The directors present the strategic report for the year ended 30 June 2023.
The Group had another very positive year, recording revenues of £20.6m, which equates to a 37% compounded annual growth rate (CAGR) since 2019. The following 2023 annual figures are listed with comparatives that cover a fifteen month period so as to reference the 2022 audited group financial statements. The business recorded gross profits of £9.2m with a gross profit margin of 45%, (2022: £7.2m, 44 %). After administrative expenses and other operating income, the group made an operating profit of £3.3m with an operating profit margin of 16% (2022: £2.2m 14%). After adjusting for depreciation, amortisation, and exceptional items, EBITDA for the year was £4.3m with an EBITDA margin of 21% (2022: £3.1m 19 %). Profit after interest and tax was £1.8m with a PAT margin of 9% (2022: 0.7m, 4%).
As would be expected from a business that marked a significant growth in revenue in the year, the number of staff we employed increased significantly too. Average employees in the period were 184 (2022: 141) and we continue to successfully recruit to fulfil an ever-increasing order book. We also increased the size of our fleet in the year and replaced company hybrid cars with fully electric vehicles as part of our overall ESG strategy.
The business continues to lay the foundations for future growth, investing in our people and IT infrastructure. We are in the process of upgrading our operational IT system which will increase efficiency, improve reporting capability, and allow the business to scale efficiently. We developed and enhanced our People Strategy and introduced a cultural survey to improve our ability to attract and retain staff in what is an increasingly competitive market.
With support from the Senior Management Team, the Board has established an effective framework for identifying, monitoring, and managing risks. The key risks the business currently faces are:
Resourcing
We are operating in an economy where the demand for labour outstrips supply. This is particularly pertinent in our sector where we require appropriately experienced and qualified engineers to deliver a range of fire and electrical services to our customers. We are also in a period of significant growth and so resourcing pressures are heightened. In response, we appointed a Head of People in the year to work with the wider Senior Management Team to enhance and drive forward our People Strategy, which looks at a range of attraction and retention strategies. This has so far proved successful, and we are managing to keep up with our requirements for new staff as we continue to grow.
Inflation
Like everyone, we continue to operate in an environment of high-cost inflation. This has mainly impacted the business through higher materials, fuel, and staff costs. To mitigate these increases, where possible, we have renegotiated contract prices with our customers. Given our customer base, we have to be sensitive to their overall purpose but on the whole, they have been open to negotiations, particularly given the strong relationships and reputation we have established, as well as a fact-based conversation around inflationary pressures. As a result, we have managed to maintain our EBITDA margins compared to 2022 and we’re confident we can continue on this basis.
Fleet
Fleet availability of new vehicles has been put under significant pressure over the last two years and we have had to expand our supply network to keep up with growth. As a management team, we now plan further in advance and place orders for vehicles 3-6 months ahead of our needs. This proactivity has meant that the business has sustained an adequate supply of vehicles to deliver on our contractual commitments in the year. In recent months we have secured vehicles for the foreseeable future and as a management team, with the support of our network, we will monitor the market so we ensure availability meets our business needs.
The group recognises the need for advancements in IT and Technology as the business grows. We recently completed an assessment of our IT and business systems, to ensure they are fit for purpose to scale effectively as our business grows. The assessment resulted in a roadmap being devised to improve and implement changes and functionality to areas such as Stock and purchasing among others in the next financial year.
We are in a period of significant growth and our aim is to continue on this trajectory. The indicators we use to measure performance against our targets are:
Annual Revenue growth (%): year-on-year growth in revenue as a %
Operating margin (%): operating profit as a % of revenue
Underlying EBITDA Margin (%): operating profit plus depreciation, amortisation, and exceptional items, as a % of revenue
Revenue per employee (£): total revenue per average number of employees in the year
Our performance against these metrics for the underlying trade of the subsidiary company RGE Services for the current and previous year are shown below:
KPI | 2022 | 2023 | 2024 Target |
Annual revenue growth (%) | 38% | 49% | >30% |
Operating margin (%) | 14% | 16% | >12% |
Underlying EBITDA (%) | 19% | 21% | 22% |
Revenue per employee (£) | £98K | £113K | >£100K |
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2023.
No ordinary dividends were paid or recommended.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
We have audited the financial statements of Bolton Topco limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 are independent of the group and 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 group's and 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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.
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.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
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 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.
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 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 parent 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.
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.
Extent to which the audit was considered 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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Attendance at the yearend stock take to assess the assumptions used by management to determine the estimated stock balance
Performance of substantive testing procedures over the stock balance estimate which is disclosed as a significant estimate involving management judgement.
Discussion with management about the potential for fraud within the stock purchase cycle and the risk of theft and obsolescence.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £719,485 (2022 - £639,501 profit).
The reserves are as follows:
• Called up share capital represents the nominal value of shares issued.
• Share premium account represents the amounts subscribed for share capital in excess of nominal value.
• Profit and loss account represents the cumulative profits or losses, net of dividends paid.
The reserves are as follows:
• Called up share capital represents the nominal value of shares issued.
• Share premium account represents the amounts subscribed for share capital in excess of nominal value.
• Profit and loss account represents the cumulative profits or losses, net of dividends paid.
Bolton Topco limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is The Nurseries, Gravel Lane, Chigwell, Essex, England, IG7 6BZ.
The group consists of Bolton Topco limited and all of its subsidiaries.
In the prior year, the reporting year end changed from 31 March 2022 to 30 June 2022. The reason for this was to bring it in line with the subsidiary year end. The prior period is therefore 15 months.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
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 £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The 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 for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Bolton Topco Limited together with all entities controlled by the parent company (its subsidiaries).
Prior year financial statements are made from 23 March 2021 to 30 June 2022. Current year financial statements are made from 1 July 2022 to 30 June 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Turnover is recognised to the extent that it is probable that the economic benefits will flow to the group and the turnover can be reliably measured. Turnover is measured at the fair value of the consideration received or receivable and represents the amount receivable for services rendered, net of returns, discounts and rebates allowed by the company and value added taxes.
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all the following conditions are satisfied:
the amount of turnover can be measured reliably;
it is probable that the group will receive the consideration due under the contract;
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract can be measured reliably.
Interest income is recognised using the effective interest rate method.
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 recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in or , unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in or , unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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.
Equity instruments issued by the group 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 group.
The tax expense represents the sum of the tax currently payable and deferred tax.
Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.
The company operates several defined contribution plans for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the company in independently administered funds.
At inception the company assesses agreements that transfer the right to use assets. The assessment considers whether the arrangement is, or contains, a lease based on the substance of the arrangement.
Leases of assets that transfer substantially all the risks and rewards incidental to ownership are classified as finance leases.
Finance leases are capitalised at commencement of the lease as assets at the fair value of the leased asset or, if lower, the present value of the minimum lease payments calculated using the interest rate implicit in the lease. Where the implicit rate cannot be determined the company’s incremental borrowing rate is used. Incremental direct costs, incurred in negotiating and arranging the lease, are included in the cost of the asset.
Assets are depreciated over the shorter of the lease term and the estimated useful life of the asset. Assets are assessed for impairment at each reporting date.
The capital element of lease obligations is recorded as a liability on inception of the arrangement. Lease payments are apportioned between capital repayment and finance charge, using the effective interest rate method, to produce a constant rate of charge on the balance of the capital repayments outstanding.
Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments under operating leases are charged to the profit and loss account on a straight-line basis over the period of the lease.
In the application of the group’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.
The key judgements and sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below.
The year end stock figure contains estimates as the company has not yet implemented a stock system for tracking stock. The majority of stock was counted at the year end but for some areas, costs have been estimated based on recent purchases. The directors consider the value to be appropriate as the the finance director was personally involved in the stock take and a strong count process was put in place. The estimates derived were based on the the actual areas counted and the areas that were not counted entirely were a minority.
Accrued income contains a degree of estimation uncertainty as despite the majority of accrued transactions being invoiced in a timely fashion post year end or being approved to be invoiced by customers, there is an element where judgement has been made based on the historic working relationship with customers. Where no significant issues exist, amounts owed for work done have been fully accrued.
Amounts recoverable on contracts is a significant estimate. Management use a multiple of labour costs incurred up to the date of the financial statements to calculate the estimate. The multiplier used is based on historic average revenue earned per operative over the average operative cost.
Goodwill contains a degree of estimation uncertainty. The directors have assessed the useful life of goodwill as 10 years. This is based on their best estimate of the period over which this asset will unwind based on their knowledge of the business.
With the exception of the estimates described above, the directors consider that there are no other significant judgements or estimates in the preparation of these financial statements.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
From 1 April 2023, the corporation tax rate increased to 25% for companies making more than £250,000 profit.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 30 June 2023 are as follows:
At balance sheet date, there is no stock provision (2022: £nil).
Trade debtors is shown at net after deducting bad debt provisions totalling £62,199 (2022: £41,654).
Amounts owed by group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand.
Other loans are secured by fixed and floating charges over the property and undertakings of the company and it's subsidiaries.
The finance lease obligations represent hire purchase liabilities for motor vehicles. All leases are on a fixed repayment basis and are secured against the related assets.
The following are the major deferred tax liabilities and assets recognised by the group, and movements thereon:
The deferred tax liability set out above is expected to reverse after one year and relates to accelerated capital allowances.
A defined contribution pension scheme is operated for all qualifying employees. At the balance sheet date, the company had unpaid defined contribution pension payable of £4,859 (2022: £1,715).
Each class of share ranks pari passu except in certain circumstances where class A Ordinary Shares are entitled to enhanced voting rights.
All issued shares were allotted during the period at par.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
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 wholly owned subsidiaries within the group.
At the year end, loan balances were owed to shareholders totaled £7,982,977 (2022: £7,691,927). Interest is charged on the loans at a rate of 12% per annum.
During the year, services were purchased from shareholders totalling £236.689 (2022: £264,634).
The directors regard YFM Equity Partners Buyout II LP as the ultimate parent company and the immediate parent company. The registered offices of the ultimate and immediate parent company is 5th Floor Valiant Building, 14 South Parade, Leeds, England, LS1 5QS.
Loans are repayable on demand and no interest is charged.