The directors present the strategic report for the year ended 31 January 2023.
INTRODUCTION
WJ Group Infrastructure Limited ("the company") was incorporated on 3rd December 2020 and began trading on this date. It is a subsidiary of WJ Group Holdings Limited.
The company is the parent of WJ (Group) Limited. The trading subsidiaries of WJ (Group) Limited are able to provide temporary and permanent road markings (screed, extruded and raised rib line), road stud installation both temporary and permanent, reflective studs, road marking removal (which includes one of the largest fleets of specialist hydro-blasting removal and retexturing machines in the UK), road surface retexturing, road truck fabrication and refurbishment, applied media products, temporary safety cameras, vehicle driver training and road marking testing services.
During the financial period THI Investments took a majority share in the WJ Group. THI's involvement will enable the company to continue to grow within the existing markets both organically and through acquisition. Additionally, it will support the company's transformation into a data driven business though IT and technology which will improve our operational efficiency. We continue to explore adjacent markets and our commitment to innovation has provided some growth opportunities, particularly in the Intelligent Transportation Systems sector.
WJ Group is committed to creating safe and sustainable journeys for everyone and we have an ambitious target of becoming net zero by 2032.
We aim to present a balanced and comprehensive review of the development and performance of our business during the year and its position at the year end. Our review is consistent with the size and non-complex nature of our business and is written in the context of the risks and uncertainties we face.
Turnover in 2023 was £2,256,735 which is in line with turnover in the prior period of £2,012,500.
The gross profit margin was 100% (2022 -100.0%) due to all the costs being within administrative costs.
The operating loss was 28.7% (2022 - 34.1%).
Total net assets at the end of the year was £73,966,411 (2022 - £78,794,628).
Due to the nature of the company being a holding company, it does not have any principal risks or uncertainties.
The company could be affected however if subsidiary companies trade is impacted for any given reason. Below are the principal risks and uncertainties for the company's subsidiaries:
Government Spending Decisions - the Companies recognise that the majority of their income derives from government sources and therefore play an active role, through a number of trade bodies and associations, in promoting and developing the safety, effectiveness and sustainability of products and services in live with evolving DoT priorities.
Competition - the Companies differentiate themselves from the competition by continued efforts in R&D and Innovation and a strategy of delivering safer and more sustainable products and services. The Companies have made strategic investments to develop the UK largest nationwide network and have diversified into adjacent markets to enable them to stay ahead of the evolving competitor base.
Materials Supply – the Companies have developed an internal supply chain for the bulk of the product they use and have developed strong partnerships in areas where internal production is not possible. The Companies work closely with their raw materials supply chains and utilise group buying power to ensure that availability of product is robust and that pricing is sustainable.
Fuel Prices – the Companies are not immune to the impact of rising fuel prices but the effect is mitigated through the development and upgrading of a modern fleet of fuel efficient vehicle and an industry leading driver awareness training program and incentivisation scheme which leads to not only improved fuel consumption but also, as a consequence, a reduction in the Companies carbon footprints.
Due to the nature of the company being a holding company, it does not have any major financial instrument risks.
The company could be affected however if subsidiary companies trade is impacted for any given reason. Below are the financial instrument risks for the company's subsidiaries:
Credit Risk – the Companies have a broad range of customers including both private companies and public sector bodies. The risk that the Companies will suffer from significant levels of bad debt is managed by the diversified customer portfolio and the well established credit control procedures operated across the Companies.
Cash Flow Risk – the Companies are funded through a combination of Hire Purchase funding, a Group Term Loan and a Group Revolving Credit Facility. The Companies also have access to committed investment funding to support significant capex or acquisitions.
Liquidity Risk – the Companies are able to meet short and medium term obligations from operational cash generation and in addition have access to in excess of £20m of undrawn committed facilities.
We consider that our key financial performance indicators are those that communicate the financial performance and strength of the company as a whole, these being turnover, gross profit margin and operating profit margin. The success of the company will be reflected in the balance sheet net assets and company liquidity.
2023 2022
Turnover £2,256,735 £2,012,500
Gross profit margin 100.0% 100.0%
Operating margin (28.7%) (34.1%)
Explanation of the key performance indicators detailed above can be found in the review of business section of this report.
The WJ Group Board strive to maintain and enhance WJ’s reputation for responsible business. To do so we actively engage with employees, suppliers, clients and communities. Endeavouring through our actions to make a positive economic and environmental contribution whilst delivering Social Value as we play our part in the future sustainable development of the nation. Set out briefly here under this S172 Statement, taking into account factors (a) to (f):
(a) the likely consequences of any decision in the long term;
The WJ Board understand the changing business environment and operate to a vision. ‘To Deliver Safe Sustainable Journeys for All’. Embedding four core values: Safety, Delivery, Innovation and Community. With this vision and these values we aim to maintain our position as the leading UK providers of road markings; safety surfacing and retexturing; road marking products and equipment; Intelligent Traffic Solutions, Off Highway and Maritime Surface Preparation, Safety Surfacing and Markings, for the long term. WJ continually deliver economic, environmental and social value to our clients, our staff, the communities we serve and all stakeholders.
At all Board Meetings the Board consider the present position of the WJ Group Companies and how that impacts our stakeholders. We record and maintain in our management systems a documented Group Stakeholders Needs and Expectations Analysis. Board Meetings further review current strategy and seek opportunities for safety, innovation, delivery and community improvement to continue our success for the benefit of The Group, its stakeholders and wider societal gains.
(b) the interests of the company’s employees;
WJ Board recognise that our people are fundamental to the success of our business; to successful service meeting the needs our clients; to furnishing good relationships with and within our communities and to the protection and improvement of our environment. To do this we must be a responsible employer; provide industry leading pay and conditions; where our people are safe, empowered and treated with Fairness, Inclusion and Respect; where everyone employed by The Group has an equal opportunity to progress their career.
Safety is imperative for us and WJ are recognised as being industry leaders in the field. WJ have developed equipment that removes and reduces risks, strives to remove vulnerable road workers from the carriageway and introduce further innovative machinery with advanced safety features to protect our people and the travelling public alike. We recognise our interdependence and that safe behaviour is the key to preventing harm, encouraging this through our safety team, employing regular and interactive training; using psychologists and external experts; establishing the WJ Training Academy and participating in national and international work on improving safety and the working environment. The interests of our employees are measured through surveys, encouraged at regular meetings and Sharing Knowledge events. Our Safety Observation System is designed to capture HSEQ near misses; opportunities for improvement in equipment, systems and behaviours whilst also providing the opportunity to highlight good practice. Regular feedback is given to our people through our ‘You Said, We Did,’ system. We are presently engaged in a human factors training program with an external training provider on improving the empowerment of and engagement with our people in developing their management and communication skills from charge hands to directors. Information is shared with our people through Company Days, internal and external social media, tool box talks and training.
(c) the need to foster the company’s business relationships with suppliers, customers and others;
To deliver our Vision good relationships with our customers are essential. We work very closely with customers to understand their needs so that we can tailor our products and services to meet or exceed our delivery requirements. Facilitating this through regular customer performance updates and surveys to aid decision making and enhance customer focus. This will include formal collaborative agreements (assessed to ISO 44001) and client, customer and community performance groups. We participate in collaborative events where we listen, understand, share knowledge and contribute creatively to mutual strategic goals. Collaboration with our suppliers enables us to understand their needs and collectively deliver an exceptional service to our customers. As an organisation our operations are critical to delivering a safe sustainable highways network, we align with our supply chain to deliver the holistic service the end user, one that delivers safer sustainable journeys for all. Investment and financial security are fundamental to meeting the needs of our clientele. Working openly and closely with our financial stakeholders strengthens WJ and gives confidence to clients and suppliers alike that we are financially secure, pay promptly and enhance supply chain sustainability, innovation and capacity.
(d) the impact of the company’s operations on the community and the environment;
The WJ Board understand our services have a significant positive impact on the community and our environment. Delivering Social and Environmental value are crucial to us, Community is a core value for WJ. We as an organisation play our part in delivering sustainable economic growth; tackling economic inequality; fighting climate change; aiding equal opportunity and supporting wellbeing. WJ plan to reach Net Zero by 2032, based on lowering embodied carbon in our materials to zero, switching out of internal combustion engines and into zero emission vehicles as technology allows and insetting carbon through the planting of a forest. Highways are key to our national economic and communication systems, the markings and safety systems WJ deliver make them safer, more efficient, sustainable and resilient. In carrying out our work, road users, communities and the environment are considered at all times to reduce the impact of our operations upon them whist creating new jobs, business opportunities and skills. WJ through creative thinking and innovative design of materials, plant and machinery strive to increase the lifecycle of our materials. With less interventions we serve our communities and environment through reduced carbon emissions and improved air quality. WJ have greatly reduced embodied carbon in materials by circa 80% independently verified to ISO 14067 and PAS 2050 through collaborative work with our supply chain and developing the use of biogenic componentry. This aligns WJ with our customers, communities and environments needs.
WJ have an active community engagement program ‘Thinking Community’, understand, measure and monetise social value through our independently accredited Social Value Calculator. The Board understand that creating additional Social Value is critical to our clientele and the nation as a whole. This synergises with the ‘Community’ value’ of WJ, our people and our stakeholder communities to make a positive contribution to society.
(e) the desirability of the company maintaining a reputation for high standards of business conduct;
The Board know, understand and believe that there is an ever growing need for companies to provide solutions that are economically, environmentally and socially responsible. To this end the Board regularly reviews its policies and procedures and promotes ethical behaviour, actively encouraging equal opportunity, tackling inequality in opportunity and promoting support for disadvantaged groups. WJ is further engaged in promoting better understanding of the abhorrent practice of Modern Slavery. WJ are independently audited by Planet Mark on our carbon reduction targets, local social and economic value and BITC through the ‘Responsible Business Tracker’ on our response to the United Nations Sustainable Development Goals.
(f) the need to act fairly between members of the company.
As a company in a service industry working primarily for the public sector we understand that beyond increasing shareholder value we have a duty to all our stakeholders. It would be short sighted in the extreme for us as a Board not to consider the impacts of all the decisions that we make without considering our stakeholders and the wider environment. To that end we work with our employees, our investors, our customers, our clients, our industry through working groups, trade associations, professional institutes, NGOs, charities, Local Authorities, Government departments and sometimes competitors through the above to enable WJ to make good decisions that deliver added economic, environmental and social value.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 January 2023.
The results for the year are set out on page 11.
No ordinary dividends were paid (2022 - £nil). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Basis for opinion
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.
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 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, 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 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 company or to cease operations, or have no realistic alternative but to do so.
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the company;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions; and
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance; and
enquiring of management as to actual and potential litigation and claims.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://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 company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
WJ Group Infrastructure Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 7 Brock Way, Newcastle, Staffordshire, ST5 6AZ.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments';
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of WJ Group Holdings Limited. These consolidated financial statements are available from its registered office, Unit 7 Brock Way, Newcastle, Staffordshire, United Kingdom, ST5 6AZ.
Preparation of consolidated financial statements
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
WJ Group Infrastructure Limited is a wholly owned subsidiary of WJ Group Holdings Limited and the results of WJ Group Infrastructure Limited are included in the consolidated financial statements of WJ Group Holdings Limited which are available from Unit 7 Brock Way, Newcastle, Staffordshire, United Kingdom, ST5 6AZ.
WJ Group Holdings Limited is the smallest group for which consolidated accounts are prepared.
Related party exemption
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with other group entities where the relationship is one of being wholly owned.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Assets under construction are not depreciated.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements
In the directors' opinion there are no critical judgements that they have made in applying the company's accounting policies and that have had a significant effect on the amounts recognised in the financial statements.
Key sources of estimation uncertainty
The directors do not consider there to be any key estimates or assumptions used in preparing the financial statements.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2).
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 January 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The long-term bank loans are secured by fixed and floating charges over the assets of the group.
The long-term bank loan is for a period of 7 years from the initial date of drawdown. The loan is to be repaid at the end of this period, in December 2027. Interest is paid on the loan at a rate of 5.5% above the base rate and repayments are made on an interest only basis.
Amounts owed to group undertakings due after more than one year are due between 1 and 2 years. Interest is payable at a rate of 2.5%. The amounts are unsecured.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
Contributions totalling £34,024 (2022 - £15,795) were payable to the fund at the balance sheet date and are included in creditors.
There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.
Profit and loss reserves represents the accumulated profits less accumulated losses and distributions up to the reporting date.
The immediate parent company and smallest group into which the entity is consolidated is WJ Group Holdings Limited which owns 100% of the ordinary share capital. WJ Group Holdings Limited is incorporated in England and copies of the group financial statements are available from its registered office of Unit 7 Brock Way, Newcastle, Staffordshire, United Kingdom, ST5 6AZ.
The ultimate controlling party is THI Holdings GmbH, a company registered in Germany. THI Holdings GmbH is controlled by the Hagenmeyer family.
The largest group into which the entity is consolidated is THI Holdings GmbH, a company registered in Germany. Copies of the group financial statements of THI Holdings GmbH are available from THI Investments, Eberhardstraße 65, 70173 Stuttgart, Germany.