposure to interest rate risk other than in relation to interest earned on short term
deposits of surplus funds when interest rates remain low..
ARTICLES OF ASSOCIATION
The Company’s Articles can only be amended by a special resolution at a General Meeting. The Company’s Articles can
only be amended by a special resolution at a General Meeting. No amendments are proposed to be made to the existing
Company Articles at the 2023 Annual General Meeting.
LISTING RULES
There are no disclosures required by LR9.8.4 that apply to the Company other than as noted below relating to controlling
shareholders.
A Shareholder Relationship Agreement as required by LR6.5.4R between the Company and the controlling shareholders,
David W Smart and John R Smart has been signed by all parties. The Company can confirm that the independence
provisions of LR6.1.4D and procurement obligations have been complied with throughout the year.
CHANGE OF CONTROL
The Company is not party to any significant agreements which take effect, alter or terminate upon change of control of
the Company following a takeover bid. The Company does not have any agreements with any Director or employee that
would provide compensation for loss of office or employment, whether through resignation, purported redundancy or
otherwise resulting from a takeover bid.
POLITICAL DONATIONS AND POLITICAL EXPENDITURE
It is the policy of the Group not to make donations for political purposes to UK or EU Political Parties or incur UK or
EU Political Expenditure and accordingly neither the Company nor its Subsidiaries made donations or incurred such
expenditure in the year.
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J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
GREENHOUSE GAS EMISSIONS
This Energy and Carbon Report, prepared in accordance with The Companies (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018, is commonly known as Streamlining Energy and Carbon
Reporting (SECR); it provides one lens to help us understand our carbon impacts and guide our actions to reduce our
emissions.
This report outlines our scope under SECR, the total energy used, and associated carbon emissions for the year ending
31st July 2023, a summary of actions taken in the year to reduce our emissions and further detail on the methodology used
to comply with SECR. We do not have responsibility for any emission sources that are not related to activities included in
our Annual Report and Statement of Accounts.
Our Scope for SECR
The SECR sets out the UK’s new mandatory reporting requirements for energy and carbon impacts of large UK
organisations, as defined by the Companies Act 2006. The Group is classed as large under the regulations.
SECR requires us to report the total annual energy consumption, and associated carbon emissions for our financial year
end. Energy relates to all energy of any fuel type where we have direct or indirect control, known as Scope 1 and
2 emissions under Greenhouse Gas Protocol (see methodology for further details). For the Group, energy in scope is
electricity and gas consumption to run our head office in Edinburgh and our office in Kirkcaldy, diesel and petrol used in
the delivery of our construction projects and property services and any business travel by personal car starting or ending
in the UK. All energy and emissions relate to our activities within the UK.
Our Impacts and Intensity Ratios
Based on the scope outlined above, our energy and carbon impacts for the current and prior years are summarised below.
These impacts show us our environmental performance and can form a baseline for us to compare ourselves to in the
future.:
Consumption Greenhouse Gas Emissions
(MWh) (tCO
2e)
Energy Source 2023 2022 2023 2022
Natural Gas 1,642 2,414 300 434
Petrol 28 27 6 6
Diesel 2,703 2,225 652 538
Gas Oil - 796 - 204
Total Scope 1 4,373 5,462 958 1,182
Grid Electricity 530 509 103 98
Total Scope 2 530 509 103 98
Business Travel 46 - 13 -
Total 4,949 5,971 1,074 1,280
Intensity ratios
To understand our progress in improving our environmental performance, and to meet SECR requirements, we have
identified intensity ratios that help put our energy consumption and emissions into the context of our business. We have
chosen to use revenue and headcount - full time equivalent (FTE) employee numbers. Therefore, our intensity ratios for
energy are kWh/£m and kWh/FTE and emissions tCO
2e/£m and tCO2e/FTE. This allows us to compare our impact with
that of similar organisations in size and/or activities. For future years, we are currently streamlining data management to
enable us to report intensity ratios for each segment of our business.
Revenue £m MWh/£m tCO
2e/£m FTE MWH/FTE tCO2e/FTE
2023 13.0 460 98.8 152 39.3 8.4
2022 14.4 414 88.9 147 40.6 8.7
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J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
GREENHOUSE GAS EMISSIONS (continued)
Intensity ratios (continued)
It is also important to note that the prior year’s results reflect the underlying impacts of the pandemic on energy use
and carbon emissions. In 2022, the reporting year covered six months of normal operation and six months of lockdown
restrictions, whereas in 2023 the whole 12-month reporting period reflected more pre-pandemic working patterns.
Reflecting the operational changes between the reporting periods, total energy fell by 5.7% and carbon emissions fell
by 7%. The increase in intensity ratio for both energy and emissions in relation to revenue is primarily driven by the
£5,728,000 of activity in the reporting period relating to own work capitalised. Although own work capitalised is excluded
from reported revenue, the underlying activities will consume energy and generate emissions which are included in this
Energy and Carbon Report.
Our Energy Efficiency Actions
Throughout the year we have taken action to reduce energy consumption and improve energy efficiency across our
construction activities, investment properties and office operations. A summary of energy saving actions and programmes
are detailed below:
• Refurbishment of our head office commenced in the year, and the plans include improvements to the thermal properties
of the building fabric, the installation of a 14kWp solar PV array, upgrading all lighting to LED and the use of motion
sensors, the installation of two EV charging points, and upgrading our heating system to an efficient gas fired system.
• For our Property investment at Bellshill, we included a 27kWp solar PV array, three electric vehicle charging points,
and the installation of Air Source Heat Pumps for the office space. Across our leased properties we are conducting a
rolling programme to replace all lighting with LEDs with motion sensors, when leases expire.
• For our construction sites, we made significant strides in the last year to invest in highly insulated site offices and
welfare units (Energy Rated - B), hired efficient generators with integrated battery storage to provide hybrid power
to the site, reducing generator run by 75% compared to a standard generator. In addition, we have appointed power
champions at each site and monitor power consumption on a monthly basis to identify unnecessary energy demand.
The Group has conducted a comprehensive calculation of its carbon impact under the Task Force on Climate-related
Financial Disclosures (TCFD) requirements and will develop its future net zero strategy and carbon reduction roadmap in
the coming year. Refer to our TCFD report on pages 20 to 31 of the financial statements.
Methodology
Overall, our methodology for preparing the energy and carbon report follows the principles set out in Environmental
Reporting Guidelines
1
, namely, relevance, completeness, consistency, and transparency. We have used the GHG Protocol
Corporate Accounting and Reporting Standard (revised edition) to data gathered to fulfil our requirement under these
regulations and emission factors from the UK Government GHG Conversion Factors for Company Reporting 2022,
and using location based methodology. In the reporting year, we did not have any certified renewable energy purchase
contracts in place, and thus market based methodology has not been applied.
Our energy and carbon emissions are based on our UK operations for the year to 31st July 2023. Electricity and mains
gas data is taken from invoices and relates to our offices (individually metered) and vacant investment properties (based
on annual apportionment). Where gas consumption is recorded from volumetric meter readings the consumption has been
converted into kWh using an assumed average gross calorific value, and the standard volume correction factor of 1.0224.
Fuels for construction plant and company vehicles are based on supplier invoices and converted into kWh based on fuel
conversion factors published within UK Government Conversion Factors for Company Reporting 2022.
For business travel, the Group’s financial records were reviewed for any expenses related to car hire, personal car mileage
claims and any other fuel consumption which we have direct or indirect control. The related kWh for mileage has been
calculated using the conversion factors provided in the GHG Conversion Factors for Company Reporting 2022 for the
average vehicle and unknown fuel type.
Limitations
None have been noted.
1. Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019, published by HM Government
10 11
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
WASTE MANAGEMENT
We manage waste in accordance with the waste hierarchy and ensure compliance with all applicable environmental
legislation across all our operations. Construction waste is managed through site waste management plans which ensure
waste arising is minimised, reused or recycled. Waste reduction is considered at the building design stage and any waste
arising in construction is segregated into either on site or off site. Where possible, waste is reused on site and waste
to landfill is minimised with preference given to recycling or energy recovery. Training is provided to all staff and
subcontractors and waste champions are assigned to each site to ensure compliance with our waste policies and procedures.
GOING CONCERN
The Group’s business activities, performance and principal risks and uncertainties are set out in the Strategic Report on
pages 13 to 33.
The Directors having assessed the business risks of the Company and Group as detailed in the Strategic Report on pages
17 to 19 confirm that they have a reasonable expectation that the Company and Group has adequate financial resources
without reliance on external funding to allow the Company and Group to continue in operational existence for a period of
at least twelve months from the date of approval of the financial statements. The Directors therefore consider the adoption
of the going concern basis as appropriate for the preparation of the Annual Report and Statement of Accounts.
The Directors have made this confirmation after reviewing the expected cash position of the Group under various
scenarios taking into account future trading activities around construction projects in hand and anticipated projects, land
acquisitions, rental income, investment property acquisitions and disposals and other capital expenditure. The Directors
prepare a number of cash flows to predict the cash position of the Group under these various scenarios. The aim of these
various cash flows is to ensure at all times regardless of the scenario the Group remains cash positive thus ensuring the
Group does not have to rely on external funding. The Group ensures that all companies within the Group are financially
supported by each other and where necessary dividends from cash and reserve positive subsidiaries are paid to the Parent
Company to allow that company to provide financial support to all subsidiary companies.
There continues to be issues around the supply lead times and the increased cost of construction materials resulting from
the current economic climate within the United Kingdom with the cost of living crisis, interest and inflation rates rising
and the impact of global conflicts. Also, the prolonged process in obtaining not only statutory approvals, but approvals for
utilities and infrastructure have resulted in construction sites experiencing delays and thereby longer build programmes
and increased costs. Although these issues have an impact on the finances of the Company and Group the Directors
consider that as they can determine the work programmes to be undertaken and they are well placed to manage the
financial risks the Company and Group are currently experiencing.
Our investment property portfolio however, remains resilient in both the industrial and commercial sectors despite the
current economic climate. Rental income has remained consistent with no significant loss of income due to reduced
occupancy or default in tenants paying rents and the Directors do not believe that this situation will significantly change
due to the types of investment properties held.
FUTURE DEVELOPMENTS
It is not anticipated that the activities of the Company and its Subsidiaries, as described in the Strategic Report, will
substantially change in the foreseeable future.
POST BALANCE SHEET EVENTS
There have been no events occuring after the Statement of Financial Position date that the Directors consider should be
brought to the attention of the shareholders.
12 13
AUDITOR
The Company’s auditor, BDO LLP, has expressed willingness to continue in office. Resolutions to re-appoint them as
the Company’s auditor and to authorise the Directors to determine their remuneration will be proposed at the Company’s
forthcoming Annual General Meeting.
CAUTIONARY STATEMENT
The Chairman’s Review on pages 4 and 5 and the Strategic Report on pages 13 to 33 have been prepared to provide
additional information to members of the Company to assess the Group’s strategy and the potential for the strategy to
succeed. It should not be relied on by any other party or for any other purpose.
This Annual Report and Statement of Accounts contain certain forward-looking statements relating to operations,
performance and financial status. By their nature, such statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and
business risk factors that could cause actual results or developments to differ materially from those expressed or implied
by these forward-looking statements. These statements are made by the Directors in good faith based on the information
available to them up to the time of their approval of this Report.
STATEMENT OF DISCLOSURE TO AUDITOR
The Directors who held office at the date of approval of the Report of the Directors, confirm that, so far as they are each
aware, there is no relevant audit information of which the Company’s Auditor is unaware; and each of the Directors has
taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and
to establish that the Company’s Auditor is aware of that information.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
16th November 2023 Company Secretary
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued) 31st JULY 2023
12 13
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT 31st JULY 2023
The Directors present their Strategic Report of the Group for the year ended 31st July 2023.
The purpose of the Strategic Report is to provide the members of the Company with information to allow them to assess
how the Directors have performed their duty to promote the success of the Company and Group.
OUR BUSINESS MODEL, STRATEGY AND OBJECTIVES
The Company was established in 1947 and was listed on the Scottish Stock Exchange in 1965 and was admitted to the
London Stock Exchange on 25th March 1973.
The Group has a portfolio of self-financed industrial and commercial properties which are owned and managed by
subsidiary company, C. & W. Assets Limited. The investment properties are located throughout the central belt of
Scotland but primarily in the Edinburgh area, this being the area of the country with which we are most familiar. Our
portfolio currently extends to almost 769,000 square feet.
The Group has six other subsidiaries, four of which are trading companies. Thomas Menzies (Builders) Limited carries out
small to medium sized building and civil engineering work for a variety of clients. McGowan and Company (Contractors)
Limited provides plumbing support to the main construction companies. Cramond Real Estate Company Limited, is the
investment holding company of the Group and holds the Group’s equity investments and monies on bank deposits. Smart
Serviced Offices Limited which trades as Foxglove Offices provides serviced office and co-working spaces in Leith. Concrete
Products (Kirkcaldy) Limited ceased to trade in the year to 31st July 2019. Northrigg Limited is a property holding company.
The Group also has an interest in a Joint Venture Company which was established for the purpose of property development.
The Group operates out of premises in Edinburgh and Kirkcaldy, with the centralised administration and finance function
being at the head office in Edinburgh. Full support is given by the company Directors and the finance staff to all Group
companies based at the two locations.
We maintain a core employee base which is beneficial to the growth and success of the Group due to the fact that they have
the expertise to ensure the construction activities of the Group are efficiently run, achieve a high level of quality of work
and retain control over operations. Employees who manage the Group’s investment property portfolio are fully aware of
current market conditions and ensure that there is appropriate marketing of the Group’s investment property portfolio. We
employ our own maintenance team thereby ensuring that our investment property portfolio is always in good condition
and ready for let.
Our objectives are to identify and exploit promising business opportunities as they arise to the benefit of the Group, its
shareholders and employees without over extending Group resources. While endeavouring to complete all our operations as
efficiently and to as high a standard as possible we do not set ourselves general performance yardsticks or volumetric targets.
To achieve these objectives our strategy is to continue to maintain and develop the relationships we have with social housing
providers and develop relationships with new and existing partners to establish new areas of construction opportunities,
retain our core workforce and only use specialist subcontractors with proven track records with the Group to ensure work
quality. We will continue to build both our residential properties and investment property portfolio within the central belt of
Scotland, being the area of the country with which we are most familiar. We will build up our resources to ensure the Group
has sufficient current working capital facilities and financing for future commercial and private residential developments.
In achieving our objectives we aim to generate value by creating long term and sustainable returns for our shareholders
by growing our income and profits and increasing the value of our investment portfolio and the net assets of the Group.
14 15
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
PERFORMANCE REVIEW
Construction activities
2023) 2022)
£000) £000)
Revenue . . . . . . . . . . . 5,961) 7,430)
Operating loss . . . . . . . . . . . (2,720) (2,487)
Construction revenue in the year has significantly decreased again this year due mainly to fallen turnover in the areas of
civil engineering undertaken by Subsidiary Company, Thomas Menzies (Builders) Limited and in work on construction
of industrial units. As noted in the previous year we completed the work for our Joint Venture, Gartcosh Estates LLP at
phase 2 of their development consisting of 2 industrial units and undertook no new construction work of industrial units
for third parties in the year.
During the year there were sales of private houses at our development at Canal View, Winchburgh a development of 64
dwellings consisting of flats and terrace houses. In total 9 properties were sold in the year. Revenue from private house
sales due to these sales increased from that of the previous year.
We commenced construction at our site in Clovenstone, Wester Hailes, Edinburgh. This site is a development of 45 flats.
Private house sales at this development are not expected until the year to 31st July 2025. There is also an element of social
housing at this site being 24 flats for Prospect Community Housing. During the year there was a small amount of revenue
earned against this contract.
During the year we also commenced construction of commercial property for a third party and again a small amount of
revenue was earned against this contract.
Full details of construction revenue is given in note 3 of the financial statements.
Construction material costs continue to remain high due to the continuing impact of Brexit, global unrest, inflation rate
increases and the overall demand for goods and services causing increases in material and labour costs. The Group
continues to monitor costs on construction contracts, with the finance and surveyor teams liaising to ensure accurate
recording of cost to contracts and monitoring of actual costs against anticipated costs and anticipated revenue to ensure
projects remain on course. The Directors continue to fully appraise contracts, at various stages, prior to acceptance to
ascertain the likely outcome of the contract. These appraisals are conducted prior to land bank acquisitions, commencement
of construction and then during the lifetime of the contract to its completion.
Overheads continue to remain relatively constant over time, the Directors do continue to monitor these with a view to
achieving any savings on costs were possible. However, with reduced revenue levels the recoverability of overhead is
difficult.
The increased material construction costs together with increased labour costs has resulted in margins being reduced
which impacts on the recoverability of overheads incurred by the Group and has resulted in the increased operating loss
incurred in the year.
14 15
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
PERFORMANCE REVIEW (continued)
Investment activities
2023) 2022)
£000) £000)
Revenue from investment properties . . . . . . . . 7,011) 6,983)
Profit on sale of investment properties . . . . . . . . –) 6,055)
Net (deficit)/surplus on valuation of investment properties . . . . . (2,164) 473)
Operating profit from investment properties . . . . . . . 2,063) 10,309)
Income from financial assets . . . . . . . . . 58) 63)
(Loss)/profit on sale of financial assets . . . . . . . . (15) 17)
Net deficit on valuation of financial assets . . . . . . . (19) (121)
Share of (losses)/profits in Joint Ventures . . . . . . . (36) 254)
Revenue from investment properties marginally increased in the year (2022, decreased by 6%). There have been movements
by tenants in and out of properties in the year but overall both occupancy levels and rental growth have remained fairly static.
Recoverability of revenue from investment properties continues to remain high and the Group has suffered little in the way
of defaulting tenants.
The office and retail development at Winchburgh was completed and handed over to our investment property company at
the start of the financial year. On completion of the build a tenant for the office was in place but we have still to lease any of
the industrial units, although a tenant is lined up to take up occupancy of one of the units in the near future. Work continues
on phase 2 at our industrial site at Bellshill for the construction of one 53,735 square foot unit and the work now includes an
office fit out within the unit which has resulted in an extension to the duration of the build.
Service charges and insurance receivable revenue have remained unchanged from the previous year due to the limited
movements in occupancy in the year (2022, increased by 4%). Service charges remain dependent on costs incurred in the
year that can be recovered and varies from year to year.
There were no disposals of properties in the year, compared to the previous year when the Group sold three of its industrial
estates for £24,032,000 which generated a profit on sale of £6,055,000.
This year the Group has suffered a deficit on the revaluation of investment property portfolio of £2,164,000, due mainly to
decreasing yields.
Income from our financial assets has decreased from that of the previous year. There were a number of acquisitions in the year
to our portfolio and disposals on which the Group suffered a loss of £15,000. The impact of world and domestic events on the
financial markets resulted in a deficit of £19,000 on the fair value of our financial assets being recorded this year.
The share of the results in our Joint Ventures is a loss of £36,000 which is due to the effect of accounting for a revaluation
deficit on the industrial development owned by Gartcosh Estates LLP.
16 17
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
PERFORMANCE REVIEW (continued)
Group results and financial position
Continuing and discontinued activities
2023 2022
£000 £000
Profit before tax . . . . . . . . . . . 105 8,192
Net bank position . . . . . . . . . . . 8,214 20,795
Net assets . . . . . . . . . . . 125,467 124,676
Overall the Group has earned a profit before tax in the year but it is significantly reduced from the profit earned in
the previous year due to the operating loss on the construction activities of the Group and the accounting for the
deficit on the revaluation of investment properties. The significant movement in the profit for this year and the profit
in the previous year is also due to the profit earned on sale of the investment properties in the previous year and the
accounting for the impact of the revaluation movement on investment properties in each year. If these are excluded
then in the current year the Group generated a profit of £2,269,000 compared to £1,664,000 in the previous year. The
movement of £605,000 arises mainly from the increased operating profit earned on the Group’s investment activities
less the increased loss on the construction activities and the increase in finance income on short-term deposits with
banks, interest on loans to Joint Ventures and interest earned on the Group’s Retirement Benefit asset.
Our net bank position, which comprises monies held on deposit, cash and cash equivalents and the netting of our bank
overdraft has decreased in the year. This is due to the cash outflows on our current private housing and own industrial
developments currently in progress. Overall, the Group continues to be net debt-free.
The Group’s net assets have increased by £791,000, the main impact being the movement in the Group’s pension
scheme surplus of £4,902,000 and the increase in our inventories of private housing for sale net of the decrease in cash
and cash equivalents. The profit generated in the year as discussed above and the accounting for share buy backs and
dividends paid to shareholders in the year also impact on the net assets.
TOTAL DIVIDEND
The Directors are recommending a final dividend of 2.27p per share which taken with the interim dividend of 0.96p
already paid in the year gives a total dividend for the year of 3.23p (2022, 3.23p), which is the same as the dividend rate
for 2022.
GREENHOUSE GAS EMISSIONS
The Group is required to report the greenhouse gas emissions for which it is responsible and on any environmental matters
which are material to the Group’s operations. Details of our emissions for the year to 31st July 2023 are set out in the
Report of the Directors on pages 9 and 10.
16 17
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group and the mitigating factors taken by the Group against these risks
are detailed below. The principal risks noted below are not all of the risks faced by the Group but are those risks which
the Group perceives as those which could have a significant impact on the Group’s performance and future prospects.
Area of principal risk or uncertainty
and impact
By focusing external construction
activities in the social housing sector,
which is a competitive market,
failure to win new contracts would
impact on our volume of work and
therefore the workforce required by
the Group.
Mitigating actions and controls
• Maintain long term relationships with social housing providers, resulting
from high standards of service, quality and post construction care thus
giving the Group an advantage over other builders when contracts are
awarded on criteria other than cost only.
• Identify potential build sites or include the provider within private housing
developments in relation to the element of affordable housing required.
• When workload is reduced workforce can be diverted to the Group’s own
commercial and private residential developments.
• Continue to acquire land for development for either private housing
developments or for resale to social housing providers as part of a construction
contract.
• Develop new areas of construction activities.
• Develop new joint venture opportunities.
Decline in home buyer confidence,
due to bank interest rates, availability
of affordable mortgages and cost of
living crisis resulting in stalling of
private house sales.
• Building developments in popular residential areas.
• Building high quality specification homes with attention to detail which
sets them apart from other new build homes and therefore make them more
attractive to buyers.
• Building a range of homes within a development thus providing choice to
buyers.
• Programming commencement of new build housing projects to market
conditions.
• Providing sales incentives.
• Considering the letting of built homes at market rates.
Social housing sector and the
housing market in general is highly
competitive with tight margins.
• We are an ‘all trades’ contractor who employs our own personnel in all
basic building trades who are supervised by site agents who are long serving
employees of the Group, and who have been promoted through their trades,
thus ensuring control of labour costs on contracts.
• We have invested heavily in plant and the maintenance thereof and therefore
limit our costs on contracts by utilising own plant as opposed to incurring
higher costs of hiring plant.
• Subcontractors employed by the Group are specialists in their fields and in the
main subcontractors have previously been used by the Group therefore quality
of work and reliability is known. No labour only subcontractors are employed.
• In house architectural technicians and surveyors provide pre-contract design
advice to resolve potential technical problems with the build and therefore
potential costs.
• Detailed appraisals of contract pre-land acquisiton and pre-construction.
18 19
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
Area of principal risk or uncertainty
and impact
Reduction in rental demand for
investment properties may result in a
fall in property valuations.
Mitigating actions and controls
• Only commence speculative developments after careful assessment of the
market.
• Continue to invest in property sectors which are robust.
• Restricting our operations to the central belt of Scotland being the area of
the country with which we are most familiar.
• Continually maintain and refurbish existing properties to retain existing
tenants and attract new tenants and improvements to our properties for
improved economic and climate efficiencies.
• Provide necessary financial incentives to retain existing tenants at end of
current leases and attract new tenants.
Reduction in demand for UK real
estate from investors may result in a
fall in valuations within our investment
property portfolio, this could result in
delays in investment decisions which
could impact on our activities.
• The Directors regularly review the property market to ascertain if changes
in the overall market present specific risks or opportunities to the Group.
• Restricting our operations to the central belt of Scotland being the area of
the country with which we are most familiar.
Reduction of financial resources. • Ensure resources are not over committed and only undertake commercial
and private housing developments after due consideration of the financial
impact on the Group’s financial resources.
• Build up resources to ensure the Group has sufficient finance for working capital
requirements and financing of commercial and private housing developments.
• Spread cash reserves over several banks taking account of the strength of
the bank and interest rates attainable.
• Invest resources in equities also taking account of the security of the
investment and the yields attainable.
Political events and policies result in
uncertainty until final decisions have
been made and the impact of decisions
are known, this could result in delays
in investment decisions which could
impact on our activities. Including
Local Government processes slowing
down our ability to commence new
building projects.
• Before any decisions are taken by the Directors in any area of the Group’s
activities the level of uncertainty and range of potential outcomes arising
from political events and policies are considered.
• Monitor Government guidelines and new legislations announcements to
ensure the Group remains up to date with legislation.
• Continue to pursue contacts at Local Government to obtain necessary
consents and planning approval.
Failure to evolve business practices
and operations in response to climate
change.
• Continue to monitor all requirements relating to the construction industry
in relation to improvements in buildings to ensure they comply with current
and emerging requirements.
• Review of designs for new buildings to ensure they are as energy efficient
as possible.
• Procurement of building materials from sustainable sources.
• Investment in energy saving measures within our investment property
portfolio.
• Establishment of Sustainability Committee to develop the Group’s
sustainability strategy with the commitment to reduce the Group’s carbon
emissions in line with science-based carbon reduction targets.
• Employ the services of external specialists and consultants for their expertise.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
18 19
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
Area of principal risk or uncertainty
and impact
Unforeseen national and global
events including world conflicts and
natural disasters.
Impact of cost of living crisis,
increased inflation and bank interest
rates.
Mitigating actions and controls
• Establish strong relationships with suppliers and subcontractors to ascertain
impact on their potential supply chains.
• Build up financial resources to ensure the Group has sufficient funds for
future working capital requirements.
• Establish continuity plans for all areas of operations.
• Retain strong control over costs on construction contracts.
• Remunerate onsite and office based employees with competitive rates of
pay and benefits.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Emerging risk
The Group faces a number of emerging risks which could have a significant impact on the Group’s performance and future
prospects. These risks are discussed by the Directors and appropriate actions taken to mitigate these risks as soon as they
are considered to be a principal risk of the Group.
VIABILITY STATEMENT
The Directors have assessed the viability of the Group over a three year period to July 2026, taking account of the Group’s
current financial strength, business model and strategy. The Directors have also taken account of the principal risks and
uncertainties facing the Group and the actions being taken to mitigate these risks as described above.
The assessment period of three years has been chosen as the Directors consider this period to be appropriate as it fits well
with the Group’s development and investment property cycles.
The Group’s financial planning process consists of cash flow projections based on the current financial position together
with current commitments and then assumptions on future developments and investment property acquisitions and
disposals.
As the Group is net debt-free the Directors are assessing the cash impact of their assumptions of future activity to ensure
that this position is maintained. The Directors vary their assumptions in terms of economic, investment and other factors
to different scenarios to assess the impact on the Group’s cash position. Even with these sensitivities applied the Group
remains net debt-free.
Based on this assessment the Directors have a reasonable expectation that the Group will continue in operation and meet
its liabilities as they fall due over the period to July 2026
20 21
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
As a Group, J. Smart & Co. (Contractors) PLC already follow prudent principles in relation to our business activities.
We will re-focus our objectives to ensure compliance with the Task Force Climate-related Financial Disclosures (TCFD)
requirements and embed TCFD into our governance, strategy and risk mitigation going forward. We support the essence of
TCFD, and recognise the importance and impact of climate change, which is reflected within our Sustainability Strategy.
As this is our first fully comprehensive review of the disclosure under the TCFD requirements, there are certain areas
where we have limited climate-related disclosures due to data limitations these include specific areas within the following
TCFD themes: Strategy (b & c) and Risk (b). In the coming year we will consider in further detail these requirements and
identify key areas we can improve the depth of our disclosures where required information is available.
The Board confirms that it has complied, were applicable, with the Listing Rule requirements as per LR 9.8.6(R)(8) for
the disclosures for TCFD. However, the Board recognises that some TCFD recommended disclosures require further
development and continual improvement, and these have been identified in the relevant pillar as an area to focus during
2023/24.
Our Sustainability History & Roadmap
The Group has a long history of sustainable practices. We aim to refurbish where possible (e.g. Head Office, Links Place
and Bridgeside House), reuse materials, utilise local suppliers and redevelop brownfield sites for both residential and
commercial projects recent examples being our developments at West Bowling Green Street, Edinburgh and Belgrave
Street, Bellshill.
Looking forward, Climate Action will be a key strategic priority for the Group, embedding processes and practices into
our business operations and providing key education and training to our employees to support our goals.
Governance
20 21
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
(a) Describe the Board’s oversight of
climate-related risks and opportunities.
(b) Describe the management’s role in
assessing and managing climate- related
risks and opportunities.
The Group understands that climate change can present risks and opportunities
to our business activities, our employees and our other stakeholders. The
Board oversees the Sustainability Strategy, which details risks, opportunities,
and identified objectives. The Strategy also addresses the carbon impact of our
waste, assets, operations and investments. It provides details of our objectives
going forward, including our efforts to reduce our carbon impact and operate
more sustainably in all aspects of our business.
The Board met 6 times throughout the year, and climate-related risks and
opportunities are placed on the agenda. The design, implementation, and
execution of the organisation’s response is discussed. The Board Director
responsible for climate-related issues is our Chairman and Joint Managing
Director, David W Smart, and the Senior Manager who leads the delivery
of the Sustainability Strategy is Jane Oliver. Our Chairman oversees the
internal management of the Group’s climate-related risks, opportunities and
strategy-setting process, and receives updates on climate-related activities
and developments throughout the business. These updates are reported by the
Sustainability Committee.
The Sustainability Committee is formed of representatives from across the
Group including the Joint Managing Directors, members of the Real Estate,
Construction, HR and Design Teams. Meeting monthly, the Committee
collaborates to identify, assess, and manage our response to climate-related risks
and opportunities. The Committee works closely with employees throughout
our Group to implement and enhance programmes and policies addressing
climate-related risks and opportunities for the Group. The Committee reports
to the Board bi-annually with its recommendations.
Our Board, oversees the integration of climate-related opportunities and risks,
including environmental and climate-related impacts, into corporate risk
assessment activities and audit functions.
2023/24 Focus: Set up of Climate Disclosures Working Group, to identify
further climate-related risks and opportunities.
Recommendation
Disclosure: Disclose the
organisation’s governance
around climate related risks and
opportunities.
Recommended Disclosures
2022/23 Progress: Approved targets and objectives and set up of
Sustainability Team.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Governance (continued)
22 23
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
(a) Describe the climate-related risks
& opportunities the organisation has
identified over the short, medium, and
long term.
(b) Describe the impact of climate-
related risks & opportunities on the
organisation’s businesses, strategy, &
financial planning.
(c) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-related
scenarios, including a 2°C or lower
scenario.
We have identified climate-related risks, opportunities and objectives through
our business activities and processes, namely: Stakeholders, Supply Chain,
Materials, Assets groups, unconsolidated Equity Investments and GHG
emissions. We have also identified risks and opportunities in terms of low,
medium and high impact, though this requires further exploration.
Our main risks, related to climate change are changes in regulation, technology,
stakeholder expectations and physical risks, including heat and unpredictable
weather.
Our opportunities are focused on the products we can offer to adapt to the effects
of climate change, including the use of green steel, low-carbon materials, low-
carbon fuels for construction activities and generating income from solar PV
from our property portfolio.
Although we have assessed the impact on our business and strategy, we
intend to analyse our processes and impacts further in order to better quantify
the impact on financial planning. Further financial quantification of risks
and opportunities will become more of a focus in future years, as data and
technologies permit.
Our identified targets and objectives support the overall direction of travel to
reduce our emissions, and where possible, are shaped by scenario analysis.
Currently, our scenario analysis is based on high-level and intuitive assessment
of the impacts for two scenarios: <2°C and > 2°C upon the current business
activities and processes outlined in disclosures (a) above.
2023/24 Focus: Re-evaluation of our carbon reduction targets to align
to Science Based targets initiative and reassess our objectives based on
more detailed scenario analysis in order to further develop our financial
planning.
Recommendation
Disclosure: Disclose the actual
and potential impacts of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning
where such information is
material.
Recommended Disclosures
2022/23 Progress: Climate Risk Analysis for the Group’s Business
activities.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Strategy
23
22 23
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Strategic Objectives
23
^ƚƌĂƚĞŐŝĐKďũĞĐƚŝǀĞƐ
Strategic
Objective
Physical/
Transitio
n Risk*
Managing the
risk or
opportunity
Risk/
Opportuni
ty
Scenario
Analysis
< 2c
Scenario
Analysis
> 2c
Target
1. Reduce the
carbon
intensity of raw
materials
Transition
Focus on steel and
investigate low
carbon concrete.
10% of total
steel purchase
is green by
2025.
2. Monitor
exposure to
flood risk for
vacant land
sites
Physical
We have reviewed
all our property
holdings, including
our vacant land
throughout the
Group. As part of
this exercise, we
have identified 3
sites which may
“by the 2080s,
each year this area
may have a 0.5%
chance of
flooding.”
According to
SEPA latest flood
maps. As the
likelihood of
flooding is so low,
we do not believe
this has a
significant impact
on our portfolio.
Area of vacant
land holding
exposed to
flood risk is
1% or below.
3. Decarbonise
investment
portfolio
Transition
Focus on divesting
high carbon
investments, when
stock market
conditions,
financial yield and
portfolio balance
permit.
10% reduction
by 2025.
4. Explore
renewable
energy strategy
to property
portfolio
Physical
&
Transition
To investigate
opportunities to
install PV
throughout the
Investment
Property portfolio.
Would allow
potential revenue
stream and
potential reduction
in the use of fossil
fuels.
Increase the
renewable
energy
generation
capabilities
across the
Investment
Property
portfolio.
24 25
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Strategic Objectives (continued)
24
Strategic
Objective
Physical/
Transitio
n Risk*
Managing the
risk or
opportunity
Risk/
Opportunity
Scenario
Analysis
< 2c
Scenario
Analysis
> 2c
Target
5. Transition to
low carbon
alternatives for
plant and
machinery
Physical
&
Transition
To look at the
short, medium
and long-term
opportunities to
upgrade plant to
more green
alternatives.
Increase the use
of HVO and
battery storage
for plant and
welfare
facilities.
6. Digital
Transformation:
to build upon &
improve data
management,
data analysis,
digital working
practices and
procure the
relevant skill sets
required to
implement
Transition
To investigate
available
options to
improve our
data collection
and IT systems
to collect quality
data, to provide
more detailed
and robust
information.
Implement
digital IT
systems and
provide training
to our employees
by 2025.
7. Continually
strive towards
Zero Waste to
landfill
Transition
To look at
alternatives to
waste
management,
and look at
opportunities to
reduce waste
and reuse where
possible.
Increase
diversion from
landfill to 95%
by 2025.
ΎPhysical Risk: Heat, Flood, Unpredictable weather.
Transition Risk: Policy, Economic, Technology, Regulation, Stakeholders.
KEY:
Risk/Opportunity
Low Risk
Medium Risk
High Risk
Low
Opportunity
Medium
Opportunity
High
Opportunity
Scenario Analysis
No Change
Minor Change
Major Change
24 2524
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Relevance to UN Sustainable Development Goals
Our 2023 Sustainability Strategy aims to support the Sustainable Development Goals (SDGs) which the Sustainability
Committee considered relevant to the Group’s activities and important to our future success. The three priority goals of
Good Health and Wellbeing, Decent Work and Economic Growth and Responsible Consumption and Production are
supported by five other goals. In addition, three future goals for 2030 including a focus on Climate Action and Affordable
and Clean Energy. We consider the strategic objectives, as outlined above, not only support our priority goals, but are also
coherent with our goals for 2030.
Risk Management & Corporate Risk
(a) Describe the organisation’s processes
for identifying and assessing climate-
related risks.
(b) Describe the organisation’s processes
for managing climate-related risks.
(c) Describe how processes for
identifying, assessing, and managing
climate-related risks are integrated
into the organisation’s overall risk
management.
Climate change is a principal risk. We have formal ongoing processes to identify,
assess and analyse risks and these form part of our Group Risk Register. These
risks are fully explained in our Principal Risks and Uncertainties section of the
Strategic Report on pages 17 to 19 of the financial statements.
We have investigated and evaluated our key climate risks (as detailed in the
Strategy section above) and opportunities, through specific work packages with
a focus on: Key Stakeholders (tenants, housing associations and employees),
Supply Chain, Construction Materials, Key Asset Groups (plant & machinery,
motor vehicles, investment properties and unconsolidated equity investments).
The assessment work has been led by members of Sustainability Committee
and with input from specialists and team members from across the organisation.
Our holistic approach ensures that the assessment has captured expertise and
knowledge in both depth and breadth.
The outcomes the work packages have enabled a more systematic evaluation
of risks and opportunities which the Board have reviewed as part of their
decision-making process in risk mitigation and setting strategic objectives.
These risks and opportunities are detailed in our Strategic Objective table on
pages 23 and 24 of the financial statements.
Whilst we have identified physical and transition risks, for our base year. We
recognise that climate change related risks, which could affect our business,
will require further financial quantification, impacts on financial planning and
resilience testing. This will be further investigated by the Sustainability team
in 2023/24.
2023/24 Focus: Continuing to develop our processes for assessing and
managing climate-related risk, in particular the impacts on financial
planning.
Recommendation
Disclosure: Disclose how the
organisation identifies, assess, and
manages climate-related risks.
Recommended Disclosures
2022/23 Progress: Publication of Sustainability Strategy detailing key
risks and opportunities.
26 27
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Metrics & Targets
(a) Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with its
strategy and risk management process.
(b) Disclose Scope 1, Scope 2, and if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
(c) Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets.
We have detailed our climate-related risks and opportunities according to
TCFD guidelines in our Sustainability Strategy. Our overarching target is to
reduce our carbon emissions by at least 30% by 2030, in line with Science
Based Targets initiative (SBTi) for 1.5°C limit to global warming by 2100.
With the development of our Net Zero Roadmap during the next financial year,
this target will become more defined, along with improvements in our business
processes, practices and actions.
The key metrics and targets we have set relate to reductions in our carbon
emissions for the most significant areas of our GHG emissions, as set out on
page 27 of the financial statements and to a focus on our investment property
portfolio and unconsolidated equity investments. Our key metrics are detailed
below under Metrics & Targets.
For the year ending 31st July 2023, our baseline year, the GHG emissions can
be found under the Greenhouse Emissions Statement on pages 27 to 31 of the
financial statements, which details Scope 1, 2 and 3 emissions, in addition to
the SECR report provided on pages 9 and 10 of the financial statements.
We plan to achieve these targets through key areas:
• Reduce negative impact by reducing emissions.
• Move towards a balanced portfolio of our equity investments.
• Remuneration - We will consider linking climate-related targets, as per
our Sustainability Strategy, into the Company remuneration process.
• Internal carbon pricing has not been considered as a method to support
our carbon reduction targets though this could be considered in the future.
2023/24 Focus: Monitor our key metrics and targets and improve data
gathering to achieve this.
Recommendation
Disclosure: Disclose the metrics
and targets used to assess and
manage relevant climate-related
risks and opportunities where
such information is material.
Recommended Disclosures
2022/23 Progress: Carried out extensive works and set baseline targets.
Our metrics and targets have been established in line with mandatory requirements. We have approved targets for Scope
1 and 2. For Scope 3, our baseline year is 2023.
Metric Title Units Baseline year 2023
Fixed Asset Investments (Carbon Intensity) tCO2e/$m invested 56
Vacant Land % acres exposed to flooding risk 0.16415%
Waste Management % diversion from landfill 94%
Energy (Property) kgCO
2e/sqft 1.79
Materials (Construction) tCO
2e/£m 624.9
Plant (Fuel Carbon Intensity) tCO
2e/£m of Construction Work 23.0
26 27
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Greenhouse Gas Emissions Statement
The 2023 Annual Report and Statement of Accounts includes our inaugural comprehensive Greenhouse Gas Emissions
Statement for the year ending 31st July 2023. The statement includes the emission categories
1
which the Board considers
to be relevant to climate-related risks, importance to stakeholders and material to the Group’s activities during the year
and where reliable data is available to calculate emissions. Where relevant, Scope 3 emissions also include Well to Tank
(WTT) emissions, such as business travel.
This statement outlines the carbon emission for the three business segments: Company, Construction and Property
Investment, along with an appropriate carbon intensity metric for each segment. This segmentation and analysis will
enable the Board to compare performance year on year, assess the effectiveness of carbon reduction actions taken, and
revise the Net Zero Roadmap.
Common with most carbon accounting and reporting the methodologies and the accuracy of reported emissions will
mature overtime, and the Board will ensure key reporting principles of transparency, comparability, comprehensiveness,
and materiality are adhered to.
The emissions included in this statement represent the Group’s base year and will form the baseline for the Group to
develop its Net Zero Roadmap towards an interim carbon reduction target of 30% by 2030; to be in line with Science
Based Targets initiative (SBTi).
The statement includes a summarised methodology, supplementary notes on each emissions category and any limitations
in the methodology.
Emissions Impact 2023
The chart below shows the profile of our total emissions for the 11 emissions categories
2
within our defined operational
boundary, covering Scopes 1, 2 and 3 and notably the three largest categories. The total emissions for the reporting period
are 18,174 tCO2e (tonnes of carbon dioxide equivalent).
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
1. As defined by the GHG Protocol: A Corporate Accounting and Reporting Standard (revised edition) for Scope 1, 2 and 3 emissions.
2. The category for purchase goods and services has been subdivided into central overheads, construction materials and subcontractors, which all fall within the formal emissions category of Purchased
goods and services.
28 29
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Segmental Analysis of the Group’s Greenhouse Gas Emissions
The table below outlines the emissions for each emission category included in the operational boundary for each business
segment and the total for the Group.
Investment Group
Emissions Category Notes Company Construction Property Total
tCO2 e tCO2 e tCO2 e tCO2 e
1.01 Direct combustion 1 389 269 - 658
1.02 Natural gas 2 28 8 264 300
2.01 Electricity 3 38 7 57 102
3.01 Purchased goods and services 4 1,392 381 838 2,611
3.01 Construction materials 5 - 2,343 - 2,343
3.01 Subcontractor services 6 - 10,812 - 10,812
3.02 Capital goods 7 273 203 - 476
3.03 Fuel- and energy-related activities 8 117 72 65 254
3.05 Waste generated in operations 9 - 20 - 20
3.06 Business travel 10 13 - - 13
3.07 Employee commuting 11 205 - - 205
3.13 Downstream leased assets 12 - - 300 300
3.15 Investments 13 80 - - 80
Total Emissions 2,535 14,115 1,524 18,174
Breakdown by Scope (in tCO
2 e)
Scope 1 417 277 264 958
Scope 2 38 7 57 102
Scope 3 2,080 13,831 1,203 17,114
Total Emissions 2,535 14,115 1,524 18,174
Relevant and Excluded Emission Categories
The Greenhouse Gas Emissions statement excludes relevant and potentially material emissions categories where data
availability and reliability were not adequate to include. The exclusions are primarily relating to the logistics from Tier 1
suppliers to our sites or central depot (upstream transportation and distribution), and the treatment of waste from the future
demolition of properties (end of life treatment of sold products).
Upstream Emissions Distribution and Transportation
For upstream logistics, the limitation is due to availability of reliable data from suppliers and practical data collection
methods that are not unnecessarily time consuming.
Downstream Emissions for Sold Properties
For end-of-life treatment of properties the calculation of emissions arising from the future demolition of property sales
in the year is problematic because the properties have a useful life of around 50 years, most materials would be recycled,
and there is a specific uncertainty around the final release of atmospheric emissions for recycled timber. In accordance
with Corporate Accounting and Reporting Standard (revised edition), sub-sets of downstream emissions relating to sold
products (categories: 9,10,11 and 12) should not be selectively excluded/included (section 6.4). Although categories 9
and 10 are not relevant to the Group’s activities, end of life emissions are and therefore, the estimated the lifetime energy-
related emissions from the sale of residential properties in the year has been excluded from the emissions statement.
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
28 29
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Carbon Intensity Metrics
The statement includes four intensity metrics, one for each segment and an overall Group metric. The Group metric
is based on total Revenue in £million, and for each business segment they are based on the underlying activity that
influences emissions for a given segment, as follows:
• Company is based on the number of full-time equivalent employees (FTE).
• Construction is based on the £millions of work carried out, including the capitalisation of own work. The capitalisation
of our own work is included as this fairly captures the underlying activities which influence carbon emissions.
• Investment property is the current floor area (square feet) under lease, excluding common areas.
The Board considers these metrics to be appropriate and comparable for the sectors in which the Group operates. The
carbon intensity metrics are provided in the table below.
Investment Group
Carbon Intensity Company Construction Property Total
Metric UoM FTE £m sqft £m
YEAR 2023 152 11.7 851,159 6.0
Carbon Intensity tCO
2e/UoM 17 1,207 0.0018 3,049
Climate-Related Risks
From our strategic analysis and risk assessment as outlined on pages 22 to 24 of the financial statements, the most
significant emissions categories (% of total emissions) with associated climate-related risks are summarised as follows:
• Construction Activities - in relation to materials and subcontractors (72.4%)
Risks are primarily associated with transition risks relating to regulatory risks in the Scottish building sector,
the adoption of new technologies, such as green steel and low carbon alternatives for concrete, insulation, and
stakeholder expectations for low carbon buildings. Physical risk is more long-term, with regards to supply of timber.
Consequently, mitigating these risks require us to work closely with the supply chain and the develop skills to work
with new materials and methods.
• General purchases of Goods and Services (12.9%)
At present, the transition risks are not considered to be significantly different to the general economy’s progress
towards a net zero future.
• Energy - in relation to fossil fuels for heating, power and transport across the company (7.4%)
Risks are primarily associated with transition risks relating to movement away from fossil fuels including the
adoption of electric vehicles, the forthcoming low emission zone in Edinburgh and expectations from clients for
energy efficient buildings with renewable energy options for the common areas we control. Physical risks in the
medium-term relate the increase in air temperatures during summer periods which may lead to an increase in energy
demand for air conditioning for offices and site activities, operating plant and welfare units.
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
30 31
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Methodology
The overall methodology for preparing this Greenhouse Gas Emissions statement follows the requirements outlined in
the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (revised edition) with supplementary
guidance provided by Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
The Group’s boundary is based on the equity method of consolidation.
The emissions factors used are generally based on the UK Governments published: UK Government GHG Conversion
Factors for Company Reporting for 2022, and emissions factors used for spend based calculations are sourced from
other reliable sources, such as Ecometrica Emission Factors. The 2022 factors are used as the emissions are prepared
throughout the reporting year and ahead of the publication of the 2023 factors.
Data sources are predominantly from the Group’s accounting records, supplier and contractor records, and other Group
information as required. Specific assumptions and methods for each emissions category are outlined in the supporting
notes below.
Limitations
Notable limitations with the methodology and emissions data are as follows:
• Emissions factors for spend are based on emissions such as purchases have been sourced from Ecometrica. The
original reference data is DEFRA from 2012 onwards, and therefore does not reflect or adjust for any inflationary
impacts in recent years. Spend based emission factors are generic and do not represent the actual emissions of the
Group’s supply chain and are based on sector averages and may have a +/- 60% uncertainty.
• The statement has been prepared on information and data available during the year, and its accuracy is dependent on
the underlying systems and process for record keeping and data management.
With the continual improvement in carbon accounting methodologies and availability of more specific data and recent
carbon factors the impact of these limitations will diminish over time. We are unable to practically estimate the material
impact of these limitations.
The notes below outline more specific areas of uncertainty for each emission category in the segmental analysis table above.
1. Represents the consumption of liquid fuels predominately by construction plant and company vehicles based on
supplier invoices.
2. The consumption of mains supplied natural gas for Group offices and heating for common areas of Investment Properties
where the Group has direct control over its use are based on supplier invoices.
3. Represents the consumption of grid electricity for Group offices and for common areas of Investment Properties where
the Group has direct control over its use are based on supplier invoices.
4. The category for purchased goods and services represents general overheads for the running of the Company and its
Subsidiaries is based on the financial data used to prepare the financial statements. Emissions relating to the purchases of
direct materials and subcontractor services in relation to the Group’s construction activities are calculated and disclosed
separately (see notes 5 and 6 below).
5. Emissions for direct materials used in construction activities are calculated based on hybrid method of quantity of raw material.
6. Emissions for direct materials used in construction activities are calculated based on hybrid method of quantity of raw
material (i.e. tonnage of concrete, m3 of timber), and spend £. For the quantify method applies the appropriate emissions
factor the for the material kgCO
2e per unit of material and for the spend method applies the overall construction factor
(0.494kgCO2e/£). For steel related products the emissions factors are sourced from University of Bath ICE v3.0 August
2019. For the current reporting year, 20% of material spend is based on quantity method, and the remainder based on
spend.
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
30 31
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (continued)
Limitations (continued)
7. Emissions relate to capitalised spend on IT equipment, motor vehicles, plant & equipment, and the refurbishment of the
head office (94.6TCO2e). Capital goods exclude any capitalisation of own work relating to Investment Properties, though
the carbon impact is included within other Scope 3 categories, namely purchased goods and services, and subcontractor
related emissions. For Property Investments, capital goods currently exclude £5,728,000 related to own work capitalised
as it was not practical for this first emissions statement to disaggregate between materials, subcontractors, purchases and
own labour to reliably estimate the emissions associated with these additions to the Investment Property portfolio.
8. This category is based on the consumption of grid electricity (kWh) for transmission losses and distribution and related
WTT emissions for both natural gas and grid electricity consumption (kWh) as obtained for Scope 1 and 2 emissions
respectively.
9. Emissions relate to the waste management of construction waste and waste from arising from the head office. All waste
from Investment Properties is excluded as this is generated and managed by the leasee. Emission factors for each waste
stream are applied to the tonnage collected by authorised waste carriers. For the reporting year, 94.1% of waste generation
was diverted from landfill.
10. For business travel, emissions are calculated from staff monthly mileage claims and the appropriate emissions factor
for the type of vehicle and fuel, along with their associated WTT emissions.
11. In June 2023, the Group conducted a survey of all employees to ascertain the commuting travel patterns by mode
(car, bus, train, cycle and walk). The survey results were extrapolated to estimate the emissions for the FTE employees
who commute using their own vehicles; an effective response rate is estimated at 94%. To calculate car emissions the
factor for average car with unknown fuel was used. Employee commuting excludes homeworking as the reported FTE
are predominantly office based.
12. Corporate Value Chain (Scope 3) Accounting and Reporting Standard (p124), states that ‘proper categorisation of
emissions from leased assets by lessors and lessees ensures that emissions in scopes 1 and 2 are not double counted.
For example, if a lessee categories emissions from the use of purchased electricity as scope 2, the lessor categories the
same emissions as scope 3, and vice versa.’ In this regard, we reasonably expect that some leasees could consider their
direct energy consumption as their Scope 1 and 2 emissions based on their operational use. In addition, to ascertain
the appropriate classification of emissions related to Investment Properties between Scopes 1, 2 and 3 requires a more
thorough examination of the ownership and operational control of underlying assets and activities which generate
emissions. For example, a leasee may own a heating system installed at an industrial unit and thus could be treated as
Scope 3, or in another scenario the leasee controls the purchases of certified renewable electricity. For this reporting
period, the emissions related to electricity and gas have been included in Scope 3 emissions. The emissions are based
on the floor area (square feet) for each leased property in the year multiplied by an appropriate energy benchmark for
different types of building and heating as deduced from: UK Gov (BEIS) Non-Domestic National Energy Efficiency
Data-Framework (ND-NEED) 30 June 2022, and other appropriate sources. From an estimated energy use for electricity
and gas, the emissions factors, as noted in the methodology are applied to result in estimated emissions of 136tCO
2e and
64tCO2e respectively. We recognise there are limitations, unquantifiable, in the benchmark methodology, and will look to
improve this with more specific benchmarks in future years. The emissions exclude life cycle emissions associated with
the construction of the leased asset, any maintenance and repairs are included within other Scope 3 emission categories.
13. Investments reflects Scope 1 and 2 emissions for equities investments managed by third-party fund managers, and
not recorded the Group’s Scope 1 and 2 emissions. The emissions are allocated based on the investee emission ratio
of tCO
2e/£million invested as of 31st July 2023 to the Group equity holding (£millions) in the investee. Carbon data
provided by fund managers is of 31st December 2021. The reported emissions for investments exclude any emissions
related to collective investments and debt investments where currently emission data is not available from fund managers.
Therefore, the reported emissions represent 24% of the total monetary value of all unconsolidated investments held as of
31st July 2023.
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
32 33
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
EMPLOYEES
The Group recognises the contribution of the staff to the success of the Group. The Group operates with a core employee
base who in the main have been with the Group for a considerable length of time and have gained a significant knowledge
of the sectors the Group operates in and of the companies within the Group. Where appropriate the Group promotes from
within whether that be the Directors, staff or site employees. The Group recognises the importance of retaining its core
staff to ensure its future success.
The Group does not have a specific Human Rights policy but it does have policies on recruitment and retention of
employees and communication with employees which are aimed at ensuring employees are fairly treated during their
employment with the Group.
The Group is committed to providing equal opportunities in recruitment and employment, full and fair consideration is given
to all applicants for employment and to all existing employees for promotion. Where employees become disabled during their
employment and are unable to fulfil current duties they are offered suitable alternative employment within the Group, if feasible.
It is the Group’s policy that there should be effective communication with employees at all levels, on matters which affect
their current jobs or future prospects and all Directors and senior staff members make themselves available to all staff
to discuss any matters of concern. In achieving this policy, the Directors are aware of the need to take account of the
practical and commercial considerations of the Group, and the needs of the employees.
A breakdown by gender of Directors, senior managers and all employees is given below:
Male Female
Directors 3 1
Senior Managers 1 1
Total Employees 135 17
32 33
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued) 31st JULY 2023
EMPLOYEES (continued)
Numerical Diversity Data of Board of Directors at 31st July 2023
In accordance with Listing Rule 9.8.6R(10) our gender identity and ethnicity data as per the format set out in LR 9
Annex 2.1 is detailed below. At the year end, the Board of Directors were asked to complete of diversity disclosure
questionnaire to confirm which categories in the tables below they identify with.
Number of senior
Number of positions on the Number in Percentage of
Board Percentage Board (CEO, CFO, executive executive
Gender Identity Members of the Board SID and Chair) management management
Men 3 75% 2 3 75%
Women 1 25% 1 1 25%
Not specified/
prefer not to say - - - - -
Number of senior
Number of positions on the Number in Percentage of
Board Percentage Board (CEO, CFO, executive executive
Ethnic background Members of the Board SID and Chair) management management
White British
or other White
(including minority
- white groups) 4 100% 3 4 100%
Mixed/Multiple
Ethnic Groups - - - - -
Asian/Asian British - - - - -
Black/African/
Caribbean/
Black British - - - - -
Other ethnic group,
including Arab - - -
- -
Not specified/
prefer not to say - - - - -
As at 31st July 2023, our chosen reference date under Listing Rule 9.8.6R(9), the Company states it has not met the
target on Board diversity relating to 40% of the individuals on the Board being women and also in relation to at least one
individual on the Board being from a minority ethnic background. The Company has met the target relating to at least
one women on the Board holding a senior position on the Board. The Board of the Company comprises a relatively small
number of individuals and therefore it is difficult for the Company to comply with the requirements of the Listing Rules
in relation to board diversity.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
16th November 2023 Company Secretary
34 35
David W Smart, Chairman and Joint Managing Director Aged 50
Joined the Company in 1998
Appointed Director in 2010
Appointed Chairman and Joint Managing Director in 2017
John R Smart, Joint Managing Director Aged 53
Joined the Company in 2002
Appointed Director in 2013
Appointed Joint Managing Director in 2017
Alasdair H Ross Aged 61
Joined the Company in 1989
Appointed Director in 2012
Patricia Sweeney Aged 54
Joined the Company in 2011
Appointed Director in 2017
J. Smart & Co. (Contractors) PLC
DIRECTORS
34 35
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE 31st JULY 2023
COMPLIANCE STATEMENT
This statement details how the Company has applied the principles and provisions as set out in the Financial Reporting
Council’s UK Corporate Governance Code issued July 2018 (the Code). A copy of the Code can be review on the
Financial Reporting Council’s website at www.frc.org.uk.
The Board recognises that it has not complied fully with the Code in the areas of appointment of Non-Executive Directors
and the establishment of Nomination, Audit and Remuneration Committees and the re-election of executive Directors. It
also has not complied with the principles relating to division of responsibilities, evaluation of the Board and individual
Directors. The Board considers that due to the nature of the Company including its size, lack of complexity and the
ownership of the Company that to follow all the principles of the Code would be onerous and would provide no discernible
benefit to the Company or shareholders. Full details and explanations of principles and provisions not complied with are
detailed below.
BOARD LEADERSHIP AND COMPANY PURPOSE
The Board of Directors (the Board) is committed to ensuring that it maintains good corporate governance of the Company
so as to achieve the long-term sustainable success of the Company. The Board remains committed to the principles
of openness, integrity and accountability in dealing with the Company’s affairs and believes it has always acted with
probity in the best interests of the Company, its employees, shareholders and stakeholders without recourse to guidance
or instruction from others and fully intends to continue to do so in the future.
The Board which is the executive management of the Company consists of the Chairman who is also one of the two Joint
Managing Directors and two other Executive Directors. The size of the Board results in efficient management of the
Company leading to the long-term sustainability and success of the Company and that the Directors fulfil their statutory
duties under S172 Companies Act 2006. The objectives of the Company as stated in the Strategic Report have been set by
the Board and are reviewed regularly to ensure that they are being met and that adequate financial and human resources
are available to meet these objectives.
The Directors are involved in the day to day management of the Company supported by senior management. The Directors
were all employees of the Company prior to their appointment as a director and therefore have the appropriate skills,
experience in their particular fields and knowledge of the Company and its culture to ensure that the Board discharges
its responsibilities effectively to ensure the continued success of the Company. The detailed involvement in the day to
day management ensures that the Directors interact daily with Company employees and encourage an open approach
to management allowing employees to raise any concerns they have directly with the Directors and ensures that actual
workplace policies and practices align to the Company’s values.
The Directors have ascertained the risks and uncertainties which could impact on the continuing success of the Company
and these are set out in the Strategic Report. The Directors have also established controls with the aim to mitigate these
risks as best as possible. The risks and the controls in place are regularly reviewed and steps are taken as necessary to
adapt the controls as it becomes apparent that changes are needed.
The Chairman always makes himself available to shareholders to answer any queries they may have throughout the year
on matters relating to the governance and performance of the Company and ensures that the views and concerns of the
shareholders are brought to the attention of the Board as a whole.
Decisions are taken by the Board quickly and effectively following ad hoc consultation among the Directors concerned
as matters arise. The Board takes the view that this direct and flexible approach is preferable to the more cumbersome
procedures prevalent in larger organisations and has made a considerable contribution to the Company’s continuing success
and ensures that this approach best serves the interests of the Company, its employees, shareholders and stakeholders.
The Board confirms that it will consider and authorise any conflicts of interest between the Directors and the Company
where there is no detrimental impact to the Company.
36 37
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
BOARD LEADERSHIP AND COMPANY PURPOSE (continued)
The Directors are aware of their responsibilities and duties under S172 Companies Act 2006 to promote the long-term
success of the Company for the benefit of its members whilst having regard to the matters as set out in section 172 (1)
(a)-(f) of the Companies Act 2006. The Directors consider the other stakeholders which are impacted by their decisions
are employees, suppliers, customers, tenants and local communities in which we operate. Whenever decisions are being
made by the Board they take into account the implications these will have on all of these stakeholders.
EMPLOYEES
As stated in the Strategic Report the employees of the Company are an important part of the success of the Company
and the Group overall. The Directors operate an open-door policy whereby any employee can discuss any matters arising
from their employment with any of the Directors. The Managing Directors visit all sites on a weekly basis which allows
all site-based staff to also communicate directly with the Directors on matters they wish to raise. The employees can also
raise any matters with Human Resources.
Health checks for all employees wishing to utilise the service continued in the year and through our private medical
insurance a Health & Wellbeing app is available to employees and regular updates are issued to all employees on
Wellbeing topics.
Employees are sent on relevant training courses to ensure their skills knowledge and training is up to date and particularly
on the sites that all health and safety issues remain a main focus.
We are committed to employing apprentices in the construction trades and currently we have 4 apprentices.
RELATIONS WITH SHAREHOLDERS
The Board has in the past and will continue to enter into dialogue with the shareholders wherever possible. The Chairman
is responsible for ensuring that the views and concerns of the shareholders are communicated to the Board. The Chairman
is also responsible for discussing governance and strategy matters with the shareholders.
We report our performance to the shareholders via our interim 6 monthly accounts, our preliminary announcement of the
year end results and the provision of the statutory financial statements.
All shareholders have the opportunity to attend the Annual General Meeting and to participate in questions and answers
with the Board on matters relating to the Company at the conclusion of the Meeting.
At the Annual General Meeting separate resolutions will be proposed on each substantially separate issue and the number
of proxy votes received for, against and withheld for each resolution will be announced.
SUBSTANTIAL SHAREHOLDERS
As at 31st July 2023 and 16th November 2023, excluding holdings of Directors, the Company has been notified of the
following holdings of substantial voting rights in respect of the issued share capital of the Company:
As at 31st July 2023 Number %
Octet Investments Limited . . . . . . 1,872,400 4.68
Estate of A J Whitehead . . . . . . . 2,311,495 5.77
As at 16th November 2023
Octet Investments Limited . . . . . . 1,872,400 4.71
Estate of A J Whitehead . . . . . . . 2,311,495 5.81
36 37
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
BOARD LEADERSHIP AND COMPANY PURPOSE (continued)
SUPPLIERS AND SUBCONTRACTORS
The Company and Group prefers to use key suppliers and subcontractors which it has existing working relationships with
and therefore is aware of the quality of products and services provided. We are committed to ensuring that all suppliers
and subcontractors are paid within the terms of their supply.
We have continued to support our suppliers and subcontractors by continuing to make payments to them based on standard
industry terms and we have adopted BACS payment methods thus ensuring suppliers receive their payments directly into
their bank on the due date for payment.
Supplies of some materials have proven difficult to obtain and costs continue to increase, however, were possible we have
continued to place orders with the suppliers we would normally use and aim to use local suppliers and subcontractors as
much as possible.
CUSTOMERS AND TENANTS
The main customers of the Group are those which the Group has worked with in the past and we have built up strong
working relationships with them which has resulted in repeat work being awarded to the Group. We maintain dialogue
throughout contracts with our customers to ensure that they are aware of the progress of all contracts and any issues which
may arise can be resolved in a timely manner.
For our private housing customers we have a dedicated sales team based at the development sites who assist the customers
from their initial viewing of properties through to the handing over of the keys to their new home.
Our investment properties are maintained to a high standard with dedicated managers who regularly inspect them and
communicate with tenants regarding any issues they have.
With regards to rental payments from tenants we have continued to allow tenants who are having cash flow issues
resulting from the coronavirus pandemic and now the cost of living crisis to make monthly payments as opposed to the
normal quarterly payments in advance. A number of our tenants have and continue to make use of this arrangement.
COMMUNITIES AND THE ENVIRONMENT
The Group supports the local community by financially supporting local and national charities and providing financial
support to local communities for gala days held for the benefit of the people living in the local area.
The Group complies with all local authority guidance and planning conditions to ensure that all building sites are safe for
employees, subcontractors and suppliers and do not interfere with surrounding neighbours.
As a private house builder we are committed to fulfilling our requirements to provide social housing and financially
contribute to local authorities under Section 75 Agreements for amenities and facilities required to support new housing
developments.
A Sustainability Committee has been established comprising of some executive Board members and senior members of
staff from various departments within the Group with the aim to ensure that the Company and Group review the impact of
climate change on all aspects of the Group’s operations and take appropriate actions to ensure that the impact of climate
change is minimised as much as possible.
The impact of our activities on Greenhouse Gas Emissions is disclosed in the Report of the Directors on pages 9 and 10
and our Report on Task Force on Climate-Related Financial Disclosures is contained in the Strategic Report on pages 20
to 31.
38 39
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
DIVISION OF RESPONSIBILITY
As mentioned above the Chairman of the Board is also one of the Joint Managing Directors who collectively act as the
Chief Executive of the Company. Bearing in mind the size of the Company, the Board sees no value in splitting the role
of Chairman and Managing Director, a policy which has served the Company well over many years. The Chairman is
responsible for the leadership of the Board, ensuring that all the Directors receive accurate, timely and clear information
on issues arising at formal and ad hoc Board meetings, setting Board agendas and ensuring adequate time is given to
discussion of the agenda points.
The Board considers that appointing Non-Executive Directors would increase costs and impose an additional administrative
burden on the Company for no discernible benefit and therefore would serve no useful purpose. As no Non-Executive
Directors have been appointed the Company has not established Nomination, Remuneration or Audit Committees. The
functions of these Committees are undertaken directly by the Board.
As the Company has no Non-Executive Directors then no director has been identified as an Independent Director.
During the year the Board held 6 formal board meetings all of which were attended by all the Directors.
Also, during the year the Directors met regularly on an ad hoc basis to undertake the executive management of the
Company and take decisions on all material matters quickly and effectively but with due care and diligence and therefore
exercising full direction and control of the Company. All Directors openly express their views and make a valuable
contribution to the running of the Company.
Due to the makeup and operation of the Board there is no requirement to formally set out in writing the responsibilities of
the Chairman, Chief Executive or the Board.
All members of the Board have the ability to seek independent professional advice, at the Company’s expense, should they
consider it necessary to enable them to fulfil their duties as a director. All Directors have access to the advice and services
of the Company Secretary, who is responsible for ensuring that Board procedures are followed and that applicable rules
and regulations are complied with.
The Statement of Directors’ Responsibilities is set out on pages 48 and 49.
COMPOSITION, SUCCESSION AND EVALUATION
As the Company has no Non-Executive Directors it has not established a Nomination Committee for the appointment
of Directors. Nominations of new directors are submitted by the Chairman for approval by the Board. All Directors of
the Company are long-serving employees of the Company at the date of nomination and appointment which ensures
that their skills, experience and knowledge are retained within the Company and onto the Board. Although the Group
does not have a specific policy on diversity, due regard is taken of the benefits of all types of diversity onto the Board
when nominations are proposed and also takes into account the skills, experience and professional background of
nominees.
No formal tailored induction upon joining the Board is required given all members of the Board are long-term
employees. As all Board members are full-time employees of the Company they are fully committed to the Company
and are able to allocate sufficient time to the Company in discharging their duties and responsibilities effectively.
There is no formal system of performance evaluation of the Board or the Directors individually. Directors are encouraged
to receive any training they consider necessary to ensure they remain up-to-date with their skills and knowledge of the
Company’s business and that they remain aware of the risks associated with the Company and also are aware of the
regulatory, legal, financial and other developments to enable them to fulfil their roles effectively.
All Directors, with the exception of the Chairman, offer themselves annually for re-election.
As the Chairman is one of the Joint Managing Directors, then the Chair will not retire after the nine years recommended
in the Code.
38 39
AUDIT, RISK AND INTERNAL CONTROL
As the Company has no Non-Executive Directors it has not established an Audit Committee, it is therefore the responsibility
of the Board to ensure the independence and effectiveness of the external audit function.
The Company does not have an internal audit function. The Board reviews the need for this function regularly and has
concluded for the time being that no internal audit function is required.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Directors have sole responsibility for the preparation of the Annual Report and Statement of Accounts which taken
as a whole is fair, balanced and understandable and provides the information necessary for the shareholders to assess the
Company’s performance, business model and strategy. The Directors are also responsible for the preparation of the Interim
Report and other price-sensitive public reports and to ensure that these reports are also fair, balanced and understandable.
The Board is responsible for and annually reviews the Group’s system of internal controls in relation to financial,
operational, compliance and risk management to ensure their continued effectiveness. The systems adopted by the Board
are designed to manage the risks of failure to achieve the Company’s business objectives as opposed to eliminate them,
as any system of control can only provide reasonable but not absolute assurance against material misstatement or loss.
The Strategic Report includes a description of the principal risks and uncertainties faced by the Group and the actions
undertaken by the Group to mitigate these risks.
The Board, in accordance with the Code, has reviewed the effectiveness of the internal controls from the commencement
of the accounting period to the date of approval of the Annual Report and Statement of Accounts. No significant failings or
weaknesses have been identified in that period. There has also been a continual process of identification by the Directors
of key areas of principal and emerging risks within the Group and appropriate action taken to mitigate and monitor such
risks. The Directors confirm that they have carried out a robust assessment of the principal and emerging risks facing
the Group, as detailed in the Strategic Report, including those which threaten the business model, future performance,
solvency and liquidity of the Group.
The main features of the Group’s internal control and risk management systems in relation to the financial reporting process are:
– contracts, development projects, land purchases and acquisition of property, plant and equipment are only
proceeded with after due consideration by the Directors;
− monthly reports for each contract and development project are prepared and reviewed by the Directors;
− subsidiary Company reports are prepared for consideration by the Directors; and
− treasury and cash management are undertaken by the Directors to ensure the Group remains net debt free.
The Board has identified that the interest in its Joint Venture company is a material investment. Both parties to the joint
venture have equal interest in the joint venture and jointly manage it with the regular board meeting being held attended
by both joint venture parties to discuss construction progress and financial position. All decisions are taken relating to
the joint venture between both parties. J. Smart & Co. (Contractors) PLC deals with the day to day administration and
accounting function of the joint venture.
GOING CONCERN AND VIABILITY
In order to ensure the Company and Group have adequate resources to ensure the continuing operations of the Company
and Group for the foreseeable future the Directors consider current and future trading including investment property
acquisitions and disposals and cash requirements. The Directors take account of prevailing market conditions in all areas
of the Group’s activities and use their knowledge and experience relating to the Group’s investment property portfolio.
Currently our construction activities are continuing inline with government legislation and guidance and recoverability
of rents from our tenants remains high. The Directors’ opinion is that the Company and Group have adequate financial
resources to allow the Company and Group to continue in operational existence for a period of at least twelve months
from the date of approval of these financial statements and therefore consider the adoption of the going concern basis as
appropriate for the preparation of these financial statements.
The Directors also consider the viability of the Group over a longer period than twelve months from the date of approval
of these financial statements, being a three-year period from the Statement of Financial Position date. The Directors
statement on this review can be found in the Strategic Report.
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
40 41
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
AUDIT, RISK AND INTERNAL CONTROL (continued)
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
As there is no Audit Committee, it is the responsibility of the Board to consider areas of the financial statements where
there are significant areas of judgement regarding estimates and assumptions, which in turn have a significant effect on the
amounts recognised in the financial statements. In respect of the 2023 financial statements these areas were:
− Investment Property Valuations – the valuation of the investment property portfolio is completed by the Directors. The
valuation of the property portfolio is inherently subjective and requires significant judgements and assumptions to
be made especially around capitalisation yields and future rental streams. Details of impact on the value of the
investment property portfolio incorporated into the financial statements is given in note 15. The Directors appoint
external valuers to value the portfolio to provide a sense check on their valuation. The valuations are discussed with the
Auditor.
− Long-term Contract Valuations and Provisions – the Directors consider contract performance to ensure appropriate
revenue recognition. Future revenue, contract performance and stage of completion of contracts are considered and loss
provisions determined and recognised where necessary. Both costs and revenues may require to be revised as future
events unfold and uncertainties are resolved, which would have a direct impact on overall performance of these
contracts.
− Retirement Benefit Surplus – the valuation of the retirement benefit obligation is dependent upon a series of assumptions
which are determined after the Directors take expert advice from the Group’s Actuary. Changes in these assumptions
could have a material affect on the surplus disclosed in the financial statements, details of the impact of changes in these
assumptions are given in note 30.
The Board discusses fully all issues relevant to the above areas and obtains where possible information and advice from
external experts for consideration by the external Auditor and only when fully satisfied with the amounts associated with
each area are they incorporated into the financial statements.
RELATIONSHIP WITH EXTERNAL AUDITOR
As the Company does not have an Audit Committee, it is the responsibility of the Chairman and the Company Secretary
to maintain an appropriate relationship with the Group’s external Auditor and to review the scope and results of the audit
and its cost effectiveness. The Board is responsible for monitoring and ensuring that the Auditor’s independence and
objectivity is not compromised. The Board takes account of the external Auditor’s own policies and procedures regarding
their integrity and independence and the professional standards they have to adhere to. The Board monitors non-audit
services. The Board is responsible for setting the remuneration of the Auditor.
REMUNERATION
As the Company has no Non-Executive Directors it has not established a Remuneration Committee, it is therefore the
responsibility of the Chairman to fix the remuneration packages of the Directors which are based on the scope of their
duties and responsibilities.
The main components of Directors’ remuneration are detailed in the Directors’ Remuneration Report and consist of
basic salary, benefits and pension contributions based on basic salary only. There are no performance or incentive-based
elements to the Directors’ Remuneration and there are no share award schemes in place.
The Chairman takes account of the remuneration packages of the workforce when determining the level of remuneration
of the Directors, benefits given are in line with those given to employees and all contributions for pension contributions
are at the same rates as those for employees.
No Director has a service contract other than their initial employment contract and therefore periods of notice and
termination payments are structured in accordance with current Employment Law.
40 41
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued) 31st JULY 2023
REMUNERATION (continued)
The remuneration policy, as approved by the shareholders at the 2021 Annual General Meeting, is regarded by the
Chairman as fulfilling the provisions of the Code for:
− Clarity – the policy is clear and understood by all Directors and by our shareholders who approved the policy.
− Simplicity – the remuneration package does not include any complex structures.
− Risk – as there are no performance-based elements to the remuneration it does not promote excessive risk taking by
the Directors.
− Predictability – as there are no performance-based elements to the remuneration the level of remuneration for the
Directors can be predicted with reasonable accuracy.
– Proportionality – remuneration levels are based on duties and responsibilities of the Directors and are not considered
to be excessive.
– Alignment to culture – as there are no incentive schemes the remuneration package is considered to be in line with
the Company’s values and strategy.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
16th November 2023 Company Secretary
42 43
ANNUAL STATEMENT
On behalf of the Board of Directors, I present the Directors’ Remuneration Report for the year ended 31st July 2023.
In addition to this statement the Report includes two other parts being the Policy Report and the Annual Report on
Remuneration, which have been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8
of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The
Report also meets the requirements of the UK Listing Authority’s Listing Rules and the Disclosure and Transparency Rules.
The Policy Report has been developed taking account of the principles of the UK Corporate Governance Code 2018.
The shareholders approved the previous Policy at the 2021 Annual General Meeting and the policy was effective for three
years from that date.
The Annual Report on Remuneration will be subject to a vote at the 2023 Annual General Meeting. Our Auditor is
required to report to the shareholders on certain information contained in the Annual Report on Remuneration and that it
has been prepared in accordance with the Act and the Regulations. The information to be audited is appropriately marked.
There have been no substantial changes to Executive Directors’ remuneration in the year. Our policy continues to be to provide
remuneration packages that will retain and motivate the Directors to sustain the long term growth and value of the Company.
DaviD w Smart
16th November 2023 Chairman
THE POLICY REPORT
As stated in the Corporate Governance Statement the Company does not appoint Non-Executive Directors and therefore
the Company does not have a Remuneration Committee to set the Executive Directors’ Remuneration Policy. The
Chairman fulfils the function of the Remuneration Committee.
The Company’s remuneration policy is to provide remuneration packages that will retain and motivate the Directors to sustain
the long term growth and value of the Company and is based on the scope of their duties and responsibilities. The Directors
are not entitled to any performance related remuneration, long term incentive schemes or share options. The remuneration
of the Directors is not performance related therefore no element of their remuneration is based on performance measures.
The policy table below summarises the main components of Directors’ Remuneration:
ELEMENT PURPOSE AND STRATEGY OPERATION
BASE SALARY
To pay a fair salary commensurate with the individual’s
role, responsibilities and experience.
Reviewed annually in July taking account of the
individual’s role and experience and the salary increases
of employees throughout the Group as a whole. No
maximum level is set.
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT 31st JULY 2023
42 43
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued) 31st JULY 2023
THE POLICY REPORT (continued)
ELEMENT PURPOSE AND STRATEGY OPERATION
BENEFITS
PENSION
The Chairman retains the right to make minor amendments to the above policy, to take account of regulatory, tax,
legislative or administrative changes without obtaining shareholder approval for these amendments.
No share options or long term incentive schemes are operated by the Company.
Directors are entitled to claim relevant expenses incurred by them in respect of their duties.
There are no provisions for the recovery of sums paid to Directors or the withholding of the payment of any sums to
Directors.
As all remuneration of Directors is fixed remuneration there is no need to illustrate, via a bar chart, the expected values
of proposed remuneration as it does not contain any elements based on performance and therefore is not subject to
change based on either the Company’s or Director’s performance.
APPROACH TO RECRUITMENT OF DIRECTORS
The Company’s approach to appointing new Executive Directors is to appoint from within the Company. As such
the remuneration of the Director has already been set by the Company and the package held by the employee prior to
appointment as a Director will remain in place. Consideration will be made of the increased duties and responsibilities
that will apply post appointment as a Director and revision to their base salary may be made to reflect this.
SERVICE CONTRACTS AND POLICY ON CESSATION
No Director has a service contract with the Company, other than their initial employment contract and therefore periods
of notice and termination payments are structured in accordance with current Employment Law. As a result of there
being no service contracts no report under Listing Rules LR9.8.8R is required.
CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN COMPANY
The Chairman when considering the remuneration of the Executive Directors takes into account the remuneration
of employees across the Group as a whole. However, the Chairman does not consult directly with employees on the
remuneration of the Executive Directors but is mindful of salary increases which are applied across the Group as a
whole.
To provide appropriate levels of retirement benefits. Depending on when a Director first became an
employee of the Company will determine whether they
are members of the Company’s Defined Benefit Pension
Scheme or Defined Contribution Scheme.
Company contributions to the Defined Benefit Scheme
are currently 35.4% of base salary. Contribution levels
are set in agreement between the scheme trustees and
the Company and can therefore vary from time to time.
Company contributions to the Defined Contribution
Scheme are currently a minimum of 10% of base salary.
To provide support to enable the Directors to carry out
their duties effectively.
Benefits include cash in lieu of a company car and
private medical insurance. No maximum level is set
as the costs of providing benefits fluctuate over time;
however the costs are monitored to ensure they remain
reasonable.
44 45
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued) 31st JULY 2023
THE POLICY REPORT (continued)
CONSIDERATION OF SHAREHOLDER VIEWS
The Chairman considers all views and concerns he receives from shareholders especially at the Annual General Meeting
when shareholders have the opportunity to ask questions of the Board on all matters relating to the Company including
Directors’ Remuneration, or at any other time throughout the year.
Although no direct communication was held by the Chairman with major shareholders prior to shaping the Remuneration
Policy he believes that it is a responsible approach to remuneration and its policies in the past and for the future as
evidenced by the level of approval of the 2022 Directors’ Remuneration Report at the 2022 Annual General Meeting,
details of which are given in the Annual Report on Remuneration below.
ANNUAL REPORT ON REMUNERATION
The following provides details of how the remuneration policy was implemented in the year to 31st July 2023.
Single Total Figure of Remuneration for Executive Directors (Audited Information)
The following table presents the single figure for the total remuneration of each Executive Director for the year ended
31st July 2023 and the prior year:
Taxable
Salary Benefits
1
Pension Total
£000 £000 £000 £000
David W Smart 90 6 96 88
2023 . . . . . . . 124 10 (13)
2
121
2022 . . . . . . . 119 10 (29)
2
100
John R Smart
2023 . . . . . . . 124 10 16 150
2022 . . . . . . . 119 10 15 144
Alasdair H Ross
2023 . . . . . . . 124 10 (24)
2
110
2022 . . . . . . . 119 10 (7)
2
122
Patricia Sweeney
2023 . . . . . . . 124 10 16 150
2022 . . . . . . . 119 10 15 144
1. Taxable benefits consist of cash in lieu of company car and private medical insurance.
2. Pension value represents the cash value of pension accrued over one year multiplied by 20 in line with new regulations with allowance for inflation and employee contributions.
44 45
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued) 31st JULY 2023
ANNUAL REPORT ON REMUNERATION (continued)
DIRECTORS’ PENSION ENTITLEMENTS
David W Smart and Alasdair H Ross are members of the Company’s Defined Benefit Pension Scheme whilst
John R Smart and Patricia Sweeney are members of the Company’s Group Personal Pension Plan.
The Company’s Defined Benefit Pension Scheme was closed to new members in 2003. The normal date of retirement
based on the scheme rules is 65 and there is no automatic entitlement to early retirement. Contributions by the employer
under the scheme are 35.4% of pensionable salary.
Accrued pension Accrued pension
as at 31 July 2023 as at 31 July 2022
£000 £000
David W Smart . . . . . . . 50 47
Alasdair H Ross . . . . . . . 62 59
SCHEME INTEREST AWARDS (AUDITED INFORMATION)
There were no scheme interests awarded in the year.
PAYMENTS TO PAST DIRECTORS (AUDITED INFORMATION)
No payments were made to past Directors in the year.
PAYMENTS FOR LOSS OF OFFICE (AUDITED INFORMATION)
No payments for loss of office were made to Directors in the year.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED INFORMATION)
The Company has no policy that Directors are required to own shares in the Company, although all Directors are currently
shareholders of the Company.
The interests of the Directors in the ordinary shares of the Company, including beneficial interests, are shown in the table
below:
Beneficial holdings
(including interests of the Director’s connected persons)
4 Dec er 2020 31 July 2023 31July 2022
David W Smart . . . . . 782,750 12,782,750 12,782,750
John R Smart . . . . . 782,750 12,782,750 12,782,750
Alasdair H Ross . . . . . 150,000 150,000 150,000
Patricia Sweeney . . . . . 150,000 150,000 150,000
There have been no changes in any Directors’ beneficial holdings between 31st July 2023 and 16th November 2023.
46 47
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued) 31st JULY 2023
ANNUAL REPORT ON REMUNERATION (continued)
PERFORMANCE GRAPH
The graph below shows a comparison of the total shareholder return for the Company’s shares for each of the last ten
financial years against the total shareholder return for the companies comprised in the FTSE EPRA/NAREIT UK index
which the Company deems to be the most relevant to the Company as it includes companies in the same sector as the
Company.
The graph compares the value of £100 invested in J. Smart & Co. (Contractors) PLC, including re-invested dividends.
Total Shareholder Return over the last ten financial years
GROUP MANAGING DIRECTORS TOTAL REMUNERATION
The following table details each of the Managing Directors their single figure of remuneration over the last ten financial
years:
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
David W Smart 179 121 100 144 179 177 154 148 166 165 207
John R Smart 140 150 144 140 140 136 133 130 126 122 115
John M Smart 86 115 115 119 133
GROUP MANAGING DIRECTORS CHANGE IN REMUNERATION
The following table compares the change in remuneration of the Group Managing Directors and that of the remuneration
of the Group’s salaried employees. This group of employees was chosen as it represents the most comparable group.
Managing Directors Other employees
% change 2022-2023 % change 2022-2023
Base salary . . . . . 7.34 % 16.94 %
Taxable benefits . . . . 4 % 3 %
J Smart & Co (Contractors) PLC
FTSE EPRA / NAREIT UK Index
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
£
200
180
160
140
120
100
80
60
40
20
0
46 47
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued) 31st JULY 2023
ANNUAL REPORT ON REMUNERATION (continued)
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table compares the total spend on remuneration of all employees of the Group, including Executive
Directors, and the total amounts paid in distributions to shareholders for the years to 31st July 2023 and 31st July 2022:
Difference in Difference as a
2023 2022 spend percentage
£000 £000 £000 %
Remuneration of employees . . . 8,085 8,154 (69) (0.9
Total distributions paid . . . 2,656 3,097 (441) 14.2
(being dividends and share buy backs)
IMPLEMENTATION OF EXECUTIVE DIRECTOR REMUNERATION POLICY FOR 2024
After taking into consideration Group employees’ salary increases for the year to 31st July 2024, an increase of 6% of
base salary was awarded to all Directors.
Base salary from 1st July 2023 Base salary from 1st July 2022
£ £
David W Smart . . . . . . . 131,250 123,800
John R Smart . . . . . . . 131,250 123,800
Alasdair H Ross . . . . . . . 131,250 123,800
Patricia Sweeney . . . . . . . 131,250 123,800
CONSIDERATIONS BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION
The Chairman is responsible for determining Directors’ Remuneration. No advice was sought in the year in considering
Directors’ Remuneration.
SUMMARY OF SHAREHOLDER VOTING AT THE 2022 ANNUAL GENERAL MEETING
The 2022 Directors’ Remuneration Report was put to the shareholders for their approval at the 2022 Annual General
Meeting. The resolution was passed on a show of hands.
Details of the proxy votes lodged, including those at the discretion of the Chairman, are as follows:
Total number % of votes cast
of votes
For . . . . . . . . . 26,743,595 100
Against . . . . . . . . . 2,954 –
Total votes cast (excluding votes withheld) . . . . . 26,746,549 100
Votes withheld . . . . . . . . . 8,124
Total votes cast (including votes withheld) . . . . . 26,754,673
Votes withheld are not included in the proxy figures as they are not recognised as a vote in law.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
16th November 2023 Company Secretary
48 49
J. Smart & Co. (Contractors) PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 31st JULY 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND STATEMENT OF ACCOUNTS
The Directors are responsible for preparing the Annual Report and Statement of Accounts in accordance with
international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements and have elected to prepare the company financial statements
in accordance with international accounting standards in conformity with the requirements of the Companies Act
2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group and
Company for that period. The Directors are also required to prepare financial statements in accordance with UK
adopted international accounting standards.
In preparing these financial statements, the Directors are required to:
− select suitable accounting policies and then apply them consistently;
– make judgements and accounting estimates that are reasonable and prudent;
– state whether they have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the
financial statements;
– state whether they have been prepared in accordance with UK adopted international accounting standards,
subject to any material departures disclosed and explained in the financial statements;
– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
will continue in business; and
– prepare a Report of the Directors, a Strategic Report and Directors’ Remuneration Report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual
Report and Statement of Accounts, taken as a whole, are fair, balanced, and understandable and provides the information
necessary for shareholders to assess the Group’s performance, business model and strategy.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the Annual Report and Statement of Accounts 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.
48 49
J. Smart & Co. (Contractors) PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES (continued) 31st JULY 2023
DIRECTORS’ RESPONSIBILITES PURSANT TO DTR4
The Directors confirm to the best of their knowledge:
− The financial statements have been prepared in accordance with UK adopted international accounting standards
and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and
Company.
– The Annual Report and Statement of Accounts includes a fair review of the development and performance of
the business and the financial position of the Group and Company, together with a description of the principal
risks and uncertainties that they face.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
16th November 2023 Company Secretary
50 51
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT 31st JULY 2023
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF J. SMART & CO. (CONTRACTORS) PLC
OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31st July 2023 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
• the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of J. Smart & Co. (Contractors) PLC (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31st July 2023 which comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated and Company Statement of Changes in Equity, Consolidated and
Company Statement of Financial Position, Consolidated and Company Statement of Cash Flows and notes to the financial
statements, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and UK adopted international accounting standards and as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Board. .
INDEPENDENCE
We were appointed by the Board on 28th January 2021 to audit the financial statements for the year ending 31st July 2021
and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments
is three years covering the years ending 31st July 2021, 31st July 2022 and 31st July 2023. We remain independent of the
Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard
were not provided to the Group or the Parent Company.
50 51
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and
the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
• Evaluation of the Directors’ assessment in respect to their ability to continue as a going concern for at least twelve
months from the date of this Annual Report. This included checking the mathematical accuracy of the models used;
• Evaluation and challenge of the Directors’ key assumptions, cash flow projections and judgements made in respect to
their going concern assumption. We did this by considering the appropriateness of the assumptions and judgements
made by the Directors, based on our understanding of the business and challenging the Directors as to the accuracy
of these assumptions and judgements relative to the equivalent metrics actually achieved in the recent history of the
Group’s performance. We challenged these based on our understanding of the business in respect to construction
contracts won, ability to deliver these within agreed timeframes and the probability of the cash flows materialising.
We evaluated the Directors’ sensitivity analysis for appropriateness and performed our own sensitivity analysis based
on our own assumptions and judgements comparing results to the Directors’ outcomes;
• We performed stress tests to identify key areas that would cause the Group to fail and assessed the likelihood of these.
We performed these sensitivities by identifying what key indicators such as revenue, cash and profit would need to
reduce by before the Group would no longer have the ability to repay it’s debts as they became due. We considered
new construction contracts and private housing sales to be some of the main assumptions made by management and
duly sensitised these by assuming much reduced trading profit to determine whether the Group had sufficient cash
and reserves to absorb any such reasonable downside scenarios;
• We performed ratio analysis to identify key risk areas in relation to going concern;
• We performed procedures to identify unrecorded liabilities that may exist in the Group. These procedures included
inspection of Director meeting minutes, post year end payments and invoice sampling, inspection of correspondence
with management’s legal advisors including obtaining confirmation of no material claims or litigations of which
we were not aware, as well as challenging new contracts taken out in the year to identify any unrecorded liabilities
or conditions not otherwise met by the Group. This included testing the Directors’ ability to forecast by comparing
previous forecasts to actual outturns and current year forecasts to post year end positions achieved and corroborating
evidence such as quoted costs, especially in relation to construction contracts to identify any potentially material
forecasting errors.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as
a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
52 53
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
OVERVIEW
Coverage 100% (2022: 100%) of Group profit before tax
100% (2022: 100%) of Group revenue
94% (2022: 94%) of Group total assets
2023 2022
Key audit matters Revenue recognition ✓ ✓
Valuation and recoverability of defined
pension benefit scheme ✓ ✓
Valuation of investment properties ✓ ✓
Materiality Group financial statements as a whole
£1,300,000 (2022: £1,200,000) based on 0.88% (2022:0.82%) of total assets
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed
the risk of management override of internal controls, including assessing whether there was evidence of bias by the
Directors that may have represented a risk of material misstatement.
The Group manages its operations from a central location in the UK and has common financial systems, processes and
controls covering all significant components.
In assessing the risk of material misstatement in the Group financial statements, and to ensure we obtained adequate
quantitative coverage of significant categories of balances in the Annual Report and Statement of Accounts, we determined
that two significant components, J. Smart & Co. (Contractors) PLC and Thomas Menzies (Builders) Limited, represented the
principal business units within the Group. A full scope audit was undertaken on these components by the Group audit team.
In addition, we performed specific procedures on the investment property balance and revenue of C. & W. Assets Limited.
We did not scope in the entire C. & W. Assets Limited subsidiary on the basis that only these two balances form the
significant risk and value areas of the subsidiary with all other balances not being significant from a Group perspective.
The Group audit team performed analytical procedures in respect of the financial information of the non-significant
components and obtained further reasoning for movements exceeding a pre-determined threshold. In addition, we
performed specific procedures over risk areas such as revenue, journals and construction costs in respect to these
insignificant components by testing a statistical sample of these balances to corroborating evidence, focussing on the cut-
off of transactions and manual journals.
52 53
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
CLIMATE CHANGE
Our work on the assessment of potential impacts on climate-related risks on the Group’s operations and financial
statements included:
• Enquiries and challenge of management to understand the actions they have taken to identify climate-related risks
and their potential impacts on the financial statements and adequately disclose climate-related risks within the annual
report;
• Our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate
change affects this particular sector; and
• Review of the minutes of Board meetings and other papers related to climate change and performed a risk assessment
as to how the impact of the Group’s commitment as set out in the Strategic Report may affect the financial statements
and our audit.
We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives
and commitments have been reflected, where appropriate, in the Directors going concern assessment and viability
assessment.
We also assessed the consistency of managements disclosures included as ‘Statutory Other Information’ in the Strategic
Report with the financial statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by
climate-related risks and related commitments.
54 55
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
KEY AUDIT MATTER
How the scope of our audit addressed the key audit matter
REVENUE
RECOGNITION
(Note 1 and 3)
The Group’s revenue is
generated from construction and
investment property activities.
These activities result in revenue
that is derived from construction
contracts, the sale of private
housing and investment property
rental revenue.
Revenue from construction
contracts (disaggregated
into Social Housing, Civil
Engineering, Industrial and
General Construction in note 3)
is recognised based on different,
individual, commercial contract
terms. This includes areas of
judgement such as when to
recognise the right to revenue
arising from the value of work
performed based on valuations
and the identification and
recognition of losses in respect to
loss making contracts.
Given the nature and complexity
of construction revenue and its
importance to the activities of the
business, we considered there to
be a significant risk of material
misstatement arising in respect of
the completeness, accuracy, cut-
off and existence of incomplete
construction revenue contracts.
As a result, we considered
the revenue recognition from
incomplete construction revenue
contracts to be a key audit
matter.
We reviewed the revenue accounting policies and practices
as well as the basis of material recognition estimates for
consistency of application and whether they were in accordance
with the requirements of the applicable accounting standards.
We tested the Group’s material revenue streams individually
according to their characteristics, performing detailed testing,
as articulated in the following paragraphs below, of a sample
of contracts during the year based on pre-determined metrics
(related to contribution to revenue and profit) designed to
address higher risk contracts and areas of judgement, as well as
an additional unpredictable sample of contracts.
We engaged in detailed discussions with the relevant
commercial directors and other key individuals in ascertaining
and verifying the judgements made for each contract. As
part of this process, we critically assessed and challenged the
recognition of revenue and profit by reference to costs incurred
to total costs as well as valuations performed at year end in
comparison to our site attendance and other corroborating
evidence such as the revenue contract agreement, testing of
material variations and claims, as well as year-end payment
certificates and cash received. This also included testing
the recoverability of contract balances and trade debtors,
certification of works and billing by matching the year end
balance to post year end receipts, where material to test.
Through our audit work we obtained an understanding of the
key estimates taken by management around these contracts
and sought detailed explanations and support for judgements
taken, in particular where material claims for variations
had been recognised. We then obtained evidence to support
recoverability of these variations or claims by reference to
customer agreement as well as cash payment of these variations
and, where appropriate, consulted with management’s experts
(in the form of Quantity Surveyors and Commercial Directors)
to gain an understanding of the basis for the judgements made.
We reviewed legal correspondence relating to significant
claims and variations to identify evidence contrary to our
understanding and management’s judgements. Our revenue and
contract profit recognition testing focused on the timing of and
amounts recognised in respect of any variable income to check
that it is improbable that a significant reversal of amounts
recognised will occur.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
54 55
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
KEY AUDIT MATTER
How the scope of our audit addressed the key audit matter
REVENUE
RECOGNITION
(continued)
We agreed the calculations underlying the estimate of costs
to complete in relation to ongoing contracts to supporting
agreements and documentation.
For a sample of projects, we carried out site visits to improve
our understanding of the projects and their risk and attended
contract review meetings to understand the process and
challenges identified.
As part of testing of construction contracts, we also
agreed a sample of applications for payment to customer
correspondence and agreed a sample to cash receipt.
We checked that costs had been appropriately allocated to
a particular contract, including the application of payroll,
subcontractor and purchasing costs by sampling all costs in
the year over all contracts and checking that the corroborative
evidence obtained in relation to these samples supported the
allocation of the cost to the particular contract being tested.
As part of our detailed testing, we reviewed post year end
performance of contracts to corroborate estimates taken at
the year-end in respect of costs expected to be incurred and
challenged assumptions which appeared inconsistent with
actual post year end performance. This included assessing the
reliability of management estimates considering the positions
adopted in previous years compared to actual outturn.
Key observations
Based on our procedures we found management’s judgements
in respect of revenue recognition to be appropriate.
KEY AUDIT MATTERS (continued)
56 57
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
KEY AUDIT MATTER
How the scope of our audit addressed the key audit matter
VALUATION AND
RECOVERABILITY
OF DEFINED
BENEFIT PENSION
SCHEME NET
ASSET
(Note 1 and 30)
The Group has a defined
benefit pension scheme.
The pension valuation
is dependent on market
conditions and key
assumptions made by
management, relating to
investment markets, discount
rate, inflation expectations and
life expectancy assumptions.
The Group has recognised
the full scheme surplus which
represents another area of
significant judgement.
The defined benefit pension
scheme obligation represented
a key audit matter given that
the setting of the assumptions
is complex and requires
the exercise of significant
management judgement
with the support of third
party actuaries. The related
sensitivities of any changes in
assumptions are disclosed in
note 30.
In testing the pension valuation, we utilised pension actuarial
experts to review the key actuarial assumptions used, both
financial and demographic, and in conjunction with our experts
considered the appropriateness of the methodology utilised to
derive these assumptions.
We benchmarked the scheme assumptions against publicly
available published data. Specifically, we challenged the
discount rate, inflation and mortality assumptions applied in
the calculation with the assistance of our pension experts in
benchmarking the assumptions applied against comparable
third party data and assessing the appropriateness of the
assumptions in the context of the Group’s own position. We
performed sensitivity analysis on the assumptions determined
by the Directors.
We considered the recoverability of the surplus to gain
assurance that the Group has an unconditional right to recover
the asset. We have seen legal confirmation that the Group has
unconditional right to the scheme surplus and challenged this
by reference to the Trust Deed, to determine whether this is
appropriate.
We confirmed the competence, independence and ability
to perform the work of the third-party actuaries used by
management by obtaining independence confirmations as well
as checking that they are qualified actuaries.
We assessed the disclosure of the net pension asset and the
related assumptions and sensitivities in the financial statements
against the relevant accounting framework and the findings of
our work.
Key observations
We have not identified any evidence to suggest that the
methodology and assumptions applied in relation to
determining the pension valuation are not within an acceptable
range.
KEY AUDIT MATTERS (continued)
56 57
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
KEY AUDIT MATTER
How the scope of our audit addressed the key audit matter
VALUATION OF
INVESTMENT
PROPERTIES
(Note 1 and 15)
The Group has a significant
portfolio of investment property.
Judgement is required by
management in terms of the
assessment of the effect on the
valuation of the individual nature
of each property, its location,
expected future rental income,
tenure and tenancy profiles,
prevailing market yields and
comparable market conditions.
Input inaccuracies or
unreasonable bases used in these
assumptions could result in a
material misstatement in the
financial statements.
This area represented a key audit
matter given that the setting of
these assumptions is complex
and requires the exercise
of significant management
judgement with the support of
third party valuation experts.
We audited the investment property portfolio, with the
assistance of our experts, who are independent 3rd party
RICS valuers. Our independent experts reviewed a sample
of the investment property portfolio valuations in order to
assess the key assumptions used, considered the methodology
utilised to derive these assumptions and the appropriateness
of the valuation technique used.
We performed detailed testing on a sample of properties,
agreeing the key aspects such as the nature of each property,
its location, expected future rental income, tenure and
tenancy profiles and prevailing market yields to corroborating
documentation, to check that the valuations are based
on accurate and reliable information in relation to those
properties.
A sample of additions to investment properties were agreed
to legal documentation and all properties at year end were
agreed to the prior year listing to confirm the completeness of
the portfolio. We performed further tests such as inspection
of Director meeting minutes and post year end receipts to
identify any unrecorded disposals. A sample of properties was
physically inspected by our audit experts.
We confirmed the competence, independence and ability to
perform the work of the third party valuation experts used
by management by obtaining independence confirmations as
well as checking that they are qualified valuers.
Assumptions made by management in their valuation, such
as rental amounts and yields, were challenged by agreeing a
sample of these assumptions to corroborating evidence in the
form of rental contracts and engagement of our own experts
to assist in reviewing these, to consider whether they are
appropriate.
The completeness and accuracy of disclosure in the financial
statements were checked with reference to our knowledge
obtained during the audit and the requirements of the relevant
accounting standards.
Key observations
We have not identified any evidence to suggest that the
methodology and assumptions applied in relation to
determining the investment properties valuation are not
within a tolerable range. Based on our procedures we found
management’s valuation in respect of investment properties to
be appropriate.
KEY AUDIT MATTERS (continued)
58 59
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
Group financial
statements
Group financial
statements
Parent company
financial statements
Parent company
financial statements
2023
£
2022
£
2023
£
2022
£
Materiality £1,300,000 £1,200,000 £173,000 £200,000
Basis for determining
materiality
0.88% of total assets at
the year end
0.82% of total assets at
the year end
0.33% of total assets at
the year end.
0.54% of total assets at
the year end.
Rationale for the
benchmark applied
We consider this
to be the principal
consideration in
assessing the financial
performance of the
Group as the Group
considers total assets to
be its key performance
indicator, which
demonstrates less
volatility than other
performance measures.
We consider this
to be the principal
consideration in
assessing the financial
performance of the
Group as the Group
considers total assets to
be its key performance
indicator, which
demonstrates less
volatility than other
performance measures.
We consider this
to be the principal
consideration in
assessing the financial
performance of the
Parent Company as
the Parent Company
considers total assets to
be its key performance
indicator, which
demonstrates less
volatility than other
performance measures.
We consider this
to be the principal
consideration in
assessing the financial
performance of the
Parent Company as
the Parent Company
considers total assets to
be its key performance
indicator, which
demonstrates less
volatility than other
performance measures.
Performance
materiality
£910,000 £840,000 £121,000 £140,000
Basis for determining
performance
materiality
70% of the above
materiality thresholds
to address the
expected total value
of known and likely
misstatements, our
knowledge of the
Group’s internal
controls and
management’s attitude
towards proposed
adjustments.
70% of the above
materiality thresholds
to address the
expected total value
of known and likely
misstatements, our
knowledge of the
Group’s internal
controls and
management’s attitude
towards proposed
adjustments.
70% of the above
materiality thresholds
to address the
expected total value
of known and likely
misstatements, our
knowledge of the
Parent Company’s
internal controls and
management’s attitude
towards proposed
adjustments.
70% of the above
materiality thresholds
to address the
expected total value
of known and likely
misstatements, our
knowledge of the
Parent Company’s
internal controls
and management’s
attitude towards
proposed adjustments.
58 59
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
OUR APPLICATION OF MATERIALITY (continued)
Component materiality
We set materiality for the remaining significant component of the Group, apart from the Parent Company whose
materiality is set out above, based on a percentage of 4.62% (2022: 7.5%) of Group materiality dependent on the size
and our assessment of the risk of material misstatement of this component. Component materiality for this component
was £60,000 (2022: £90,000). In the audit of this component, we further applied performance materiality levels of 70%
(2022:70%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality
was appropriately mitigated.
Reporting threshold
We agreed with the Board that we would report to them all individual audit differences in excess of £39,000, (2022:
£36,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative
grounds.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the
Annual Report and Statement of Accounts other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Parent Company’s compliance with the provisions of the UK
Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
GOING CONCERN
AND LONGER-TERM
VIABILITY
• The Directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified set out on page 39; and
• The Directors’ explanation as to its assessment of the Group’s prospects, the period this
assessment covers and why the period is appropriate set out on page 39.
OTHER CODE
PROVISIONS
• Directors’ statement on fair, balanced and understandable set out on page 39;
• Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks set out on pages 39 and 40;
• The section of the Annual Report that describes the review of effectiveness of risk
management and internal control systems set out on pages 39 and 40; and
• The section describing the work of the Audit Committee set out on page 38. As set out on
page 38 to 40 the Directors consider it impracticable to have an Audit Committee for the
Group.
60 61
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
STRATEGIC REPORT
AND REPORT OF
THE DIRECTORS
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Report of the Directors for the
financial year for which the financial statements are prepared is consistent with the
financial statements; and
• the Strategic Report and the Report of the Directors have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements
in the Strategic Report or the Report of the Directors.
DIRECTORS’
REMUNERATIONS
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
CORPORATE
GOVERNANCE
STATEMENT
In our opinion, based on the work undertaken in the course of the audit the information about
internal control and risk management systems in relation to financial reporting processes and
about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure
Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the
FCA Rules), is consistent with the financial statements and has been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements
in this information.
In our opinion, based on the work undertaken in the course of the audit information about
the Parent Company’s corporate governance code and practices and about its administrative,
management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and
7.2.7 of the FCA Rules.
We have nothing to report arising from our responsibility to report if a corporate governance
statement has not been prepared by the Parent Company.
MATTERS ON
WHICH WE ARE
REQUIRED TO
REPORT BY
EXCEPTION
We have nothing to report in respect of the following matters in relation to which 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 and the part of the Directors’ Remuneration
Report to be audited 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.
60 61
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Non-compliance with laws and regulations
Based on:
• Our understanding and accumulated knowledge of the Group and its subsidiaries and the sector in which it operates;
• Discussion with management and those charged with governance as well as the Board; and
• Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations,
we considered the significant laws and regulations to be the applicable accounting framework, UK corporate tax, VAT
and employment tax legislation.
The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect
on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We
identified such laws and regulations to be the Health and Safety legislation, UK Companies Act 2006, industry related such
as regulations impacting the construction industry, and the Listing Rules.
Our procedures in respect of the above included:
• Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and
regulations;
• Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and
regulations;
• Review of financial statement disclosures and agreeing to supporting documentation;
• Involvement of tax specialists in the audit; and
• Review of legal expenditure accounts to understand the nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment
procedures included:
• Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
• Obtaining an understanding of the Group’s policies and procedures relating to:
o Detecting and responding to the risks of fraud; and
o Internal controls established to mitigate risks related to fraud.
• Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
• Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
• Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted
by these; and
• Involvement of our forensics specialists in identifying key risk areas susceptible to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls,
revenue recognition (cut-off) relating to construction contract revenue and construction related activities such as supplier
changes, petty cash misappropriation, manipulation of expense accounts and related collusion.
62 63
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued) 31st JULY 2023
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (continued)
Our procedures in respect of the above included:
• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular
in relation to the recognition of revenue, the assumptions and estimates used in the valuation of investment property
and the defined pension benefit scheme net asset (for more information on how we audited these areas, refer to the
“Key audit matters” section above). We sought to identify any areas of management bias by corroborating these
estimates and judgements and challenging management as to their appropriateness based on third party empirical
evidence, recalculating management’s estimate, following up on information in relation to estimates to the date of
issue as well as in some cases developing our own estimate range and comparing this to management’s estimate;
• Designed targeted audit tests to address the areas identified at the planning stage with our forensic specialists which
included:
o testing a sample of capitalised assets in order to identify those that should not have been capitalised based on
recognition criteria of the applicable accounting standards;
o maintaining awareness of the possibility of money laundering in construction contracts;
o testing of unusual cash payments identified through use of our data analytics software to corroborating evidence;
o comparison of bank accounts between suppliers and payroll in order to identify any duplicates;
o reviewing supplier transactions to identify unusual items and testing those items that meet a pre-determined
threshold to corroborating evidence;
o testing supplier changes to corroborating evidence to identify unauthorised or potentially fraudulent changes;
o reviewing petty cash movements in order to identify any large or unusual items which could be indicative of
potentially fraudulent payments and testing these to corroborating evidence where identified.
• In response to the risk of fraud in revenue recognition relation to cut-off, we performed the procedures set out in the
key audit matters section of the report;
• Identifying and testing journal entries to corroborating evidence, in particular journal entries posted with specific
keywords, manual journals to revenue and cash, journals posted by individuals with certain system access levels and
an unpredictable sample of journals; and
• Testing of payroll calculations and payments to identify potential fraud and in order to incorporate unpredictability
into our testing by checking those processors of payroll only received what is contractually due to them with reference
to their employment contracts.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
aliStair rae (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Edinburgh, UK
16th November 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
62 63
Notes | 2023 | 2022 | ||||||||||
£000 | £000 | |||||||||||
| Restated | ||||||||||||
| Note 1 | ||||||||||||
| REVENUE | . | . | . | . | . | . | . | . | 3 | |||
Cost of sales | . | . | . | . | . | . | . | . | ( | ( | ||
GROSS PROFIT | . | . | . | . | . | . | . | . | ||||
Other operating income | . | . | . | . | . | . | 4 | |||||
Administrative expenses | . | . | . | . | . | . | ( | ( | ||||
| OPERATING PROFIT BEFORE PROFIT ON SALE AND NET (DEFICIT)/SURPLUS | ||||||||||||
ON VALUATION OF INVESTMENT PROPERTIES | . | . | . | . | ||||||||
Profit on sale of investment properties | . | . | . | . | ||||||||
Net (deficit)/surplus on valuation of investment properties | . | . | 15 | ( | ||||||||
OPERATING (LOSS)/PROFIT | . | . | . | . | . | . | 6 | ( | ||||
Share of (loss)/profits in Joint Ventures | . | . | . | . | 16 | ( | ||||||
Income from financial assets | . | . | . | . | . | . | 7 | |||||
(Loss)/profit on sale of financial assets | . | . | . | . | ( | |||||||
Net deficit on valuation of financial assets | . | . | . | . | ( | ( | ||||||
Finance income | . | . | . | . | . | . | . | 8 | ||||
Finance costs | . | . | . | . | . | . | . | 8 | ( | ( | ||
Gain on remeasurement of subsidiary company | . | . | . | |||||||||
PROFIT BEFORE TAX | . | . | . | . | . | . | . | 10 | ||||
Taxation | . | . | . | . | . | . | . | . | . | 9 | ( | |
PROFIT FOR YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS | . | |||||||||||
| EARNINGS PER SHARE | ||||||||||||
Basic and diluted | . | . | . | . | . | . | . | 12 |
J. Smart & Co. (Contractors) PLC
CONSOLIDATED INCOME STATEMENT
for the year ended 31st July 2023
64 65
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st July 2023
Notes | 2023 | 2022 | ||||||||||
£000 | £000 | |||||||||||
PROFIT FOR THE YEAR | . | . | . | . | . | . | . | |||||
| OTHER COMPREHENSIVE INCOME | ||||||||||||
| Items that will not be subsequently reclassified to Income Statement: | ||||||||||||
Remeasurement gains on defined benefit pension scheme | . | . | 30 | |||||||||
| Deferred taxation on remeasurement gains | ||||||||||||
on defined benefit pension scheme | . | . | . | . | . | 24 | ( | ( | ||||
| TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY | ||||||||||||
RECLASSIFIED TO INCOME STATEMENT . | . | . | . | . | ||||||||
TOTAL OTHER COMPREHENSIVE INCOME | . | . | . | . | ||||||||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX | . | |||||||||||
ATTRIBUTABLE TO EQUITY SHAREHOLDERS | . | . | . | . |
64 65
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31st July 2023
Capital
Share | Redemption | Retained | ||||||||||
Capital | Reserve | Earnings | Total | |||||||||
£000 | £000 | £000 | £000 | |||||||||
At 1st August 2021 | . | . | . | . | . | . | . | |||||
Profit for the year | . | . | . | . | . | . | . | |||||
Other comprehensive gain | . | . | . | . | . | . | ||||||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | . | . | . | |||||||||
| TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY | ||||||||||||
Shares purchased and cancelled | . | . | . | . | . | ( | ( | ( | ||||
Transfer to Capital Redemption Reserve | . | . | . | . | ( | |||||||
Dividends | . | . | . | . | . | . | . | . | ( | ( | ||
TOTAL TRANSACTIONS WITH OWNERS | . | . | . | . | . | ( | ( | ( | ||||
At 31st July 2022 | . | . | . | . | . | . | . | |||||
Profit for the year | . | . | . | . | . | . | . | |||||
Other comprehensive gain | . | . | . | . | . | . | ||||||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | . | . | . | |||||||||
| TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY | ||||||||||||
Shares purchased and cancelled | . | . | . | . | . | ( | ( | ( | ||||
Transfer to Capital Redemption Reserve | . | . | . | . | ( | |||||||
Dividends | . | . | . | . | . | . | . | . | ( | ( | ||
TOTAL TRANSACTIONS WITH OWNERS | . | . | . | . | . | ( | ( | ( | ||||
At 31st July 2023 | . | . | . | . | . | . | . | . |
66 67
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
as at 31st July 2023
Capital
Share Redemption Retained
Capital Reserve Earnings Total
£000 £000 £000 £000
At 1st August 2021 . . . . 840 168 7,374 8,382
Profit for the year . . . . – – 10,244) (10,244)
Other comprehensive gain . . . – – 5,415) 5,415)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR – – 15,659) 15,659)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled . . (22) – (1,727) (1,749)
Transfer to Capital Redemption Reserve . – 22 (22) –
Dividends . . . . . – – (1,348) (1,348)
TOTAL TRANSACTIONS WITH OWNERS . . (22) 22 (3,097) (3,097)
At 31st July 2022 . . . . . 818 190 19,936 20,944
Profit for the year . . . . – – 12,709) 12,709)
Other comprehensive gain . . . – – 3,247)
3,247)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR – – 15,956) 15,956)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled . . (16) – (1,329) (1,345)
Transfer to Capital Redemption Reserve . – 16 (16) –
Dividends . . . . . – – (1,311) (1,311)
TOTAL TRANSACTIONS WITH OWNERS . . (16) 16 (2,656) (2,656)
At 31st July 2023 . . . . . 802 206 33,236 34,244
66 67
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31st July 2023
Notes | 2023 | 2022 | |||||||||||
£000 | £000 | ||||||||||||
| NON-CURRENT ASSETS | |||||||||||||
Property, plant and equipment | . | . | . | . | . | . | 13 | ||||||
Investment properties | . | . | . | . | . | . | . | 15 | |||||
Investments in Joint Ventures | . | . | . | . | . | . | 16 | ||||||
Financial assets | . | . | . | . | . | . | . | . | 17 | ||||
Trade and other receivables | . | . | . | . | . | . | 20 | ||||||
Retirement benefit surplus | . | . | . | . | . | . | 30 | ||||||
Deferred tax assets | . | . | . | . | . | . | . | 24 | |||||
| CURRENT ASSETS | |||||||||||||
Inventories | . | . | . | . | . | . | . | . | 18 | ||||
Contract assets | . | . | . | . | . | . | . | . | 19 | ||||
Corporation tax asset | . | . | . | . | . | . | . | 2 | |||||
Trade and other receivables | . | . | . | . | . | . | 20 | ||||||
Monies held on deposit | . | . | . | . | . | . | 21 | ||||||
Cash and cash equivalents | . | . | . | . | . | . | 21 | ||||||
TOTAL ASSETS | . | . | . | . | . | . | . | . | |||||
| NON-CURRENT LIABILITIES | |||||||||||||
Deferred tax liabilities | . | . | . | . | . | . | . | 24 | |||||
Lease liabilities | . | . | . | . | . | . | . | 25 | |||||
| CURRENT LIABILITIES | |||||||||||||
Trade and other payables | . | . | . | . | . | . | 22 | ||||||
Lease liabilities | . | . | . | . | . | . | . | 25 | |||||
Corporation tax liability | . | . | . | . | . | . | |||||||
Bank overdraft | . | . | . | . | . | . | . | 21 | |||||
TOTAL LIABILITIES | . | . | . | . | . | . | . | ||||||
NET ASSETS | . | . | . | . | . | . | . | . | |||||
| EQUITY | |||||||||||||
Called up share capital | . | . | . | . | . | . | . | 26 | |||||
Capital redemption reserve | . | . | . | . | . | . | 26 | ||||||
Retained earnings | . | . | . | . | . | . | . | 26 | |||||
TOTAL EQUITY | . | . | . | . | . | . | . | . |
The financial statements on pages 63 to 107 were approved by the Board of Directors and authorised for issue
on 16th November 2023 and were signed on its behalf by:
DaviD w Smart John r Smart
Director Director
Company Number SC025130
68 69
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF FINANCIAL POSITION
as at 31st July 2023
Notes 2023 2022
£000 £000
NON-CURRENT ASSETS
Property, plant and equipment . . . . . . 14 1,088 670
Investments in Subsidiaries and Joint Ventures . . . 16 1,748 1,748
Trade and other receivables . . . . . . 20 3,374 3,374
Retirement benefit surplus . . . . . . 30 19,998 15,096
26,208 20,888
CURRENT ASSETS
Inventories . . . . . . . . 18 17,380 12,067
Contract assets . . . . . . . . 19 – 16
Trade and other receivables . . . . . . 20 6,585 2,448
Corporation tax asset . . . . . . . 1,053 1,421
Cash and cash equivalents . . . . . . 21 1 –
25,019 15,952
TOTAL ASSETS . . . . . . . . 51,227 36,840
NON-CURRENT LIABILITIES
Deferred tax liabilities . . . . . . . 24 5,067 3,856
CURRENT LIABILITIES
Trade and other payables . . . . . . 22 2,593 1,997
Bank overdraft . . . . . . . 21 9,323 10,043
11,916 12,040
TOTAL LIABILITIES . . . . . . . 16,983 15,896
NET ASSETS . . . . . . . . 34,244 20,944
EQUITY
Called up share capital . . . . . . . 26 802 818
Capital redemption reserve . . . . . . 26 206 190
Retained earnings . . . . . . . 26 33,236 19,936
TOTAL EQUITY . . . . . . . . 34,244 20,944
A separate Statement of Comprehensive Income for the Company has not been presented as permitted by
Section 408 of the Companies Act 2006. The profit for the Company is £12,709,000 (2022, profit £10,244,000).
The financial statements on pages 63 to 107 were approved by the Board of Directors and authorised for issue
on 16th November 2023 and were signed on its behalf by:
DaviD w Smart John r Smart
Director Director
Company Number SC025130
68 69
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st July 2023
Notes | 2023 | 2022 | |||||||||||
£000 | £000 | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ) | ||||||||||||
Profit after tax | . | . | . | . | . | . | . | . | |||||
Tax (credit)/charge for year | . | . | . | . | . | . | ( | ||||||
Profit before tax | . | . | . | . | . | . | . | . | |||||
| Adjustments for: | |||||||||||||
Share of losses/(profits) from Joint Ventures | . | . | . | . | ( | ||||||||
Depreciation | . | . | . | . | . | . | . | . | |||||
Unrealised deficit/(surplus) on valuation of investment properties | . | ( | |||||||||||
Unrealised deficit on valuation of financial assets | . | . | . | ||||||||||
Profit on sale of property, plant and equipment | . | . | . | ( | ( | ||||||||
Profit on sale of investment property | . | . | . | . | . | ( | |||||||
Loss on derecognition of asset | . | . | . | . | . | . | |||||||
Loss/(profit) on sale of financial assets | . | . | . | . | ( | ||||||||
Gain on remeasurement of subsidiary company | . | . | . | ( | |||||||||
Change in retirement benefits | . | . | . | . | . | . | ( | ( | |||||
Interest received | . | . | . | . | . | . | . | ( | ( | ||||
Interest paid | . | . | . | . | . | . | . | . | |||||
Change in inventories | . | . | . | . | . | . | . | ( | ( | ||||
Change in contract assets | . | . | . | . | . | . | ( | ||||||
Change in receivables | . | . | . | . | . | . | . | ||||||
Change in payables | . | . | . | . | . | . | . | ( | |||||
CASH OUTFLOW FROM OPERATING ACTIVITIES | . | . | . | ( | ( | ||||||||
Tax paid | . | . | . | . | . | . | . | . | ( | ( | |||
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES | . | ( | ( | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||
Additions to property, plant and equipment | . | . | . | . | ( | ( | |||||||
Additions to investment properties | . | . | . | . | . | ( | ( | ||||||
Expenditure on own work capitalised - investment properties | . | ( | ( | ||||||||||
Proceeds of sale of property, plant and equipment | . | . | . | ||||||||||
Proceeds of sale of investment property | . | . | . | . | |||||||||
Purchase of financial assets | . | . | . | . | . | . | ( | ( | |||||
Proceeds of sale of financial assets | . | . | . | . | . | ||||||||
Monies held on deposit | . | . | . | . | . | . | ( | ||||||
Acquisition of investment in Subsidiary – net cash acquired | . | ||||||||||||
Interest received | . | . | . | . | . | . | . | ||||||
Loan to Joint Ventures | . | . | . | . | . | . | . | ( | |||||
Investment in Joint Ventures | . | . | . | . | . | . | ( | ||||||
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES | . | ( |
70 71
Notes | 2023 | 2022 | |||||||||||
£000 | £000 | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||
Interest costs on leases | . | . | . | . | . | . | . | ( | ( | ||||
Purchase of own shares | . | . | . | . | . | . | . | ( | ( | ||||
Dividends paid | . | . | . | . | . | . | . | . | ( | ( | |||
NET CASH OUTFLOW FROM FINANCING ACTIVITIES | . | . | . | ( | ( | ||||||||
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | . | . | ( | ||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | . | . | 27 (a) | ||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | . | . | . | 27 (a) |
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
for the year ended 31st July 2023
70 71
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31st July 2023
Notes 2023) 2022)
£000) £000)
CASH OUTFLOW FROM OPERATING ACTIVITIES
Profit after tax . . . . . . . . 12,709 10,244
Tax credit . . . . . . . . (295) (466)
Profit/(loss) before tax . . . . . . . 12,414 9,778
Adjustments for:
Depreciation . . . . . . . . 217 211
Profit on sale of property, plant and equipment . . . (38) (3)
Loss on derecognition of asset . . . . . . 42 –
Dividend received from Subsidiaries and Joint Ventures . . (14,100) (12,360)
Change in retirement benefits . . . . . (41) (14)
Interest received . . . . . . . (628) (2)
Change in inventories . . . . . . . (5,313) (4,590)
Change in contract assets . . . . . . 16 230
Change in receivables – non-current . . . . . – (364)
Change in receivables - current . . . . . (4,040) (524)
Change in payables . . . . . . . 596) (232)
CASH OUTFLOW FROM OPERATING ACTIVITIES . . . (10,875) (7,870)
Tax received . . . . . . . . 791) 12
NET CASH OUTFLOW FROM OPERATING ACTIVITIES . . . (10,084) (7,858)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . (690) (204)
Proceeds of sale of property, plant and equipment . . . 51 9)
Interest received . . . . . . . – 2)
Loan to Joint Ventures . . . . . . . – (1,440)
Investment in Joint Ventures . . . . . . – (50)
Dividend received from subsidiaries and Joint Ventures . . 14,100) 12,360
NET CASH INFLOW FROM INVESTING ACTIVITIES . . . 13,461) 10,677
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares . . . . . . . (1,345) (1,749)
Dividends paid . . . . . . . . (1,311) (1,348)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES . . . (2,656) (3,097)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS . . 721 (278)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . 28 (a) (10,043) (9,765)
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . 28 (a) (9,322) (10,043)
72 73
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS 31st JULY 2023
72 73
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
74 75
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
74 75
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
76 77
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
76 77
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
78 79
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
78 79
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
80 81
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
1. ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
80 81
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
2. SEGMENTAL INFORMATION
IFRS 8: Operating Segments requires operating segments to be identified on the basis of internal reporting about
components of the Group that are regularly reviewed by the chief operating decision maker to allow the allocation
of resources to the segments and to assess their performance. The chief operating decision maker has been identified
as the Board of Directors. The chief operating decision maker has identified two distinct areas of activities in the
Group being construction activities and investment property activities.
All revenue from construction and investment property income arises from activities within the UK and therefore
the Board of Directors does not consider the business from a geographical perspective. The operating segments are
based on activity and performance of an operating segment is based on a measure of operating results.
Operating
Profit / (Loss)
2023 2022
£000 £000 £000)
2023
Construction activities 5,961) (2,720) –)
Investment property activities 7,011) 2,063 –)
12,972) (657) –)
2022
Construction activities 7,430) – (2,487)
Investment property activities 6,983) – 10,309)
14,413) – 7,822)
OPERATING (LOSS)/PROFIT . . . . . . . . (657) 7,822)
Share of results of Joint Ventures . . . . . . . (36) 254)
Finance and investment income . . . . . . . 844 221)
Finance and investment costs . . . . . . . . (46) (133)
Gain on remeasurement of subsidiary company . . . . . –) 28)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX . . . . . 105) 8,192)
The Group had sales from construction activities from two customers amounting to £1,281,000 and £753,000
respectively (2022, sales from construction activities from two customers amounting to £2,051,000 and £1,387,000
respectively).
OTHER SEGMENTAL INFORMATION
Non-Current Assets Segment Segment
Additions Depreciation Assets Liabilities
£000 £000 £000 £000
2023
Construction activities . . . . . . 978) 398 )47,195) 17,964)
Investment properties activities . . . . 5,776) 47 100,192) 5,452)
Joint Ventures . . . . . .) . –) –) 1,496) –)
148,883) 23,416)
Allocation of corporation tax creditor . . . . . . (958) (958)
147,925) 22,458)
2022
Construction activities . . . . . . 380) 351 )36,679) 16,744)
Investment properties activities . . . . 2,221) 48 109,748) 6,539)
Joint Ventures . . . . . .) . –) –) 1,532) –)
147,959) 23,283)
Allocation of corporation tax creditor . . . . . . (1,499) (1,499)
146,460) 21,784)
Revenue
. . . . . . .
. . . . . .
. . . . . . .
. . . . . .
82 83
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| Disaggregation of Revenue | 2023) | 2022) | ||||||||||||
£000) | Restated | £000 | ||||||||||||
| Construction activities | Note 1 | |||||||||||||
Social housing | . | . | . | . | . | . | . | . | . | 397) | 9) | |||
Civil engineering | . | . | . | . | . | . | . | . | . | 3,223) | 4,330) | |||
Industrial | . | . | . | . | . | . | . | . | . | . | 77) | 1,387) | ||
Commercial | . | . | . | . | . | . | . | . | . | 97) | –) | |||
General construction | . | . | . | . | . | . | . | . | . | 4) | 42) | |||
Private house sales | . | . | . | . | . | . | . | . | . | 2,163) | 1,662) | |||
5,961) | 7,430) | |||||||||||||
| Investment properties activities | ||||||||||||||
Rental income | . | . | . | . | . | . | . | . | . | 6,186) | 6,158) | |||
Service charges and insurance receivable | . | . | . | . | . | . | 824) | 824) | ||||||
Sundry income | . | . | . | . | . | . | . | . | . | . | 1) | 1) | ||
7,011) | 6,983) | |||||||||||||
Total Revenue | 12,972) | 14,413) | ||||||||||||
| The transaction price allocated to unsatisfied performance obligations in respect of construction activities at 31st | ||||||||||||||
| July 2023 are as set out below. | ||||||||||||||
Social housing | . | . | . | . | . | . | . | . | . | . | 3,829) | –) | ||
Civil engineering | . | . | . | . | . | . | . | . | . | 457) | 422) | |||
Industrial | . | . | . | . | . | . | . | . | . | . | –) | –) | ||
Commercial | . | . | . | . | . | . | . | . | . | . | 2,965) | –) |
82 83
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
4. OTHER OPERATING INCOME | 2023) | £000) | 2022) | £000 | |||||
| Restated | |||||||||
| Note 1 | |||||||||
Profit on disposal of property, plant and equipment | . | . | . | . | . | 4) | 29) |
5. STAFF COSTS AND DIRECTORS’ REMUNERATION | 2018) | 2017) | ||||||||||
Group | Company | |||||||||||
2023 | 2022 | 2023) | 2022) | |||||||||
£000 | £000 | £000) | £000) | |||||||||
| Staff costs during the year amounted to: | ||||||||||||
Wages, salaries and short term benefits | . | . | 6,478 | 6,392 | 4,810) | 4,744) | ||||||
Social security costs | . | . | . | . | . | 772 | 732 | 592) | 554) | |||
Post-employment benefits | . | . | . | . | 835 | 1,030 | 641) | 840 ) | ||||
8,085 | 8,154 | 6,043) | 6,138) | |||||||||
| The average monthly number of employees during the year was made up as follows: | No. | No. | No.) | No.) | ||||||||
Construction and related services | . | .. | . | 128 | 123 | 85) | 81) | |||||
Office and management | . | . | . | . | 24 | 24 | 18) | 18 ) | ||||
152 | 147 | ,103) | 99) | |||||||||
| | ||||||||||||
84 85
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
6. OPERATING (LOSS)/PROFIT | 2023) | 2022) | |||||||||||
| This is stated after charging: | £000) | £000) | |||||||||||
Staff costs (note 5) | . | . | . | . | . | . | . | . | . | . | 8,085) | 8,154) | |
Hire of plant and machinery | . | . | . | . | . | . | . | . | . | 179) | 572) | ||
Ground rents | . | . | . | . | . | . | . | . | . | . | . | 125) | 78) |
Depreciation of owned assets | . | . | . | . | . | . | . | . | . | 445) | 399) | ||
Loss on derecognition of owned assets | . | . | . | . | . | . | 42) | –) | |||||
7. INCOME FROM FINANCIAL ASSETS | ) | ||||||||
Dividend income from financial assets | . | . | . | . | . | . | 58) | 63 |
9. TAXATION | ) | |||||||||||
| UK Corporation Tax | ||||||||||||
Current tax on income for the year | . | . | . | . | . | . | . | 358) | 997) | |||
Corporation tax over provided in previous years | . | . | . | . | . | (40) | (4) | |||||
) | 318) | 993) | ||||||||||
Deferred taxation (note 24) | . | . | . | . | . | . | . | . | (413) | 578) | ||
| Current Tax Reconciliation | (95) | 1,571) | ||||||||||
Profit on ordinary activities before tax | . | . | . | . | . | . | 105 | 8,192) | ||||
Share of losses/(profits) of Joint Ventures | . | . | . | . | . | . | 36 | (254) | ||||
Gain on remeasurement of subsidiary company | . | . | . | . | . | – | (28) | |||||
141) | 7,910) | |||||||||||
Current tax at 21.01% (2022, 19.00%) | . | . | . | . | . | . | 30) | 1,503) | ||||
| Effects of: | ||||||||||||
Expenses not deductible for tax purposes | . | . | . | . | . | . | 490) | 124) | ||||
Ineligible depreciation | . | . | . | . | . | . | . | . | – | (1,189) | ||
Non taxable income including revaluation surplus | . | . | . | . | . | (567) | (103) | |||||
Chargeable gains | . | . | . | . | . | . | . | . | . | – | 752) | |
Effect of change in tax rate | . | . | . | . | . | . | . | . | (90) | 547) | ||
Adjustments to corporation tax charge in respect of prior years | . | . | . | (40) | (4) | |||||||
Adjustments to deferred tax charge in respect of prior years | . | . | . | 80 | (30) | |||||||
Deferred tax not recognised | . | . | . | . | . | . | . | . | 2 | (29) | ||
(95) | 1,571 |
84 85
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
9. TAXATION (continued)
The Finance Act 2020, which received Royal assent on 22nd July 2020, states that the corporation tax rate for the
financial year commencing 1st April 2020 is 19%. The Finance Act 2021, which received Royal assent on 24th
May 2021, states that the corporation tax rate for the financial year commencing 1st April 2023 is 25%.
The effective corporation tax rate is 21.01% (2022, 19.00%) being the average rate applicable over the period.
Deferred tax provisions have been calculated using the 25% rate.
In addition to amounts charged to the Income Statement, a deferred tax charge of £1,083,000 (2022, £1,804,000)
relating to actuarial gains on the defined benefit pension scheme has been recognised directly to Equity.
There are no income tax consequences attached to dividends paid or proposed by the Company to its shareholders.
10. PROFIT BEFORE TAX FOR THE FINANCIAL YEAR )
The Group uses underlying profit before tax as an alternative performance measure, which is the profit before tax
excluding net surplus or deficit on valuation of investment properties and financial assets accounted for through
the Income Statement. As the net surplus or deficit on valuation of investment properties and financial assets can
fluctuate from year to year and is not a realised surplus or deficit by excluding this amount, the Directors consider
that a truer reflection of actual Group performance is obtained. Analysis of this alternative performance measure
is as follows:
2023) | 2022) | ||||||||||
£000) | £000) | ||||||||||
Profit before tax | . | . | . | . | . | . | . | . | 105) | (8,192) | |
Deficit/(surplus) on valuation of investment properties | . | . | . | . | 2,164 | ((473) | |||||
Deficit on valuation of financial assets | . | . | . | . | . | . | 19) | 121 | |||
| 2,288) | 7,840) |
11. DIVIDENDS )
2021 | Final Dividend of 2.27p per share, | . | . | . | . | . | . | –) | 948) |
2022 | Interim Dividend of 0.96p per share | . | . | . | . | . | . | –) | 400) |
2022 | Final Dividend of 2.27p per share | . | . | . | . | . | . | 923) | –) |
2023 | Interim Dividend of 0.96p per share | . | . | . | . | . | . | 388) | –) |
1,311) | 1,348) |
The Board is proposing a Final Dividend of 2.27 p per share (2022, 2.27 p) which will cost the Company no more
than £904,000.
The proposed Final Dividend is subject to approval by the shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements.
86 87
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
12. EARNINGS PER SHARE 2023) 2022)
Profit attributable to Equity shareholders | £000 | . | . | . | . | . | 200) | 6,621) | ||
Basic Earnings per share | . | . | . | . | . | . | . | . | 0.49p | 15.90p |
Basic earnings per share are calculated by dividing the profit attributable to equity shareholders by the weighted
average number of shares in issue during the year.
The weighted average number of shares for the year to 31st July 2023 amounted to 40,572,000 (2022, 41,638,000).
There is no difference between basic and diluted earnings per share.
| 13. PROPERTY, PLANT AND EQUIPMENT - GROUP | |||||||||||
Land and | Plant,) | ||||||||||
buildings | equipment) | ||||||||||
Freehold | and vehicles) | Total) | |||||||||
£000 | £000) | £000) | |||||||||
| Cost: | |||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | 896 | 5,013) | 5,909) | |
Additions | . | . | . | . | . | . | . | . | 434 | 544) | 978 |
Derecognition of asset | . | . | . | . | . | . | (126) | – | (126) | ||
Disposals | . | . | . | . | . | . | . | . | – | (371) | (371) |
At 31st July 2023 | . | . | . | . | . | . | . | 1,204 | 5,186) | 6,390) | |
| Depreciation: | |||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | 674 | 4,028) | 4,702) | |
Provided during year . | . | . | . | . | . | . | 5 | 440) | 445) | ||
Derecognition of asset | . | . | . | . | . | . | (84) | – | (84) | ||
Disposals | . | . | . | . | . | . | . | . | – | (343) | (343) |
At 31st July 2023 | . | . | . | . | . | . | . | 595 | 4,125) | 4,720) | |
| Net book value: | |||||||||||
At 31st July 2023 | . | . | . | . | . | . | . | 609 | 1,061) | 1,670) | |
At 31st July 2022 | . | . | . | . | . | . | . | 222 | 985) | 1,207) |
Included within Freehold Land and Buildings is land costing £13,000 (2022, £13,000) which is not depreciated.
86 87
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| 14. PROPERTY, PLANT AND EQUIPMENT - COMPANY | |||||||||||||
Land and) | Plant,) | ||||||||||||
buildings) | equipment) | ||||||||||||
Freehold) | and vehicles) | Total) | |||||||||||
£000) | £000) | £000) | |||||||||||
| Cost: | |||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | 361) | 2,885) | 3,246) | |||
Additions | . | . | . | . | . | . | . | . | 434) | 256) | 690) | ||
Derecognition of asset | . | . | . | . | . | . | (126) | –) | (126) | ||||
Disposals | . | . | . | . | . | . | . | . | –) | (218) | (218) | ||
At 31st July 2023 | . | . | . | . | . | . | . | 669) | 2,923) | 3,592) | |||
| Depreciation: | |||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | 145 | 2,431) | 2,576) | |||
Provided during year . | . | . | . | . | . | . | 4 | 213) | 217) | ||||
Derecognition of asset | . | . | . | . | . | . | (84) | –) | (84) | ||||
Disposals | . | . | . | . | . | . | . | . | – | (205) | (205) | ||
At 31st July 2023 | . | . | . | . | . | . | . | 65 | 2,439) | 2,504) | |||
| ) | |||||||||||||
| Net book value: | |||||||||||||
At 31st July 2023 | . | . | . | . | . | . | . | 604 | 484) | 1,088) | |||
At 31st July 2022 | . | . | . | . | . | . | . | 216 | 454) | 670) |
88 89
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| 15. INVESTMENT PROPERTIES | |||||||||||
Land and) | Land and) | ||||||||||
buildings) | buildings | Right-of-use) | |||||||||
Freehold) | Leasehold | Asset) | Total | ||||||||
£000) | £000 | £000 | £000) | ||||||||
| Cost or valuation: | |||||||||||
At 1st August 2022 | . | . | . | . | . | 67,907) | 9,657) | 69, | 2132 | 77,777) | |
Additions | . | . | . | . | . | . | 5,776 | –) | – | 5,776) | |
Deficit on valuation | . | . | . | . | (1,692) | (472) | –) | (2,164) | |||
At 31st July 2023 | . | . | . | . | . | 71,991) | 9,185) | 213) | 81,389) | ||
| Cost or valuation: | |||||||||||
At 1st August 2021 | . | . | . | . | . | 75,744) | 17,103) | 213 | 93,060) | ||
Additions | . | . | . | . | . | . | 2,218) | 3) | – | 2,221) | |
Disposals | . | . | . | . | . | . | (9,303) | (8,674)) | – | (17,977) | |
(Deficit)/surplus on valuation | . | . | . | (752) | 1,225 | –) | 473) | ||||
At 31st July 2022 | . | . | . | . | . | 67,907) | 9,657) | 213) | 77,777) |
Right-of-use Asset relates to a ground lease on which the Group has built investment properties. The rent paid by
the Group to the lessee for the ground is a set annual rent and is not contingent on rents received by the Group from
tenants and therefore the lease falls within the definition of IFRS 16: Leases.
Valuation Process
The Group’s investment properties are valued by David W Smart, MRICS, who is a Director of the Parent
Company, on the basis of fair value, in accordance with the RICS Valuation – Global Standards 2017, incorporating
the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015).
The Directors also requested a third party external valuer to value the Group’s investment property portfolio.
The valuations prepared by the Director and the external valuers are compared to ensure that there are no variations
outside of acceptable valuation differences.
Investment properties, excluding ongoing developments, are valued using the investment method of valuation.
This approach involves applying capitalisation yields to current and estimated future rental streams and then
allowing for voids arising from vacancies and rent free periods and associated running costs. The capitalisation
yields and rental values are based on comparable property and leasing transactions in the market, using the valuers’
professional judgment and market observations. Other factors taken into account in the valuations include the
tenure of the property, tenancy details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the residual method of valuation, which is the same as
the investment method, as described above, with a deduction for all costs necessary to complete the development,
together with a further allowance for remaining risk.
In accordance with IAS 40: Investment Property, net annual surpluses or deficits are taken to the Income Statement
and no depreciation is provided in respect of these properties.
88 89
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
15. INVESTMENT PROPERTIES (continued)
The Group considers all of its investment properties fall within ‘Level 3’ of the fair value hierarchy as described
by IFRS 13: Fair Value Measurement. Level 3 valuations are those using inputs for the asset or liability that are
not based on observable market data. The main unobservable inputs relate to estimated rental value and equivalent
yield. There have been no transfers of properties in the fair value hierarchy in the financial year.
The table below summarises the key unobservable inputs used in the valuation of the Group’s Freehold and
Leasehold investment properties:
Estimated Rental Value | Equivalent Yield | ||||||
£ per sq ft | % | ||||||
£000 | Low | Average | High | Low | Average | High | |
| Fair Value at 31st July 2023 | |||||||
| Investment | |||||||
Commercial | 21,285 | 11.00 | 16.00 | 21.00 | 8.04 | 9.40 | 11.29 |
Industrial | 59,891 | 4.75 | 7.82 | 10.89 | 7.24 | 7.98 | 9.95 |
| Fair Value at 31st July 2022 | |||||||
| Investment | |||||||
Commercial | 22,113 | 11.00 | 15.25 | 19.50 | 6.78 | 8.60 | 10.57 |
Industrial | 55,451 | 4.75 | 7.75 | 10.75 | 6.00 | 7.19 | 9.06 |
The following table illustrates the impact of changes in the key unobservable inputs (in isolation) on the fair value
of the Group’s Freehold and Leasehold investment properties:
5% change in estimated | 25bps change in equivalent | ||||
rental value | yield | ||||
Increase | Decrease | Decrease | Increase | ||
£000 | £000 | £000 | £000 | £000 | |
| Fair Value at 31st July 2023 | |||||
| Investment | |||||
Commercial | 21,285 | 1,171 | (1,171) | 653 | (620) |
Industrial | 59,891 | 2,713 | (2,713) | 1,828 | (1,713) |
| Fair Value at 31st July 2022 | |||||
| Investment | |||||
Commercial | 22,113 | 1,183 | (1,183) | 696 | (658) |
Industrial | 55,451 | 2,511 | (2,511) | 1,785 | (1,667) |
The Group had obligations of £2,623,000 (2022, £6,133,000) in respect of future developments and repair costs of
investment properties at the Statement of Financial Position date.
90 91
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| Group | ||||||||
2023 | 2022 | ) | ||||||
£000 | £000 | |||||||
As at 1st August 2022 | . | . | . | . | . | 1,532 | 1,267) | |
Less: Net assets of joint venture now a subsidiary company | – | (39) | ||||||
1,532) | 1,228) | |||||||
Investment in Joint Venture in year | . | . | . | –) | 50) | |||
| Group’s share of (loss)/profit | ||||||||
and total comprehensive (loss)/income | . | . | (36) | 254 | ||||
As at 31st July 2023 | . | . | . | . | . | 1,496) | 1,532) |
2023 | 2022 | |||||||||||
£000 | £000) | |||||||||||
Non-Current assets | . | . | . | . | . | . | . | . | . | 5,870 | 5,866) | |
Current assets | . | . | . | . | . | . | . | . | . | . | 298 | 235) |
Of which are cash and cash equivalents | . | . | . | . | . | . | . | 176) | 115) | |||
Non-Current liabilities | . | . | . | . | . | . | . | . | . | (3,010) | (3,010) | |
Of which are financial liabilities excluding trade and other payables and provisions | . | . | (3,010) | (3,010) | ||||||||
Current liabilities | . | . | . | . | . | . | . | . | . | (1,078) | (1,011) | |
Of which are financial liabilities excluding trade and other payables and provisions | . | . | –) | –) | ||||||||
Net assets | . | . | . | . | . | . | . | . | . | . | 2,080 | 2,080) |
Group’s interest in net assets | . | . | . | . | . | . | . | . | 1,496 | 1,532) | ||
Revenue | . | . | . | . | . | . | . | . | . | . | –) | –) |
Other Operating Income | . | . | . | . | . | . | . | . | 134 | 123) | ||
(Loss)/profit and total comprehensive (loss)/income | . | . | . | . | . | (72) | 511) | |||||
Group’s share of (loss)/profit and total comprehensive (loss)/income | . | . | (36) | 256) |
90 91
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
2023) | 2022) | |||||||||
£000) | £000) | |||||||||
Aggregate carrying amount of individually immaterial joint ventures | . | . | –) | –) | ||||||
| Aggregate carrying amount of the Group’s share of: | ||||||||||
Loss after tax and total comprehensive loss | . | . | . | . | . | . | – | (2) |
| Registered in and | |||
Principal Country | J. Smart & Co. (Contractors) PLC | ||
Name of Joint Venture | of Operation | Interest in Joint Venture | |
Gartcosh Estates LLP | Scotland | 50% | |
Name of Joint Venture | Jointly managed with | Issued Share capital | |
Gartcosh Estates LLP | Fusion Assets Limited | Partnership Interest 50 A Shares |
2023) | 2022) | |||||||||
£000) | £000) | |||||||||
At 1st August 2022 and 31st July 2023 | . | . | . | . | . | . | 708) | 708) |
Company Name | Nature of business |
McGowan and Company (Contractors) Limited | Plumbing contractors |
Cramond Real Estate Company Limited | Investment holding |
Thomas Menzies (Builders) Limited | Civil engineering contractors |
Concrete Products (Kirkcaldy) Limited | Non trading |
C. & W. Assets Limited | Investment property company |
Smart Serviced Offices Limited | Serviced office and co-working space provider |
Northrigg Limited | Investment property company |
92 93
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| 17. FINANCIAL ASSETS | ||||||||||||||
| Group | ||||||||||||||
2023) | 2022) | |||||||||||||
£000) | £000) | |||||||||||||
| Listed investments | ||||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | . | . | 1,069) | 1,184) | |||
Additions | . | . | . | . | . | . | . | . | . | . | 368) | 47) | ||
Disposals | . | . | . | . | . | . | . | . | . | . | (193) | (41) | ||
Change in fair value | . | . | . | . | . | . | . | . | . | (19) | (121) | |||
At 31st July 2023 | . | . | . | . | . | . | . | . | . | 1,225) | 1,069) |
92 93
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
19. CONTRACT BALANCES
The timing of revenue recognition results in amounts due from customers for construction contracts, those
which have not yet been invoiced are disclosed as Contract Assets and once invoiced they are disclosed as
Trade Receivables (note 20). The Group does not receive deposits or payments in advance for contracts and
therefore has no Contract Liabilities to disclose. The Group did not incur costs to obtain contracts.
Group | Company | ||||||||||||
2023) | 2022) | 2023) | 2022) | ||||||||||
£000) | £000) | £000) | £000) | ||||||||||
Contract Assets | . | . | . | . | . | . | 33) | 16) | –) | 16) | |||
As at 1st August 2022 | . | . | . | . | . | 16) | 246) | 16) | 246) | ||||
Transfers from contract assets recognised at the beginning of the year to trade receivables | . | . | (16) | (246) | (16) | (246) | |||||||
Increase related to services provided in the year | . | 33) | 16) | –) | 16) | ||||||||
As at 31st July 2023 | . | . | . | . | . | 33) | 16) | –) | 16) |
20. TRADE AND OTHER RECEIVABLES
| NON-CURRENT ASSETS: | |||||||||
Loan to Joint Venture companies | . | . | . | 3,010) | 3,010) | 3,010) | 3,010) | ||
Loans to Subsidiary Companies | . | . | . | – | – | 364 | 364 | ||
3,010) | 3,010) | 3,374) | 3,374) | ||||||
| CURRENT ASSETS: | |||||||||
Trade receivables | . | . | . | . | . | 623 | 1,242 | 25 | 179 |
Amounts owed by Subsidiaries . | . | . | . | – | – | 5,741 | 2,116 | ||
Other receivables | . | . | . | . | . | 857 | 974 | 97 | 34 |
Prepayments and accrued income | . | . | . | 872 | 226 | 722 | 119 | ||
2,352 | 2,442 | 6,585 | 2,448 | ||||||
| The ageing of past due but not impaired trade debtors is as follows: | |||||||||
Less than 30 days | . | . | . | . | . | 542 | 826 | 25 | 134 |
30 to 60 days | . | . | . | . | . | 71 | 203 | – | 43 |
Greater than 60 days | . | . | . | . | . | 10 | 213 | – | 2 |
623 | 1,242 | 25 | 179) |
94 95
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
20. TRADE AND OTHER RECEIVABLES (continued)
Trade receivables are subject to standard payment terms and conditions normal for construction industry being 14
days from date applications are issued or 30 days from date of invoice whichever is applicable. Investment property
rent it is payable in advance and insurance and service charge invoices due on demand.
21. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following: | Group | Company | |||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
£000 | £000 | £000 | £000 | ||||||||
Cash at bank and on hand | . | . | . | . | 10,634 | 11,071 | 1) | –– | |||
Short term available deposits | . | . | . | . | 8,022 | 20,725 | –) | –– | |||
Cash and cash equivalents | 18,656 | 31,796 | 1 | – | |||||||
Bank overdrafts | . | . | . | . | . | (10,491) | (11,049) | (9,323) | (10,043) | ||
Net cash balance | 8,165 | 20,747 | (9,322) | (10,043) |
Monies held on deposit of £49,000 (2022, £48,000) are held in bank accounts which have original maturity
dates exceeding three months and therefore do not meet the criteria of cash and cash equivalents as defined in
IAS 7: Statement of Cash Flows.
94 95
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
22. TRADE AND OTHER PAYABLES
CURRENT LIABILITIES: | Group | Company | |||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
Trade payables | . | . | . | . | . | . | 1,072 | 759 | 835 | 500 | |||
Amounts owed to Subsidiaries . | . | . | . | – | – | 126 | 105 | ||||||
Other taxes and social security costs | . | . | . | 428 | 250 | 252 | 139 | ||||||
Other creditors and accruals | . | . | . | . | 1,218 | 1,087 | 1,380 | 1,253 | |||||
Deferred income | . | . | . | . | . | 194 | 210 | – | – | ||||
2,912 | 2,306 | 2,593 | 1,997 |
Included in Other creditors and accruals are contract loss provisions. of £275,000 (2022, £318,000) for the Group
and £267,000 (2022,£280,000) for the Company.
96 97
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
24. DEFERRED TAXATION
| DEFERRED TAX ASSETS | |||||||||
| GROUP | |||||||||
| Other | |||||||||
| £000 | |||||||||
At 1st August 2021 | . | . | . | . | . | . | . | 179 | |
Charged to Income Statement | . | . | . | . | . | . | (166) | ||
At 31st July 2022 | . | . | . | . | . | . | . | 13 | |
Charged to Income Statement | . | . | . | . | . | . | –) | ||
At 31st July 2023 | . | . | . | . | . | . | . | 13) |
| DEFERRED TAX LIABILITIES | |||||||||
GROUP | Valuation | ||||||||
Accelerated | Retirement | Surplus on | Other | ||||||
Capital | Benefit | Investment | Fair | Timing | |||||
Allowances | Obligations | Properties | Value | Differences | Total | ||||
£000 | £000 | £000 | £000 | £000 | £000 | ||||
At 1st August 2021 | . | . | . | 1,753 | 1,966 | 2,209 | 6 | 22 | 5,956 |
(Credited)/charged to Income Statement | (13) | 4 | 429 | (6) | (2) | 412) | |||
Charged to Equity | . | . | . | –) | 1,804 | – | –) | –) | 1,804 |
At 31st July 2022 | . | . | . | 1,740 | 3,774 | 2,638 | – | 20 | 8,172 |
Charged/(credited) to Income Statement | 28 | 143 ) | (582) | – | (2) | (413) | |||
Charged to Equity | . | . | . | –) | 1,083 | –) | –) | –) | 1,083) |
At 31st July 2023 | . | . | . | 1,768 | 5,000 | 2,056 | – | 18 | 8,842 |
96 97
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
24. DEFERRED TAXATION (continued)
DEFERRED TAX LIABILITIES (continued)
COMPANY | Accelerated | Retirement | Other | ||||||
Capital | Benefit | Timing | |||||||
Allowances | Obligations | Differences | Total | ||||||
£000 | £000 | £000 | £000 | ||||||
At 1st August 2021 | . | . | . | . | . | 66 | 1,966 | 15 | 2,047 |
Charged/(credited) to Income Statement | . | . | 5 | 4 | (4) | (5 | |||
Charged to Equity | . | . | . | . | . | –) | 1,804 | –) | 1,804 |
At 31st July 2022 | . | . | . | . | . | 71 | 3,774 | 11 | 3,856 |
(Credited)/charged to Income Statement | . | . | (13) | 143 ) | (2) | 128) | |||
Charged to Equity | . | . | . | . | . | –) | 1,083 | –) | 1,083) |
At 31st July 2023 | . | . | . | . | . | 58 | 5,000 | 9 | 5,067 |
2023 | 2022 | ||||||||
| Issued and fully paid ordinary shares of 2p each | Number | £000 | Number | £000 | |||||
At 1st August 2022 | . | . | . | . | . | 40,847,133 | 818 | 41,960,393 | 840 |
Purchased and cancelled | . | . | . | . | (803,213) | (16) | (1,113,260) | (22) | |
At 31st July 2023 | . | . | . | . | . | 40,043,920 | 802 | 40,847,133 | 818 |
98 99
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
27. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
| (a) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS | |||||||||||||
2023 | 2022 | ||||||||||||
£000 | £000 | ||||||||||||
Cash and cash equivalents | . | . | . | . | . | . | . | . | 18,656 | 31,796 | |||
Bank overdraft | . | . | . | . | . | . | . | . | . | . | (10,491) | (11,049) | |
Net position | . | . | . | . | . | . | . | . | . | . | 8,165 | 20,747 | |
| (b) ANALYSIS OF NET FUNDS | At 1st | Cash | At 31st | ||||||||||
August 2022 | Flow | July 2023 | |||||||||||
£000 | £000 | £000 | |||||||||||
Cash and cash equivalents | . | . | . | . | . | . | 31,796 | (13,140) | 18,656 | ||||
Bank overdraft | . | . | . | . | . | . | . | . | (11,049) | 558 | (10,491) | ||
Net funds | . | . | . | . | . | . | . | . | 20,747 | (12,582) | 8,165 | ||
| (c) ANALYSIS OF DEBT | Lease | ||||||||||||
| Liabilities | |||||||||||||
| £000 | |||||||||||||
As at 1st August 2022 | . | . | . | . | . | . | . | . | . | 213 | |||
Cash flows | . | . | . | . | . | . | . | . | . | . | –) | ||
As at 31st July 2023 | . | . | . | . | . | . | . | . | . | 213 | |||
As at 1st August 2021 | . | . | . | . | . | . | . | . | . | 213 | |||
Cash flows | . | . | . | . | . | . | . | . | . | . | –) | ||
As at 31st July 2022 | . | . | . | . | . | . | . | . | . | 213 |
28. NOTES TO THE COMPANY STATEMENT OF CASH FLOWS
| (a) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS | ||||||||||||||
2023 | 2022 | |||||||||||||
£000 | £000 | |||||||||||||
Cash and cash equivalents | . | . | . | . | . | . | . | . | 1 | – | ||||
Bank overdraft | . | . | . | . | . | . | . | . | . | (9,323) | (10,043) | |||
Net position | . | . | . | . | . | . | . | . | . | . | (9,322) | (10,043) | ||
(b) ANALYSIS OF NET FUNDS | At 1st | Cash | At 31st | |||||||||||
August 2022 | Flow | July 2023 | ||||||||||||
£000 | £000 | £000 | ||||||||||||
Cash and cash equivalents | . | . | . | . | . | . | . | 2,9 – | (2,941) | 1 | ||||
Bank overdraft | . | . | . | . | . | . | . | . | (10,043) | 720 | (9,323) | |||
Net funds | . | . | . | . | . | . | . | . | . | (10,043) | 721 | (9,322) |
98 99
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS
The Group operates a defined benefit pension scheme for certain active and former employees of the Group. The
scheme was closed to new members in the year to 31st July 2003. The scheme is subject to the funding legislation
outlined in the Pensions Act 2004 together with documents issued by the Pensions Regulator and Guidance Notes
adopted by the Financial Reporting Council.
The Group has concluded that the trust deed relating to the scheme grants the unconditional right to any surplus
of the scheme on the full settlement of the scheme liabilities to the Group and therefore have concluded that any
surplus on the scheme can be incorporated into the Group and Company financial statements.
Advice on the Group’s right to a surplus arising on the pension scheme was sought in the year to 31st July 2022
from a firm of lawyers who specialise in this area. Their advice was that the Group had an unconditional right
to the surplus based on the original Trust Deed and Deed of Variation and therefore the full surplus arising of
the calculation thereof under IAS 19 (amended): Employee Benefits should be accounted for in the financial
statements.
The scheme is administered by a separate Board of Trustees which is composed of employer nominated
representatives and member nominated Trustees and is a separate legal entity. The assets of the scheme are held
separately from the assets of the Group and are administered and managed professionally under the supervision
of the Trustees. The Trustees are required by law to act in the best interests of all classes of beneficiaries to the
scheme and are responsible for the investment policy and the day-to-day running of the scheme. The Trustees
are also responsible for jointly agreeing with the employer the level of contributions due to the Pension scheme.
The scheme provides qualifying employees with an annual pension based on final pensionable salary on attainment
of a normal retirement age of 65. Active members also benefit from life assurance cover. However the payment of
these benefits are at the discretion of the Trustees of the scheme.
The pension scheme’s independent qualified Actuary carries out a triennial valuation using the Projected Unit
Credit Method to determine the level of the scheme’s surplus or deficit. The last completed triennial valuation was
as at 31st October 2021 which revealed a surplus of £9,291,000, representing a funding level of 124%. Following
this latest triennial valuation the Group and the scheme Trustees agreed that employer contributions to the scheme
would remain at 35.4% and employee contributions are to remain at 3%.
There were no outstanding contributions at the year end.
The Group expects to pay a contribution of £442,000 (2022, £501,000) during the financial year to 31st July 2024.
100 101
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS (continued)
ASSUMPTIONS
The financial assumptions used to calculate scheme liabilities under IAS 19 (amended): Employee Benefits are:
2023 | 2022 | |||||||||||
Valuation method | . | . | . | . | . | . | . | . | Projected Unit | Projected Unit | ||
Discount rate | . | . | . | . | . | . | . | . | . | 5.4% | 3.5% | |
Inflation rate - Retail price index | . | . | . | . | . | . | 3.2% | 3.4% | ||||
Inflation rate - Consumer price index | . | . | . | . | . | . | 2.6% | 2.8% | ||||
Salary increases | . | . | . | . | . | . | . | . | . | 3.2% | 3.4% | |
Pension increases | . | . | . | . | . | . | . | . | 2.0% – 3.4% | 2.0% – 3.5% |
The mortality assumptions imply the following expectations of years of life from age 65:
2016 2015 2014
Man currently aged 65 | . | . | . | . | . | . | . | . | 21.3 | 21.4 |
Woman currently aged 65 | . | . | . | . | . | . | . | 23.7 | 23.9 | |
Man currently aged 45 | . | . | . | . | . | . | . | . | 22.6 | 22.6 |
Woman currently aged 45 | . | . | . | . | . | . | . | 25.1 | 25.3 |
SENSITIVITY TO KEY ASSUMPTIONS
The scheme exposes the Group to actuarial risks, such as interest rate risk, inflation risk, longevity risk and
investment risk. The key assumptions used for IAS 19 are discount rate, inflation rates and mortality. If different
assumptions were used then this could materially affect the results disclosed in the financial statements. Movements
in the key assumptions would have the following effect on the level of the surplus:
| Increase in scheme liabilities | |||||||||
2023 | 2022 | ||||||||
Change in assumption | £000 | £000 | |||||||
Discount rate | Decrease of 0.25% | . | . | . | . | . | . | 633 | 851 |
Inflation rate | Increase of 0.25% | . | . | . | . | . | . | 197 | 231 |
Mortality rate | Increase in life expectancy of 1 year | . | . | . | 823 | 1,165 |
The sensitivity information has been prepared using the same methodology as the calculation of the current year
scheme obligations.
100 101
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS (continued)
STATEMENT OF FINANCIAL POSITION DISCLOSURES
The investments held by the scheme and the reconciliation of the scheme assets and liabilities to the Statement of
Financial Position were:
Valuation | Valuation | Valuation | |||||||
2023 | 2022 | 2021 | |||||||
£000 | £000 | £000 | |||||||
| EQUITIES | |||||||||
UK | . | . | . | . | . | . | 11,377 | 12,765 | 13,001 |
Overseas | . | . | . | . | . | 20,253 | 19,763 | 22,441 | |
Multi-asset diversified funds | . | . | . | 2,173 | 4,292 | 3,507 | |||
Absolute return funds | . | . | . | . | 3,025 | 870 | 973 | ||
| BONDS | |||||||||
Government | . | . | . | . | . | 3,672 | 1,292 | 1,158 | |
Corporate | . | . | . | . | . | 2,984 | 2,760 | 3,632 | |
OTHER Cash | . | . | . | . | . | . | 1,068 | 3,692 | 2,565 |
Fair value of scheme assets | . | . | . | 44,552 | 45,434 | 47,277 | |||
Present value of scheme liabilities | (24,554) | (30,338) | (39,414) | ||||||
Scheme surplus | . | . | . | . | . | 19,998) | 15,096) | 7,863 | |
Deferred taxation | . | . | . | . | (5,000) | (3,774) | (1,966) | ||
Net pension scheme surplus | . | . | . | 14,998) | 11,322) | 5,897 |
102 103
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS (continued)
In the most recent triennial valuation dated 31st October 2021, the defined benefit scheme liabilities were split 34%
in respect of active scheme members, 5% in respect of deferred scheme members and 61% in respect of retirees.
The duration of the defined benefit scheme liabilities as at 31st July 2023 is 11 years (2022, 11 years).
The assets of the scheme are invested in funds managed by Abrdn Capital Limited, in direct investments via
Rathbone Investment Management Limited; in insurance policies with companies belonging to the Royal London
Group; and in bank accounts. The assets do not include any directly owned ordinary shares issued by J. Smart
& Co. (Contractors) PLC. The fair value of the assets of the pension scheme are determined based on publicly
available market prices wherever available.
| The following amounts are incorporated into the financial statements | 2023 | 2022 | |||||||||||
£000 | £000 | ||||||||||||
| Analysis of amounts charged to operating (loss)/profit: | |||||||||||||
Current service cost | . | . | . | . | . | . | . | . | . | (431) | (642) | ||
Past service cost | . | . | . | . | . | . | . | . | . | – | – | ||
Total service cost | . | . | . | . | . | . | . | . | . | (431) | (642) | ||
| Analysis of amounts charged to net finance income: | |||||||||||||
Interest income | . | . | . | . | . | . | . | . | . | . | 1,573 | 744 | |
Interest costs | . | . | . | . | . | . | . | . | . | . | (1,042) | (623) | |
531 | 121 | ||||||||||||
| Movement in present value of defined benefit obligations: | |||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | . | . | 30,338 | 39,414 | ||
Service cost | . | . | . | . | . | . | . | . | . | . | 431 | 642 | |
Interest cost | . | . | . | . | . | . | . | . | . | . | 1,042 | 623 | |
Charges paid | . | . | . | . | . | . | . | . | . | . | –) | –) | |
Employee contributions | . | . | . | . | . | . | . | . | 29 | 32 | |||
Benefit payments | . | . | . | . | . | . | . | . | . | (1,455) | (1,592) | ||
Actuarial movements due to scheme experiences | . | . | . | . | . | (189 | (987) | ||||||
Actuarial movements due to changes in demographic assumptions . | . | . | (197) | (117) | |||||||||
Actuarial movements due to changes in financial assumptions | . | . | . | (5,823) | (7,677) | ||||||||
At 31st July 2023 | . | . | . | . | . | . | . | . | . | 24,554 | 30,338 |
102 103
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS (continued)
2023 | 2022 | ||||||||||||
£000 | £000 | ||||||||||||
| Movement in fair value of scheme assets: | |||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | . | . | 45,434 | 47,277 | ||
Interest income | . | . | . | . | . | . | . | . | . | 1,573 | 744 | ||
Employer contributions . | . | . | . | . | . | . | . | . | 472 | 535 | |||
Employee contributions . | . | . | . | . | . | . | . | . | 29 | 32 | |||
Benefits paid | . | . | . | . | . | . | . | . | . | . | (1,455) | (1,592) | |
Charges paid | . | . | . | . | . | . | . | . | . | . | –) | –) | |
Return on plan assets excluding amount shown in interest income | . | . | . | (1,501) | (1,562) | ||||||||
At 31st July 2023 | . | . | . | . | . | . | . | . | . | 44,552 | 45,434 | ||
| Movement in scheme surplus: | |||||||||||||
At 1st August 2022 | . | . | . | . | . | . | . | . | . | 15,096 | 7,863 | ||
Current service cost | . | . | . | . | . | . | . | . | . | (431) | (642) | ||
Past service cost | . | . | . | . | . | . | . | . | . | – | – | ||
Contributions | . | . | . | . | . | . | . | . | . | . | 472 | 535 | |
Net finance income included in finance income | . | . | . | . | . | 531) | 121 | ||||||
Actuarial remeasurement of pension scheme liability | . | . | . | . | 4,330) | 7,219) | |||||||
At 31st July 2023 | . | . | . | . | . | . | . | . | . | 19,998) | 15,096 | ||
| Analysis of the actuarial gain included in the statement of comprehensive income: | |||||||||||||
Loss on scheme assets excluding amounts shown in interest income | . | . | (1,501) | (1,562) | |||||||||
Changes in assumptions underlying present value of scheme liabilities | . | . | 5,831 | 8,781) | |||||||||
At 31st July 2023 | . | . | . | . | . | . | . | . | . | 4,330) | 7,219 |
| History of experience gains and losses: | ||||||||||||
| Loss on scheme assets | ||||||||||||
Amount (£000) | . | . | . | . | . | . | . | . | . | . | (1,501) | (1,562) |
Percentage of market value of scheme assets | . | . | . | . | . | . | 3.4% | 3.4% | ||||
| Changes in assumptions underlying present value of scheme liabilities | ||||||||||||
Amount (£000) | . | . | . | . | . | . | . | . | . | . | 5,831) | 8,781 |
Percentage of market value of scheme liabilities | . | . | . | . | . | . | 23.8% | 28.9% | ||||
| Total amounts included in Consolidated Statement of Comprehensive Income | ||||||||||||
Amount (£000) | . | . | . | . | . | . | . | . | . | . | 4,330) | 7,219 |
Percentage of market value of scheme liabilities | . | . | . | . | . | . | 17.6% | 23.8% |
104 105
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
30. RETIREMENT BENEFIT OBLIGATIONS (continued)
DEFINED CONTRIBUTION SCHEMES
In the year to 31st July 2003 the Group commenced operation of a defined contribution Group Personal Pension
Plan for eligible employees. The plan is externally administered and managed professionally by AEGON UK plc.
The net contribution to the plan for the year was £315,000 (2022, £307,000) and are expensed through the Income
Statement as incurred.
STAKEHOLDER SCHEMES
The Group has stakeholder pension arrangements for those employees not eligible for membership of either the
Defined Benefit or Defined Contribution schemes. The Group makes contributions to these schemes and has no
liability beyond these contributions. The contributions to these schemes in the year amounted to £70,000 (2022,
£65,000) and are expensed through the Income Statement as incurred.
MULTI EMPLOYER SCHEME
The Group was also a member of the multi-employer pension scheme, Plumbing & Mechanical Services (UK)
Industry Pension Scheme which closed to future benefit buildup effective 30th June 2019. The Group makes
contributions to this scheme which in the year amounted to £2,000 (2022, £1,000) and are expensed through the
Income Statement as incurred.
No provision has been made for amounts payable by the Group in respect of Section 75 pension liabilities relating
to the Group’s participation in this scheme given that, as at the date of these financial statements, any potential
liability has not yet been assessed.
104 105
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
32. OPERATING LEASE ARRANGEMENTS
GROUP – AS LESSEE
Future minimum lease payments payable under non-cancellable operating leases for ground leases were payments
to the lessors are contingent on rents received by the Group from tenants and as such, do not fall within the scope
of IFRS 16: Leases for capitalisation:
2023 | 2022 | |||||||||||||
£000 | £000 | |||||||||||||
Within one year | . | . | . | . | . | . | . | . | . | . | 92 | 91 | ||
In two – five years exclusively . | . | . | . | . | . | . | . | 275 | 302 | |||||
After five years | . | . | . | . | . | . | . | . | . | . | 150 | 203 | ||
517 | 596 |
GROUP – AS LESSOR
Gross property rental income earned in the year amounted to £6,186,000 (2022, £6,158,000). At the Statement
of Financial Position date, the Group had contracted with its tenants for the following future minimum lease
payments:
Within one year | . | . | . | . | . | . | . | . | . | . | 6,265 | 5,917 |
Within one and two years | . | . | . | . | . | . | . | . | 5,350 | 5,099 | ||
Within two and three years | . | . | . | . | . | . | . | . | 4,519 | 4,370 | ||
Within three and four years | . | . | . | . | . | . | . | . | 3,733 | 4,024 | ||
Within four and five years | . | . | . | . | . | . | . | . | 3,012 | 3,193 | ||
After five years | . | . | . | . | . | . | . | . | . | . | 7,403 | 9,542 |
30,282 | 32,145 |
106 107
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
2023 | 2022 | 2023 | 2022 | |||||||
£000 | £000 | £000 | £000 | |||||||
Sale of goods and | Purchase of goods and | |||||||||
SUBSIDIARY | services to Subsidiaries | services from Subsidiaries | ||||||||
McGowan and Company (Contractors) Limited | . | . | 131 | 137 | 536 | 246 | ||||
Cramond Real Estate Company Limited | . | . | . | – | – | – | – | |||
Thomas Menzies (Builders) Limited | . | . | . | . | 72 | 67 | 47 | 6 | ||
Concrete Products (Kirkcaldy) Limited | . | . | . | – | – | – | – | |||
C. & W. Assets Limited . | . | . | . | . | . | 3,287 | 6,659 | – | – | |
Smart Serviced Offices Limited | . | . | . | . | 116 | 118 | – | – | ||
Northrigg Limited | . | . | . | . | . | . | – | – | – | – |
Amounts owed | Amounts owed | |||||||||
SUBSIDIARY | by Subsidiaries | to Subsidiaries | ||||||||
McGowan and Company (Contractors) Limited | . | . | – | – | 90 | 105 | ||||
Cramond Real Estate Company Limited | . | . | . | – | – | – | – | |||
Thomas Menzies (Builders) Limited | . | . | . | . | – | 1 | 36 | – | ||
Concrete Products (Kirkcaldy) Limited | . | . | . | – | – | – | – | |||
C. & W. Assets Limited . | . | . | . | . | . | 5,741 | 2,115 | – | – | |
Smart Serviced Offices Limited | . | . | . | . | 1,140 | 1,020 | – | – | ||
Northrigg Limited | . | . | . | . | . | . | 364 | 364 | – | – |
106 107
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued) 31st JULY 2023
| During the year the Directors received dividends from the Company as follows: | ||||||||||||
2023 | 2022 | |||||||||||
£000 | £000 | |||||||||||
David W Smart | . | . | . | . | . | . | . | . | . | . | 413 | 413 |
John R Smart | . | . | . | . | . | . | . | . | . | . | 413 | 413 |
Alasdair H Ross | . | . | . | . | . | . | . | . | . | . | 5 | 5 |
Patricia Sweeney . | . | . | . | . | . | . | . | . | . | 5 | 5 |
| The following Directors received goods and services from Group Companies in the year amounting to: | ||||||||||||
David W Smart | . | . | . | . | . | . | . | . | . | . | 4 | 1 |
John R Smart | . | . | . | . | . | . | . | . | . | . | 6 | 40 |
Alasdair H Ross | . | . | . | . | . | . | . | . | . | . | – | – |
Patricia Sweeney . | . | . | . | . | . | . | . | . | . | – | – |
108 109
108 109
110
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