The director presents the strategic report for the year ended 30 June 2023.
The financial year July 2022 – June 2023 was characterized by the fact that our management focus was primarily on stabilisation and refinement across the entire group and as such all of our activities were carried out with that specific focus in mind. Having ended the previous financial year with the recent acquisition of CEL Sheet Metal Ltd we set about achieving the goal of having a full year void of any further acquisitions and rather, focused on absorbing the recent addition of CEL into the wider group as well as strengthening our existing business units, Steelway Group and JHT Fabrications.
The year saw the handing over process of CEL from the previous owners over to the business unit management team successfully completed, as well as new workflows being adopted that enable CEL to “report” directly to members of the Northern Industries management team in a manner that is appropriate for a business that is a member of a larger group. Key client relationships where managed with a personal touch by our group COO Paul Sweeting and extensive guidance and “mentorship” of the business unit management team was nurtured by our COO as well as our Group Finance Director Sonia Shaw. This has enabled CEL to begin to show early indications of a promising future under group ownership.
Alongside the afore mentioned activities taking place our largest business unit Steelway Group experienced rapid and continuous growth and development not only in sheer scale of operations, but also as a direct result, in an increase in revenues and earnings. The incumbent Steelway Managing Director Peter Noble Jones would eventually end his tenure as M.D as at the 30th of June 2023, but not before leaving in place a robust business unit that has in the 2.5 years under Northern Industries ownership increased its revenues by roughly 50%. The role of Steelway M.D has since been taken up by a new manager in the weeks following the conclusion of the financial year and Steelway continuous to have a dedicated M.D in place.
JHT Fabrications continued to suffer from the previous effects of Covid-19 as a large proportion of its previously reliable customer base where still for the most parts slow to return back to the market within which JHT operates with stable and steady jobs. The Group COO made many resources available to JHT and its business unit management team both in terms of strategic time as well as direct resources available to Steelway in the form of more efficient access to steel suppliers, and not least, by providing JHT with a reliable stream of inter-company sub contract work to support the JHT business.
This resulted in JHT being able to continue trading whilst continuing to pursue the return of its core base of work, which would eventually slowly start to return towards the last quarter of the financial year. JHT is currently in a stable position and continues to work very closely with it’s sister company Steelway which has proven to be a win-win scenario for both businesses as it allows JHT to enjoy a steady stream of work as well as access to efficiently sourced materials, whereas JHT’s availability to serve as a partial sub contractor to Steelway enabled Steelway to unlock work from its order book which for most of the year remained at record high levels.
Key hires during the financial year
As far as human resources are concerned, a decision was taken to hire and onboard a Group Financial Controller to support the Group F.D and as a result this new hire has proven to be an asset to the group and a core member of the finance team.
The Group’s revenue for 2022/23 amounted to £30,583,421 GBP, and the operating profit ended at £594,914 GBP. Net financials showed an expense of £30,007,895 GBP. Profit for the year amounted to a £120,377 GBP.
The Group’s gross assets amount to £14,059,172 GBP. The equity ended at (£401,457) GBP. Members of the management team are incredibly pleased with the fact that the actual revenue for this financial year fell perfectly within the forecasted range provided in the FY 21/22 annual report of £30 million to 31 million GBP– 2023, which we believe demonstrates management’s ability to provide the market with reliable and accurate forecasts.
The parent company’s operating profit amounts to £57,172 GBP and profit for the year ended at a loss of £179,793 GBP. Gross assets amount to £2,399,757 GBP. The equity ended at (£10,535) GBP.
The group’s equity levels improved from (521,834) GBP as of June 30th 2022 to a level of (401,457) as of 30th June 2023 which is an equity improvement of 120,377 GBP. The management expects that this trend of positive equity improvements will continue materially into the subsequent financial year ending June 2024.
Principal Risks and Uncertainties
The groups operations expose it to a variety of financial risks including the effects of changes in interest rates on debt, credit risk and liquidity risk.
The groups principal financial instruments comprise sterling cash and bank deposits, inter-group debt used for the funding of the purchase of the business units alongside institutional debt from banks and invoice financing which is a major component debt, together with trade debtors and trade creditors that arise directly from the operations of its business units.
The main risks arising from the company's financial instruments can be analyzed as follows:‑
Price risk
The group is exposed to price risk from the cost increases in material and utility cost in the market.
Credit risk
The group’s principal financial assets are bank balances, cash, and trade debtors, which represent the company's maximum exposure to credit risk in relation to financial assets.
Currency Risk
As the groups functional currency is GBP and operates mainly in the United Kingdom, the income statement, balance sheet, and cash flows are subject to a minimal risk of currency fluctuations.
The groups principal financial assets are bank balances, cash and trade debtors, which represent the groups maximum exposure to credit risk in relation to financial assets. However, there is a risk that the operating businesses’ customers encounter credit downgrades due to the current market volatility, which could impact the operating business’s ability to fully draw on the maximum invoice financing facilities against those associated customers up to a certain extent.
The primary customer base of the underlying business units is directly or indirectly linked to government infrastructure sites, specifically within the utility sector. Given the profile of the customers, the directors consider the risk associated to the debtor book to be modest.
The groups credit risk is primarily attributable to its trade debtors. Credit risk is managed by
monitoring the aggregate amount and duration of exposure to any one customer depending upon their credit rating. The amounts presented in the balance sheet are net of allowances for doubtful debts, estimated by the group management based on prior experience and their assessment of the current economic environment.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The group has no significant concentration of credit risk, with exposure spread over many counterparties and customers.
The groups policy has been to ensure continuity of funding through acquiring an element of the groups fixed assets under finance leases and arranging funding via shareholder and bank loans.
However, as the steel sector has experienced a certain level of volatility there is always a risk of having to effectively manage the group’s cash position as well as that of its business units.
Notwithstanding the above, Northern Industries UK 1 Ltd is indebted to its parent company Northern Industries A/S to the tune of £1,822,881 as of the 30th June 2023, and that debt is interest bearing and is susceptible to foreign exchange rate movements and inflation adjustments. There is a risk that Northern Industries UK 1 Ltd experiences challenges with servicing the debts owed to it’s parent company, however it is management’s assessment that any action taken by the parent company under such circumstances would be limited in nature as it is not in the interest of the parent company to take any drastic actions against it’s own subsidiary.
Northern Industries enters 2023/24 with a growing order book allowing for revenue growth in the coming year and expects a revenue in the range of 31 million GBP to 33 million GBP. The challenging market conditions are expected to influence 2023/24 as seen in 2022/23. Continued increases in key production costs along with higher inflation will put the margin under pressure.
On behalf of the board
The director presents his annual report and financial statements for the year ended 30 June 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
In accordance with the company's articles, a resolution proposing that TC Group be reappointed as auditor of the group will be put at a General Meeting.
We have audited the financial statements of Northern Industries UK 1 Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the group profit and loss account, 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, the company 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 FRS 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 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.
Material uncertainty related to going concern
We draw attention to Note 1.4 in the financial statements which indicates that the group incurred a loss before tax of £32,341 during the year ended 30 June 2023 and, as of that date, the group's total liabilities exceeded total assets by £401,547. As stated in note 1.4, these events or conditions, along with other matters set forth in note 1.4, indicate that a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
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 director is 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's 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 its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the director's report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has 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.
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.
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and its management.
Our approach was as follows:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations;
We considered the legal and regulatory frameworks directly applicable to the financial statements reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations in the UK;
We considered the nature of the industry, the control environment and business performance, including the key drivers for management’s remuneration;
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit;
We considered the procedures and controls that the company has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included: testing manual journals; reviewing the financial statement disclosures and testing to supporting documentation; performing analytical procedures; and enquiring of management, and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
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.
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 £179,793 (2022 - £118,504 profit).
Northern Industries UK 1 Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .
The group consists of Northern Industries UK 1 Limited and all of its subsidiaries.
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. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Northern Industries UK 1 Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
These financial statements are prepared on the going concern basis. The director has a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the director is aware of certain material uncertainties which may cause doubt on the group's ability to continue as a going concern.
The group is currently in a net liability position and has made losses before tax for the current period and previous two periods. The group currently has loans and borrowings outstanding of £5,826,080. Of these loans, £1,822,881 is owed to the groups parent company, Northern Industries A/S.
Although the group has reported a loss before tax, EBITDA of £1,525,144 has been generated in the period, and the director expects that the growth of the group will continue over the next 12- 24 months, strengthening the groups overall position.
The board of Directors of the groups Danish parent company has signed an agreement to purchase the shares of a Swedish shell company, in a reverse takeover deal which would allow the group to be listed on the Spotlight Stock Exchange and which would in such a case allow significant funds to be raised from this venture which would help support the UK subsidiaries. Notwithstanding the above the Director is exploring multiple possible scenarios for further funding for the group which could also include potential financial support from shareholders or other means of attracting external capital into the group. The director is confident that a financing solution will be achieved.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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 profit or loss, 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 profit or loss, 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, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the director is 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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The annual depreciation charge for tangible fixed assets is sensitive to changes in the estimated useful economic lives and residual values of assets. The useful economic lives and residual values are re-assessed annually.
They are amended when necessary to reflect current estimates, based on technological advancement, economic utilisation and the physical condition of the assets.
The estimated selling price is reviewed for each individual stock item and the directors assess the need for any specific provisions depending on the market conditions or condition of the individual stock item.
The carrying value of work in progress is reviewed for each individual item in order to ensure the carrying value is not in excess of the items net realisable value at any given stage in the production process. Directors assess the need for any specific provisions depending on market conditions and the condition and stage of completion of each item included in work in progress.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Investment income includes the following:
The rate of UK corporation tax increased from 19% to 25% from 1st April 2023.
The effective rate of tax for the period has been calculated as 20.5% based on 9 months of profits chargeable at 19% and 3 months chargeable at 25%.
The actual (credit)/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:
Tangible Assets with a Net Book Value of £1,474,214 (2022: £1,643,410) at 30 June 2023 are secured against the group's Hire Purchase obligations.
Details of the company's subsidiaries at 30 June 2023 are as follows:
The following subsidiaries were exempt from audit under section 479A of the companies act;
JHT Group Holdings Limited, Steelway Group Holdings Limited, Steelway Group Limited, Steelway Holdings Limited, Steelway Limited, CEL Sheet Metal (Holdings) Limited and Matt Page Installations Limited.
£355,000 of the amount in other creditors relates to deferred consideration due to the sellers from the purchase of CEL Sheet Metal Limited.
£130,000 of the amount in other creditors relates to deferred consideration due to the sellers from the purchase of Steelway Group Limited.
£350,000 of the amount in other creditors relates to deferred consideration due to the sellers from the purchase of CEL Sheet Metal Limited which is not yet payable.
£320,000 of the amount in other creditors relates to deferred consideration due to the sellers from the purchase of Steelway Group Limited which is not yet payable.
The group has the following bank loans:
A loan was entered into by Steelway Group Holdings Limited in December 2020 with a lending company, Triple Point. The loan is to be repaid in equal quarterly instalments over 48 months on which interest is paid at a rate of 8.25%, repayable by December 2024. The loan is secured by way of a fixed and floating charge over the assets and investments held by Steelway Group Holdings Limited and group companies Steelway Fensecure Limited, Steelway Access Covers Limited, Steelway Group Limited, JHT Fabrications Limited and JHT Group Holdings Limited.
A loan was entered into by CEL Sheet Metal Limited in March 2022 with a lending company Close Brothers. The loan is to be repaid in equal monthly instalments over 36 months on which interest is paid at a rate of 6% over the bank of England base rate, repayable by March 2025. the loan is secured by way of a floating charge over the assets and investments held by CEL Sheet Metal Limited.
A loan was entered into by Steelway Fensecure Limited in March 2023, with Cynergi Finance. The loan is to be repaid in equal monthly instalments over 5 years on which interest is paid at a rate of 35%. The loan is to be fully repaid by March 2028. The loan is secured by way of a fixed charge over the plant and equipment owned by Steelway Fensecure Limited.
Loans from group undertakings
An arrangement was entered into by Northern Industries UK 1 Limited in July 2022, with Northern Industries A/S, its ultimate parent company. The loan is subject to interest which accrues daily at a rate of 10%, an inflation adjustment is also chargeable on the loan annually based on the movement in the Net Price Index published by Statistics Denmark. If payments are defaulted on the loan interest rate rises to 17.55%.
The loan was granted in Danish Kroner and is therefore exposed to movements in the DKK to GPB exchange rate. This loan is fully repayable by 5 July 2031.
Invoice discounting
Invoice discounting arrangements have been entered into by the CEL Sheet Metal Limited and Steelway Fensecure Limited. The invoice discounting balances are secured against each company's trade debtors and by fixed and floating charges over each company's assets.
A hire purchase agreement was entered into by CEL Sheet Metal Limited in March 2022 with a lending company Close Brothers. The agreement is to be repaid in equal monthly instalments over 60 months on which interest is paid at a rate of 20.2%, repayable by March 2027. the loan is secured on the assets to which it relates.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Steelway Group Holdings Limited holds a loan due to Triple Point. The loan is secured via a debenture with Steelway Group Holdings Limited, Steelway Fensecure Limited, Steelway Access Covers Limited, Steelway Group Limited, JHT Fabrications Limited and JHT Group Holdings Limited. The lender has a fixed and floating charge over investments and the assets held by the entities.
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:
On 25 July 2023 the board of directors of Northern Industries A/S, the parent company of Northern Industries UK 1 Limited, signed a share purchase agreement in which the shares of Northern Industries A/S will be purchased by a Swedish company and in turn the existing shareholders of Northern Industries A/S will purchase 90% of the shares in the Swedish company.
Northern Industries A/S has committed to costs of 600,000 DKK in respect of the above deal.
The remuneration of key management personnel is as follows.
During the year JHT Fabrications Limited leased a property from J Thompson and L Jackson at a rental amounting to £36,996 (2022: £36,996), which is charged on normal commercial terms. In addition, J Thompson and L Jackson were paid £50,167 (2022: £49,000) in consultancy fees by JHT Fabrications Limited during the year. J Thompson and L Jackson were previously shareholders of Northern Industries UK 1 Limited and JHT Fabrications Limited.
During the year, YMS Investments 1 ApS, a company controlled by Mr Yusufa Sey, was paid £30,328 (2022: £nil) by Steelway Fensecure Limited and £nil (2022: £48,577) by JHT Fabrications Limited in respect of consultancy and project management fees. Mr Yusufa Sey is a director and shareholder of Northern Industries UK 1 Limited.
Northern Industries UK 1 Limited operate management agreements with Northern Industries A/S, the ultimate parent company of Northern Industries UK 1 Limited. During the year £30,837 (2022: £nil) was paid by JHT Fabrications Limited, £56,628 (2022: £nil) by Steelway Fensecure Limited and £64,500 (2022: £nil) by CEL Sheet Metal Limited to Northern Industries A/S under the management agreement on behalf of Northern Industries UK 1 Limited.
Northern Industries UK 1 Limited operated management agreements with Magnus Kjoller Holdings ApS, a shareholder of Northern Industries UK 1 Limited. During the year £40,004 (2022: £40,008) was paid by JHT Fabrications Limited and £61,386 (2022: £80,004) by Steelway Fensecure Limited to Magnus Kjoller Holdings ApS under the management agreement on behalf of Northern Industries UK 1 Limited. This management agreement was cancelled in January 2023 and replaced by the agreement in place with Northern Industries A/S as detailed above.