The directors present the strategic report for the year ended 30 June 2023.
The principal activity of the company continued to be that of manufacturing, cutting and distribution of cables.
British Cables Company’s (BCC) turnover was slightly below prior year, which was due to end of a large export copper cable contract and also due to a moratorium being placed by BCC's large customer for a period of 3 months with the effect spread over 6 months. War in Ukraine continues to have pressure on raw material prices as well as energy prices, which has made competing with foreign imports a lot difficult. Our industry is also LME (London Metal Exchange) driven and turnover year on year (YoY) is therefore not directly comparable. Average LME (copper) in 21/22 was £7,140 and in 22/23 LME had increased to £6,878. Overall turnover decreased by £1.4m, of which the copper impact was £0.4m positive and volume was £1.8m reduction. Openreach continue to rollout fibre to new build properties, which influences the copper cables we manufacture. Sales in to the Rail sector increased by 44% YoY but Copper Telco cable saw the largest reduction compared to prior year. Due to the moratorium fibre sales reduced by just over £1m YoY.
Common across the whole of the cable manufacturing industry has been and continues to be the indirect impact of the war in Ukraine namely increased raw material costs / material shortages and long lead times.
One major account imposed a moratorium on spend affecting all of their suppliers, which although originally thought to last 3 months ended lasting a full half of year with the obvious negative effect on revenues. Order levels have since started to return to pre challenge levels.
We continue to resolutely adhere to the key strategic objective of reducing the dependency on the copper telecommunications market by entering new markets, securing new customers and supplying newly introduced products through our NPI program. New rail products targeting the rail infrastructure sectors both in the UK and Europe gain significant traction which bode well for the ensuing years.
The increase in trading accounts continues to be key in our development and our risk spreading strategy. Active accounts continue to remain on a steady and upward trajectory.
Embracing digitalisation and utilisation of several new platforms drives and continues to build the BCC brand. Engagement with the British Government / Department of International trade combined with the “Buy British overtones” have allowed us to enter / tender for more infrastructure projects Internationally. The Middle East markets in particular call for UK manufactured products.
BCC’s manufacturing efficiency remains a key focus along with scrap management / scrap reduction programs
The transfer of the manufacturing facility from our sister Company in Ireland has been completed, thus increasing both manufacturing capability and capacity. This will allow BCC to produce products for existing, new and emerging markets.
Tight labour markets required extra focus on resource planning, upskilling, multiskilling, succession programs and retention.
Entering and focussing on developing business in these new and buoyant markets, securing medium and long-term contracts will provide significant growth over the ensuing years.
The company makes little use of financial instruments other than an operational bank account and confidential invoice finance facility, so its exposure to credit risk, liquidity risk and cash flow risk is not material for the assessment of the assets, liabilities, financial position and profit and loss of the company.
Price risk
The company is exposed to commodity price risk as a result of its operations. The directors believe that the group has adequate controls established to ensure that prices charged to customers reflect the cost of copper for each order received.
Foreign exchange risk
The company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Euros. Foreign risk arises from future commercial transaction and recognised assets and liabilities.
Since the movement of machinery from sister company IDH, BCC are now fully operational and approved for all the cable range previously being manufactured by IDH. A small delay in getting the equipment setup was due to lead time of new equipment added to existing piece of kit, which will make the manufacturing more efficient and price more competitive in a highly competitive market.
IDH Limited will be supported by BCC in UK to manufacture goods for Irish and export market, but will continue to be a Hans Wilms Beteiligungs GmbH company. It was also decided that some manufacturing will remain in IDH, so they can serve the Irish markets.
The business has successfully secured new long-term contracts to supply optical fibre cables and also new contract for supply of copper telecommunication cable. Both these commenced from Autumn 2021.
The key tenet of the business continues to be health, safety, quality and the environment. The health and safety of all employees remains paramount.
Our policy aims to provide and support a culture where health, safety, quality and the environment is at the top of everyone's agenda. This has been achieved by ensuring that all our staff, operatives and sub-contractors receive adequate training, have the correct personal protective equipment and feel empowered to raise any concerns that they may have.
The Company retains its enviable record of exceeding H&S standards having achieved the RoSpa Presidents award for three consecutive years following being awarded Gold awards each year for over a decade.
Accreditations
BS EN ISO 9001 : 2015 Quality Management System
BS EN ISO 14001 : 2015 Environmental Management System
BS EN 45001 : 2018 Health & Safety Management System
Certificate of Product Approval to cover cables to BS EN 50525-3-41:2011
H07Z-R Class 2 1 core 1.5mm2 to 25mm2
H05Z-K Class 5 1 core 0.5mm2 to 1mm2
H07Z-K Class 5 1 core 1.5mm2 to 10mm2
Certificate of Product Approval to cover cables to BS 8436:2011
Screened Class 2 2 core, 3 core and 4 core 1.0mm² to 4.0mm²
Certificate of Product Approval to cover cables to BS 7211:2012
6241B- 6243B – Class 1 & Class 2, 1.5mm2 – 16mm2
Certificate of Product Approval to cover cables to BS 6004:2012
6181Y Class 1 1 core 1.0mm² to 2.5mm² and Class 2 1 core 4.0mm² to 25mm²
Certificate of Product Approval to cover cables to BS 7629-1:2015FG200 Fire Resistant Screened Class 1 & 2 2 core, 3 core and 4 core 1.5mm² to 4.0mm²
LPCB Certificate of Product Approval to cover single core fire resistant cables to BS 6387:2103
FG100 Single Core Fire Resistant cables 1.0mm2 – 16.0mm2
BCC also have a range of certificates / approvals covering the fire performance CPR requirements.
Key Performance Indicators
2023 2022
£'000 £'000
Turnover 35,249 36,696
Gross profit 7.3% 8%
EBITDA 276 910
EBITDA % 0.8% 2.4%
Debtor Days 65 71
Creditor Days 58 60
Gross profit % dropped to 7.3% which is mainly to do with the energy price increases and packaging price increases. EBITDA % dropped 1.6% due to these large hikes.
Debtor days have gone down from 71 days to 65 days. This is due to improvements in cash collections and challenging some increased payment terms requested. Creditor days have reduced year on year from 60 days to 58 days. This seems to be the longest terms currently being offered by suppliers. As there is shortage of supplies, trying to negotiate extended terms doesn’t seem to be of interest. Moving to new suppliers is becoming difficult, as suppliers are only willing to serve its existing customers base.
This statement by the board describes how the responsibilities under s172 (1) (a) to (f) of the Companies Act 2006 have been approached. The directors consider that they have acted in good faith to promote the success of the company on behalf of the stakeholders, in relation to matters set out in s172 of the Act. The stakeholders of the business include the employees, clients and suppliers of the business.
The directors monitor and review strategic objectives against growth plans and regular reviews at departmental and board level are held across the business in the key areas. These areas being H & S, Financial performance, Operations, Human Resources and Risks and Opportunities.
The directors consider H&S fundamental to the management of the business. Safe working practices that minimise environmental impact are key to the success of the business and vitally important for our stakeholders, the communities and the environments we work in.
The fundamental principle in the governance of British Cables Company is the clear, fair and trusting approach to all interactions with employees, clients and suppliers; this is reflected in the length of service of employees and management teams and the longevity of the relationships with our clients and suppliers. The company’s employees, clients and suppliers are critical to the success of the business and so it is recognised that engagement is an important aspect in those relationships.
The directors recognise and understand that it is important to keep employees informed of all matters concerning them and does this in a number of ways including site notices, meetings, verbal and written communications. The views and interests of employees are considered in consultation with them through working groups or forums, which evolve over time to meet the needs of all parties. The policy of the company is to consult and discuss with employees any issues that arise in accordance with relevant procedures or legislation.
The company has an equal opportunities policy and is committed to the principles within the policy in respect of all stakeholders. The company has built, and continues to grow, the business on a reputation for delivering excellent customer service. The company, through the senior management team and employees, strives continuously to improve in every aspect of the products and services it provides, for the mutual benefit of all stakeholders.
The company enjoys good relationships with suppliers in relation to credit arrangements and takes a firm approach to debtor management. Payment terms reduce the risk to the business whilst the process for debt collection minimises the risk of non-payments. The directors have overall responsibility for delivering the company’s strategy and values and for ensuring high standards of governance. The primary aim of the directors is to promote the long-term sustainable success of the company to generate benefit for the stakeholders
Strong customer relationships and a reputation for delivering great customer service will provide a springboard for continued growth with existing and new customers. Our increased capability and capacity positions us well for securing sustainable growth over the ensuing years.
The experienced team, along with the supportive shareholders will continue to drive the business through 2020 and beyond. A strong balance sheet and cash position means the business is in the perfect position to build on the success of past years.
Business investment and improvement plans will continue to further enhance health and safety culture, improve the client experience, and develop our people and systems to provide greater efficiencies for the benefit of all stakeholders.
The directors are very confident for the future of the business.
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On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2023.
The results for the year are set out on page 13.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2022/23 UK Government’s Conversion Factors for Company Reporting.
Utilities
Invoices from electricity and natural gas suppliers were provided, with energy consumption expressed in kilowatt hours. Emissions were calculated using the average UK mix.
Transport
Fuel consumption by company owned vehicles is recorded by fuel cards, expressed in litres.
Energy consumption and emissions were calculated using the average forecourt mineral blend of fuels.
For rental vehicles the engine size and mileage was recorded. Vehicles were grouped by engine size and fuel type according reporting guidance in order to estimate emissions, which in turn was converted to energy consumption in kilowatt hours. For combustion engines the average forecourt mineral blend was used and for electric vehicles the average UK generation mix was used.
Fugitive Emissions
Where air conditioning repairs included replacement of escaped refrigerant gasses, invoices from maintenance contractors were provided, expressing the type of refrigerant used and quantity in kilograms. All emissions have been converted and expressed as its carbon dioxide equivalent.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per full-time employee, a recommended ratio for the sector.
Future strategy surrounds the continuous look out for efficiencies to be made within the production processes.
These include:
- Greater power savings by the shutting down of key production processes when they are in standby mode and the conversion of Core lines to more efficient drive systems. For example, DC to AC power on Lines 1512 and 1513 is planned to be rolled out across all Core production lines over time.
- Core vessel management has been reviewed and shorter times (electrical savings) are to be used without degradation in product quality.
- Greater control on the usage of gas heating across the site where older gas lines have been removed and more efficient electrical systems installed for personnel welfare.
- Finally following the Management Review 2023, an ambitious 1.5 % Carbon reduction has been agreed to continue to aim of a minimum certification level of C by 2030.
After performing their assessment and making appropriate enquiries, the directors have a reasonable expectation that the company will remain a going concern for the foreseeable future and accordingly, the financial statements have been prepared on a going concern basis. The results and conclusions of the going concern assessment are described in more detail in note 1 of the financial statements.
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.
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 procedures we carried out and the extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations;
Enquires with management about any known or suspected instances of fraud;
Examination of journal entries and other adjustments to test for appropriateness and identify any instances of management override of controls;
Auditing the risk of fraud and management override of revenue by incorporating data analytics into our sampling of source entries and testing specific transactions to determine the completeness of revenue, and
Review of legal and professional expenditure to identify any evidence of ongoing litigation or enquiries.
Because of the field in which the client operates we identified that employment law, health and safety legislation and compliance with the UK Companies Act are the areas most likely to have a material impact on the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
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 profit and loss account has been prepared on the basis that all operations are continuing operations.
British Cables Company Limited is a private company limited by shares incorporated in England and Wales. The registered office is Ashenhurst Works, Blackley, Manchester, M9 8ES.
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 £'000.
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’ and Section 12 ‘Other Financial Instrument Issues’: Interest income/expense and net gains/losses for each category of financial instrument; 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 financial statements of the company are consolidated in the financial statements of Standard Cableteam UK Limited. These consolidated financial statements are available from its registered office, Delauneys Road, Blackley, Manchester, M9 8FP, United Kingdom.
As with most businesses, at the date of approval of the financial statements, the company has been recovering from the effects of the Covid-19 pandemic. Currently 3 things that we are assessing on a regular basis is are:
War in Ukraine – this is having a bigger impact than Covid-19 has done. Shortages in supplies of certain raw materials is driving higher prices. Also, sanctions placed by the UK government with Russia is making it difficult for our suppliers to source materials. We have been comforted by our suppliers that they have alternative supplies in place, albeit at a slightly higher costs, but supply will continue.
Energy Costs – as the country is feeling the pressure from wholesalers increasing energy costs, and seeing large numbers of ‘smaller’ energy companies not being able to survive. We have been working closely with our brokers to ensure this does not have big impact on our costs, and manage our energy costs for us.
Inflation – this has increased 3 folds from 12 months ago. We are seeing that prices of not only raw materials, but transport, fuel, energy and commodity increasing. In order to minimize impact of inflation we are making some improvements on our production by driving efficiencies, and negotiating hard with our raw material suppliers to keep the prices down. Ultimately we are also negotiating with our customers, with whom we have long term contracts, to pass some of the increase over.
The directors have prepared detailed cashflow forecasts including assumptions on key contracts which have now come to fruition, these demonstrate that the company has sufficient cash resources to be able to withstand the future trading conditions arising due to the factors listed above, whilst being able to continue to meet its liabilities as they fall due and meet the financial covenant requirements for the 12 month period following approval of the accounts. The Hans Wilms Beteiligungs-GmbH group has also confirmed that it will provide financial support for the company for the 12 month period following the approval of the accounts. Therefore the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
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 in the course of construction are not depreciated as they have no been brought into use.
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 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.
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 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.
The company manufactures and buys copper and fibre cable. It is necessary to consider the recoverability of the cost of inventory and the associated provisioning required. When calculating the inventory provision, management considers stock not sold within the last 12 months, stock over 12 months old, short lengths and stock for which the company has more than 12 months of cover.
Stock is stated at the lower of cost and estimated selling price less cost to complete and sell. Cost is determined on a standard cost basis and is reviewed periodically. The carrying value of stock at the year end is as disclosed in note 14.
An analysis of the company's turnover is as follows:
The company shipped plant and machinery from overseas in the previous period from a fellow group undertaking. The exceptional costs incurred in that period relate to the costs to transport the plant and machinery to the company's premises.
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 1 (2022 - 1).
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
In March 2021 the Chancellor confirmed, in the budget, an increase in the corporation tax rate from 19% to 25%. The Finance Bill 2021 had its third reading on 24 May 2021 and is now considered substantively enacted. The timing differences expected to reverse on or after 1 April 2023 have been accounted for at 25%.
Details of the company's subsidiaries at 30 June 2023 are as follows:
The bank loans are secured by a debenture over all of the company's assets and undertaking as well as fixed and floating charges over the property at Ashenhurst Works, Blackley, which is owned by HW Real Estate UK Ltd.
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.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
There are unlimited cross company guarantees on bank borrowing facilities and loans between British Cables Company Limited, HW Real Estate UK Ltd and Standard Cableteam UK Limited.
The potential liability at 30 June 2023 for the company under this guarantee is £2,050,000.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
During the year the company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The company has taken advantage of the disclosure exemption relating to section 33.1A of the standard with regards to the requirement of disclosing transactions with fellow group entities.
As at the balance sheet date, the company is a wholly owned subsidiary of Standard Cableteam UK Limited. The directors consider that the ultimate parent undertaking of this company is Hans Wilms Beteiligungs GmbH.