The financial year is two months old and both months are closed in Xero, so before the forward look here is where they actually leave us. Revenue landed well, but the year is starting behind the line, and the cause is margin, not sales. The sections below show exactly where it went.
The year needs about £47,500 of gross profit a month to cover overheads and the directors' charge, so £95,000 over 2 months. The closed months banked £73,146, which leaves them £21,854 behind pace. That shortfall folds into the rest of the year rather than being a hole to claw back on its own, but it means the front half has no cushion to give.
The closed months came in at 22.3% gross against the 32% the jobs are priced at. Each bar starts from the gross profit the month should have made at its priced margin and shows where the rest went. The table beside it walks the same month all the way down to the net result.
| Revenue | £171,468 |
| Direct costs | (£133,381) |
| Gross profit · 22.2% | £38,088 |
| Overheads | (£34,070) |
| Operating result | £4,018 |
| Finance · directors' charge | (£10,760) |
| Net result | (£6,742) |
The margin lost on delivery was mainly Staveley electrical labour and materials running over their estimate, and a small operating profit still survived before the directors’ charge.
| Revenue | £155,943 |
| Direct costs | (£120,885) |
| Gross profit · 22.5% | £35,058 |
| Overheads | (£40,842) |
| Operating result | (£5,784) |
| Finance · directors' charge | (£10,760) |
| Net result | (£16,544) |
A £7,500 Warmfloors grant is stripped out, and the overhead line ran heavy on a one off cost that turned the operating result negative, broken down under overheads below.
Below the gross profit line, the other cost block is overheads. Across the closed months they ran £7,301 over a £67,611 budget, but that is almost entirely one item. Strip the one off that landed in the period and the underlying overhead is within about £1,801 of budget, so the run rate is sound. What is worth naming is the mix.
| Overhead line | Budget /mo | Jun | Jul | Read |
|---|---|---|---|---|
| Business insurance | £2,060 | £2,978 | £3,176 | Over both months — the excess is Vitality health, budgeted as cancelled |
| Vehicle fuel | £2,400 | £2,824 | £2,505 | Over, on top of the £900 a month already added to the budget |
| Digital marketing | £245 | £1,004 | £1,268 | Higher by design, and the directors are aware of it |
| Vehicle hire | £2,830 | £1,353 | £1,803 | Running under, a saving of about £1,250 a month if it holds |
Business insurance runs over both months because it still carries Vitality health at about £1,020 a month, against a budget that assumed it cancelled. That is a live keep or cancel decision worth roughly £12,000 a year. Everything else in the table is either a deliberate spend or a timing swing that evens out.
Several other lines look heavy or light in a single month only because the budget spreads an annual cost evenly while the spend lands in lumps. June carries the year end accountancy books; drinks and entertaining, equipment repairs and training all even out across the year. None of those moves the budget, they just make a single month look noisy.
Each closed month measured against what the forecast prepared the month before expected for it. Revenue landed ahead of the forecast in 2 of 2 months and gross profit fell short in 1 of 2.
Revenue came in almost bang on. The whole miss was margin: the forecast expected a low thirties gross, the month delivered 22%, and that lost gross profit runs straight down to the net result.
A much busier month than forecast, and gross profit beat too. The net still landed worse because of the one off engineer bonus in overheads, the same Prosper Squared item covered under overheads.
Revenue beat the forecast in both months and the pipeline is converting into work on site. Sales is not the problem two months in, so the focus does not need to be on winning more of the same, it needs to be on what that work earns.
Both months delivered 22 to 23% gross against a low thirties priced margin, and the largest single cause is Staveley electrical labour and materials running over. Every point of margin recovered here is worth more than the same revenue won elsewhere. This is the number to hold the delivery team to for the rest of the year.
Strip the one off engineer bonus and overheads are running on budget, so the cost base below the gross profit line is under control. The one live call is Vitality health at about £12,000 a year. The pressure on the year is margin and the empty months, not overhead creep.
Two months at a small net loss is a slow start, not a broken one, and the ground lost against pace is recoverable inside a strong first half. The real risk to the year sits in the empty second half, which the forward look covers. These two months set the margin discipline; they do not decide the year.
June and July are official actuals from Xero. The July engineer payroll and the treatment of the St John Fisher deposit are still to be confirmed and may move these figures slightly. The finance line is the flat £10,760 a month directors’ charge used in the model, not a bank cost, so the operating result is the truer read of trading.