REGISTERED NUMBER: 10437934 (England and Wales) |
Group Strategic Report, |
Report of the Director and |
Consolidated Financial Statements |
for the Year Ended 31 December 2022 |
for |
Highfield Environmental Holdco Limited |
REGISTERED NUMBER: 10437934 (England and Wales) |
Group Strategic Report, |
Report of the Director and |
Consolidated Financial Statements |
for the Year Ended 31 December 2022 |
for |
Highfield Environmental Holdco Limited |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Contents of the Consolidated Financial Statements |
for the Year Ended 31 December 2022 |
Page |
Company Information | 1 |
Group Strategic Report | 2 |
Report of the Director | 4 |
Report of the Independent Auditors | 6 |
Consolidated Statement of Comprehensive Income | 9 |
Consolidated Balance Sheet | 10 |
Company Balance Sheet | 11 |
Consolidated Statement of Changes in Equity | 12 |
Company Statement of Changes in Equity | 13 |
Consolidated Cash Flow Statement | 14 |
Notes to the Consolidated Cash Flow Statement | 15 |
Notes to the Consolidated Financial Statements | 17 |
Highfield Environmental Holdco Limited |
Company Information |
for the Year Ended 31 December 2022 |
DIRECTOR: |
REGISTERED OFFICE: |
REGISTERED NUMBER: |
AUDITORS: |
Chartered Accountants and Statutory Auditors |
Medway House |
Fudan Way |
Teesdale Business Park |
Stockton on Tees |
TS17 6EN |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Group Strategic Report |
for the Year Ended 31 December 2022 |
The director presents his strategic report of the company and the group for the year ended 31 December 2022. |
REVIEW OF BUSINESS |
The Highfield Environmental Holdco Limited group (Highfield Group) is a waste management business based in the North East of England that provides a range of services to customers, including: |
- landfill site facilities at Cowpen and Teesport (the latter including both non-hazardous and hazardous components); |
- a composting facility at Cowpen; and |
- landfill gas generation. |
In light of the size and straightforward nature of the business it is not considered that detailed key financial and other performance indicators are of particular relevance for these consolidated financial statements. |
In terms of overview financial indicators: |
- turnover for the year to 31 December 2022 £21,281,563 [year to 31 December 2021 - £18,014,492]; |
- profit/(loss) for the year to 31 December 2022 £184,061 [year to 31 December 2021 - £512,654]; |
- EBITDA for the year to 31 December 2022 £4,922,495 [year to 31 December 2021 - £3,880,964]. |
where EBITDA is stated before any fair value gains or losses on investments. |
Turnover from landfill operations increased from circa £15,085,000 in 2021 to circa £18,185,000 in 2022 (per note 3). On a landfill tax exclusive basis revenues rose from circa £4,460,000 in 2021 to circa £5,710,000 in 2022. |
As noted in note 3 to the financial statements revenues from landfill gas operations increased from circa £385,000 in 2021 to circa £535,000 in 2022, with revenues from composting operations remaining broadly static at circa £2,550,000 in 2021 and circa £2,560,000 in 2022. |
It is noted that the group has continued to invest significantly in tangible fixed assets during 2022 with total additions of circa £630,000. In addition the group has spent circa £1,040,000 on landfill capping works at the Cowpen and Teesport sites during 2022. |
As regards overview operational indicators total landfill waste tonnages received for the year to 31 December 2022 were circa 405,000 tonnes against circa 365,000 tonnes in the year to 31 December 2021 (excluding amounts not deposited into the void). Total composting input tonnages received for the year to 31 December 2022 were circa 85,000 tonnes against circa 105,000 tonnes in the year to 31 December 2021. |
PRINCIPAL RISKS AND UNCERTAINTIES |
During the year the management of the Highfield Group reviewed the principal risks and uncertainties present, and consider that the more significant risks, in addition to developments in the macro and micro economic environment relevant to Highfield Group's strategy, are those set out below: |
Technology |
The risk that the technologies employed by the Highfield Group do not deliver expected performance or products to the markets in which the group operates. |
Dynamics |
The risk that the group's service offering fails to react to legislative and market dynamics, in particular developments re landfill policies and alternative waste disposal or reprocessing methods. |
In mitigation of these risks the Highfield Group regularly reviews its service offerings to ensure that they are fully compliant and meeting the needs of customers. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Group Strategic Report |
for the Year Ended 31 December 2022 |
PRINCIPAL RISKS AND UNCERTAINTIES (continued) |
See also Future Developments in the Report of the Director and the narrative in the Going Concern section of note 2 to the consolidated financial statements. |
The group's activities also expose it to a number of financial risks including the following: |
Credit Risk |
The group considers that the principal relevant financial assets here are trade debtors. Group policies aim to minimise credit losses on trade debtors by, for example, granting credit terms to customers who satisfy credit worthiness procedures or demonstrate a suitable payment history - with credit being assessed with reference to insured limits where applicable. The group assesses the recoverability of trade debtors based on an assessment of the individual counterparties and considers that the carrying value of the assets presents their recoverable amount. |
Price Risk |
The group's main relevant financial assets are the investments held in landfill trust arrangements, which are exposed to price risk where the investments are held in portfolios that are exposed to fluctuations in the prices of applicable underlying assets. As is discussed further in note 13 to the consolidated financial statements, the landfill trust arrangements and assets held are overseen by independent trustees with the group having no control or right to day-to-day involvement. |
Interest Risk |
The group's main relevant financial liabilities used to be considered to be the other loans drawn down under two unitranche facilities however the facilities have operated with a fixed cash interest rate of 5% per annum with effect from 1 January 2020, with the interest rate and terms remaining unchanged when the maturity of the facilities was extended to 31 March 2023 and then to 31 March 2026. |
Liquidity and Cashflow Risk |
As regards liquidity risk this is the risk that the group encounters difficulty in meeting obligations associated with financial liabilities. The group aims to mitigate liquidity risk, and ensure that sufficient funds are available for ongoing operations and future developments, by managing operational cash generation as well as via the use of asset finance arrangements and the unitranche debt facilities (see also Future Developments in the Report of the Director). |
As regards cashflow it is noted that forecasts are prepared regularly with forecast headroom and developments being monitored by management on an ongoing basis. |
ON BEHALF OF THE BOARD: |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Report of the Director |
for the Year Ended 31 December 2022 |
The director presents his report with the financial statements of the company and the group for the year ended 31 December 2022. |
PRINCIPAL ACTIVITY |
As noted in the Group Strategic Report, the principal activities of the group in the period under review involved the provision of various waste management services. |
DIVIDENDS |
No dividends will be distributed for the year ended 31 December 2022. |
FUTURE DEVELOPMENTS |
As regards day-to-day operations the management of the group continue to review opportunities to develop the waste management service offering of the business and continue to assess and respond to the impacts of issues arising on the operations of the business. |
As regards other developments it is noted that, in September 2023, the owners of Highfield Environmental Holdco Limited exchanged contracts to dispose of the whole of the issued share capital of the company to an unconnected third party. |
Completion of the transaction is conditional upon a number of conditions being satisfied however these are considered to be essentially administrative in nature with completion hence being expected to occur in the near future. |
See the Possible Change of Control section of the Post Balance Sheet Events note for further details. |
In the unlikely event that the transaction does not complete then the Director considers that the baseline position is that the business (the group and parent company) will continue operating under its existing ownership and funding arrangements for the foreseeable future (with the updated termination date of the other loan facilities being 31 March 2026). |
The current lenders to the group and voting owners of the parent company may continue to review possible other options regarding the future development of the business in this scenario however they have indicated that they do not expect the outcome from this process (if any) to impact the ability of the group and/or the parent company to continue as a going concern for the foreseeable future. |
As noted above it is noted that the lenders to the group and voting owners of the parent company have indicated that they are in a position to provide additional funding should this be required for day-to-day, development or other purposes. |
EVENTS SINCE THE END OF THE YEAR |
Information relating to events since the end of the year is given in the notes to the financial statements. |
DIRECTOR |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
The group's operations expose it to a variety of financial risks that include the effects of credit risk, price risk, liquidity risk and interest rate risk. The group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the group where appropriate. See the Group Strategic Report for further information. |
DISCLOSURE IN THE STRATEGIC REPORT |
The group has chosen, in accordance with Companies Act 2006 s414C(11), to set out in the Group Strategic Report certain information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the Report of the Director. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Report of the Director |
for the Year Ended 31 December 2022 |
STATEMENT OF DIRECTOR'S RESPONSIBILITIES |
The director is responsible for preparing the Group Strategic Report, the Report of the Director and the financial statements in accordance with applicable law and regulations. |
Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the director is required to: |
- | select suitable accounting policies and then apply them consistently; |
- | make judgements and accounting estimates that are reasonable and prudent; |
- | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. |
The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable him to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. |
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS |
So far as the director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information. |
AUDITORS |
The auditors, Tindle's LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting. |
ON BEHALF OF THE BOARD: |
Report of the Independent Auditors to the Members of |
Highfield Environmental Holdco Limited |
Opinion |
We have audited the financial statements of Highfield Environmental Holdco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, Notes to the Financial Statements, including a summary of 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). |
In our opinion the financial statements: |
- | give a true and fair view of the state of the group's and of the parent company affairs as at 31 December 2022 and of the group's profit for the year then ended; |
- | have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and |
- | have been prepared in accordance with the requirements of the Companies Act 2006. |
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the group 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 director's 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 the 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 director with respect to going concern are described in the relevant sections of this report. |
Emphasis of matter - investments |
We draw attention to note 13 of the consolidated financial statements, which describes the background to and treatment of three landfill trusts that were established in 2011 and 2016 with the consent of the Environment Agency in connection with the funding of restoration and aftercare commitments for the landfill sites that were acquired by the group in 2016. The note includes details regarding the independent management of the trusts and the basis on which the £7,022,671 of trust fund assets are recognised in the consolidated financial statements for the year ended 31 December 2022. Our opinion is not modified in respect of this matter. |
Other information |
The director is responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Director, but does not include the financial statements and our Report of the Auditors thereon. |
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. |
In connection with our audit of the financial statements, 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 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. |
Report of the Independent Auditors to the Members of |
Highfield Environmental Holdco Limited |
Opinions on other matters prescribed by the Companies Act 2006 |
In our opinion, based on the work undertaken in the course of the audit: |
- | the information given in the Group Strategic Report and the Report of the Director for the financial year for which the financial statements are prepared is consistent with the financial statements; and |
- | the Group Strategic Report and the Report of the Director have been prepared in accordance with applicable legal requirements. |
Matters on which we are required to report by exception |
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 Group Strategic Report or the Report of the Director. |
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 director's remuneration specified by law are not made; or |
- | we have not received all the information and explanations we require for our audit. |
Responsibilities of director |
As explained more fully in the Statement of Director's Responsibilities set out on page five, 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 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 group's and 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 group or the parent company or to cease operations, or has no realistic alternative but to do so. |
Auditors' responsibilities for the audit of the financial statements |
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 a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. |
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: |
- | we identified the key laws and regulations applicable to the group through discussions with the management and from our knowledge and experience of the waste management sector; |
- | we focussed on laws and regulations where it was considered that non-compliance could have a direct and material impact on the consolidated financial statements or the operations of the group, which included the Companies Act 2006 and FRS 102 along along with environmental compliance and taxation legislation; |
- | we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and as part of our procedures on related financial statement items, including inspecting applicable documentation; |
- | we assessed the susceptibility of the group's consolidated financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by making enquiries of management regarding their knowledge of actual, suspected and alleged fraud and by assessing other factors including, but not limited to, the role of accounting estimates, internal control systems, management override and journal entries. |
The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area. |
Report of the Independent Auditors to the Members of |
Highfield Environmental Holdco Limited |
Auditors' responsibilities for the audit of the financial statements - continued |
Audit procedures performed by the engagement team then also included the following (using a sample basis as applicable): |
- | considering issues regarding revenue recognition; |
- | testing of journal entries and complex transactions; |
- | considering the rationale behind identified significant or unusual transactions; and |
- | assessing whether judgements and assumptions made in the calculation of accounting estimates appeared reasonable. |
It is noted that, in light 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. It is considered that this risk increases the more that compliance with a law or regulation is removed from the events and transactions that are reflected in the financial statements as we will be less likely to become aware of instances of non-compliance. It is also noted that the risk is greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. |
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors. |
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 a Report of the Auditors 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. |
for and on behalf of |
Chartered Accountants and Statutory Auditors |
Medway House |
Fudan Way |
Teesdale Business Park |
Stockton on Tees |
TS17 6EN |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Consolidated Statement of Comprehensive Income |
for the Year Ended 31 December 2022 |
2022 | 2021 |
Notes | £ | £ |
TURNOVER | 3 | 21,281,563 | 18,014,492 |
Cost of sales | (13,470,218 | ) | (11,645,457 | ) |
GROSS PROFIT | 7,811,345 | 6,369,035 |
Administrative expenses | (4,887,682 | ) | (4,656,232 | ) |
2,923,663 | 1,712,803 |
Other operating income | 4 | 17,994 | 164,757 |
OPERATING PROFIT | 6 | 2,941,657 | 1,877,560 |
Profit/(loss) on disposal of investments | 7 | - | (1 | ) |
2,941,657 | 1,877,559 |
Interest receivable and similar income | 38,541 | 198 |
2,980,198 | 1,877,757 |
Fair value gain/(loss) on investments | (520,918 | ) | 389,590 |
2,459,280 | 2,267,347 |
Interest payable and similar expenses | 8 | (1,684,247 | ) | (1,724,605 | ) |
PROFIT BEFORE TAXATION | 775,033 | 542,742 |
Tax on profit | 9 | (590,972 | ) | (30,088 | ) |
PROFIT FOR THE FINANCIAL YEAR |
OTHER COMPREHENSIVE INCOME | - | - |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
184,061 |
512,654 |
Profit attributable to: |
Owners of the parent | 184,061 | 512,654 |
Total comprehensive income attributable to: |
Owners of the parent | 184,061 | 512,654 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Consolidated Balance Sheet |
31 December 2022 |
2022 | 2021 |
Notes | £ | £ | £ | £ |
FIXED ASSETS |
Intangible assets | 11 | 2,901,766 | 3,658,749 |
Tangible assets | 12 | 10,059,375 | 10,244,466 |
Investments | 13 | 7,022,671 | 7,543,589 |
19,983,812 | 21,446,804 |
CURRENT ASSETS |
Stocks | 14 | 22,554 | 33,603 |
Debtors: amounts falling due within one year | 15 | 1,427,505 | 1,680,460 |
Debtors: amounts falling due after more than one year |
15 |
1,016,670 |
1,162,108 |
Cash at bank and in hand | 6,907,554 | 7,069,312 |
9,374,283 | 9,945,483 |
CREDITORS |
Amounts falling due within one year | 16 | 4,692,360 | 4,325,344 |
NET CURRENT ASSETS | 4,681,923 | 5,620,139 |
TOTAL ASSETS LESS CURRENT LIABILITIES |
24,665,735 |
27,066,943 |
CREDITORS |
Amounts falling due after more than one year |
17 |
(15,956,802 |
) |
(18,591,836 |
) |
PROVISIONS FOR LIABILITIES | 22 | (10,962,011 | ) | (11,538,316 | ) |
NET LIABILITIES | (2,253,078 | ) | (3,063,209 | ) |
CAPITAL AND RESERVES |
Called up share capital | 23 | 108 | 108 |
Share premium | 24 | 2,623 | 2,623 |
Other reserves | 24 | 568,861 | 693,830 |
Retained earnings | 24 | (2,824,670 | ) | (3,759,770 | ) |
SHAREHOLDERS' FUNDS | (2,253,078 | ) | (3,063,209 | ) |
The financial statements were approved by the director and authorised for issue on 15 November 2023 and were signed by: |
D J Martin - Director |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Company Balance Sheet |
31 December 2022 |
2022 | 2021 |
Notes | £ | £ | £ | £ |
FIXED ASSETS |
Intangible assets | 11 |
Tangible assets | 12 |
Investments | 13 |
CURRENT ASSETS |
Debtors: amounts falling due within one year | 15 |
Cash in hand |
NET CURRENT ASSETS |
TOTAL ASSETS LESS CURRENT LIABILITIES |
CAPITAL AND RESERVES |
Called up share capital | 23 |
Share premium | 24 |
SHAREHOLDERS' FUNDS |
Company's profit for the financial year | - | - |
The financial statements were approved by the director and authorised for issue on |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Consolidated Statement of Changes in Equity |
for the Year Ended 31 December 2022 |
Called up |
share | Retained | Share | Other | Total |
capital | earnings | premium | reserves | equity |
£ | £ | £ | £ | £ |
Balance at 1 January 2021 | 108 | (4,779,790 | ) | 2,623 | 1,201,196 | (3,575,863 | ) |
Changes in equity |
Profit for the year | - | 512,654 | - | - | 512,654 |
Total comprehensive income | - | 512,654 | - | - | 512,654 |
Transfer between reserves | - | 507,366 | - | (507,366 | ) | - |
Balance at 31 December 2021 | 108 | (3,759,770 | ) | 2,623 | 693,830 | (3,063,209 | ) |
Changes in equity |
Profit for the year | - | 184,061 | - | - | 184,061 |
Total comprehensive income | - | 184,061 | - | - | 184,061 |
Measurement adjustment re loans | - | - | - | 626,070 | 626,070 |
Transfer between reserves | - | 751,039 | - | (751,039 | ) | - |
Balance at 31 December 2022 | 108 | (2,824,670 | ) | 2,623 | 568,861 | (2,253,078 | ) |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Company Statement of Changes in Equity |
for the Year Ended 31 December 2022 |
Called up |
share | Retained | Share | Total |
capital | earnings | premium | equity |
£ | £ | £ | £ |
Balance at 1 January 2021 |
Changes in equity |
Balance at 31 December 2021 |
Changes in equity |
Balance at 31 December 2022 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Consolidated Cash Flow Statement |
for the Year Ended 31 December 2022 |
2022 | 2021 |
Notes | £ | £ |
Cash flows from operating activities |
Cash generated from operations | 1 | 4,554,355 | 4,311,147 |
Interest paid | (912,962 | ) | (1,205,595 | ) |
Interest element of hire purchase payments paid |
(10,486 |
) |
(1,786 |
) |
Tax paid | (454,207 | ) | (264,674 | ) |
Tax refunds | 30,802 | - |
Net cash from operating activities | 3,207,502 | 2,839,092 |
Cash flows from investing activities |
Purchase of tangible fixed assets | (233,164 | ) | (962,415 | ) |
Sale of tangible fixed assets | 18,583 | 1,045 |
Interest received | 37,753 | - |
Net cash from investing activities | (176,828 | ) | (961,370 | ) |
Cash flows from financing activities |
Loan repayments in year | (3,000,000 | ) | - |
Capital repayments in year | (192,432 | ) | (112,959 | ) |
Net cash from financing activities | (3,192,432 | ) | (112,959 | ) |
(Decrease)/increase in cash and cash equivalents | (161,758 | ) | 1,764,763 |
Cash and cash equivalents at beginning of year |
2 |
7,069,312 |
5,304,549 |
Cash and cash equivalents at end of year | 2 | 6,907,554 | 7,069,312 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Cash Flow Statement |
for the Year Ended 31 December 2022 |
1. | RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS |
2022 | 2021 |
£ | £ |
Profit before taxation | 775,033 | 542,742 |
Depreciation charges | 1,989,150 | 2,004,160 |
Profit on disposal of fixed assets | (8,312 | ) | (756 | ) |
Loss/(gain) on revaluation of fixed assets | 520,918 | (389,590 | ) |
Provisions utilised | (1,040,325 | ) | (11,123 | ) |
Loss on disposal of investments | - | 1 |
Finance costs | 1,684,247 | 1,724,605 |
Finance income | (38,541 | ) | (198 | ) |
3,882,170 | 3,869,841 |
Decrease/(increase) in stocks | 11,049 | (8,050 | ) |
Decrease in trade and other debtors | 254,885 | 105,966 |
Increase in trade and other creditors | 406,251 | 343,390 |
Cash generated from operations | 4,554,355 | 4,311,147 |
2. | CASH AND CASH EQUIVALENTS |
The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts: |
Year ended 31 December 2022 |
31.12.22 | 1.1.22 |
£ | £ |
Cash and cash equivalents | 6,907,554 | 7,069,312 |
Year ended 31 December 2021 |
31.12.21 | 1.1.21 |
£ | £ |
Cash and cash equivalents | 7,069,312 | 5,304,549 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Cash Flow Statement |
for the Year Ended 31 December 2022 |
3. | ANALYSIS OF CHANGES IN NET DEBT |
Other |
non-cash |
At 1.1.22 | Cash flow | changes | At 31.12.22 |
£ | £ | £ | £ |
Net cash |
Cash at bank |
and in hand | 7,069,312 | (161,758 | ) | 6,907,554 |
7,069,312 | (161,758 | ) | 6,907,554 |
Debt |
Finance leases | (104,433 | ) | 192,432 | (399,995 | ) | (311,996 | ) |
Debts falling due |
after 1 year | (18,591,836 | ) | 3,000,000 | (124,969 | ) | (15,716,805 | ) |
(18,696,269 | ) | 3,192,432 | (524,964 | ) | (16,028,801 | ) |
Total | (11,626,957 | ) | 3,030,674 | (524,964 | ) | (9,121,247 | ) |
4. | MAJOR NON-CASH TRANSACTIONS |
Other non-cash changes re debts falling due after one year of £(124,969) comprise: £(751,039) relating to the partial unwinding of measurement adjustments re other loans (see note 18) and £626,070 relating to the recognition of a further measurement adjustment re other loans (see note 18). |
Other non-cash changes re finance leases of £(399,995) relate to a new agreement that commenced in the year ended 31 December 2022. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements |
for the Year Ended 31 December 2022 |
1. | STATUTORY INFORMATION |
Highfield Environmental Holdco Limited is a |
2. | ACCOUNTING POLICIES |
BASIS OF PREPARING THE FINANCIAL STATEMENTS |
These consolidated financial statements have been prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and the Companies Act 2006. |
The consolidated financial statements have been prepared under the historical cost convention modified to include certain items at fair value. The financial statements are prepared in £ sterling (the functional currency). |
GOING CONCERN |
The consolidated accounts show net liabilities of £(2,253,078) at 31 December 2022 after a profit for the year of £184,061 (or a profit before tax of £775,033). The profit for the year was after depreciation charges and amortisation charges net of profits on disposal totalling £1,980,838 in aggregate. |
The group has shown robust financial performance since the balance sheet date with the management accounts as at 30 September 2023 reflecting a positive net assets position (before the impact of any fair value gains or losses on investments). |
Possible Change of Control |
In September 2023 the owners of Highfield Environmental Holdco Limited exchanged contracts to dispose of the whole of the issued share capital of the company to an unconnected third party. |
Completion of the transaction is conditional upon a number of conditions being satisfied however these are considered to be essentially administrative in nature with completion hence being expected to occur in the near future. |
See the Possible Change of Control section of the Post Balance Sheet Events note for further details. |
As noted the other loans outstanding in the subsidiary company, Highfield Environmental Limited, will be settled in full as part of the completion of the transaction partly using the cash reserves of the subsidiary and partly using funds to be introduced to the Highfield Environmental Group by the potential purchaser. |
As also noted the funds are expected to be introduced into Highfield Environmental Holdco Limited by the potential purchaser as a capital contribution rather than as an intercompany loan. |
Highfield Environmental Holdco Limited is then expected to effectively transfer the funds introduced to Highfield Environmental Limited, with this also being a capital contribution rather than an intercompany loan. |
The group has prepared forecasts and projections that allow for completion of the transaction, including the resulting capital contribution, and that are considered reasonable in the context of the current economic and business environment. |
The forecasts show ongoing cash generation and financial headroom hence the group considers that it is in a position to continue operations for the foreseeable future (where this means a period of more than 12 months from the date of approval of the accounts). |
The potential purchaser has also indicated that they are in a position to provide additional funding should this be required post completion. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
ACCOUNTING POLICIES - continued |
GOING CONCERN - continued |
Alternative Scenario (Funding, Covenants and Future Developments) |
Funding |
In the unlikely event that the transaction outlined under Possible Change of Control above does not complete then the group will continue to operate under the existing loan facilities. It is noted that the group does not have a bank overdraft or other undrawn loan facilities. |
As noted in the loans note below, during the year ended 31 December 2022, the lenders formalised an agreement to extend the termination date for the group's existing loan facilities from 31 March 2023 to 31 March 2026, with other key terms (including interest) remaining unchanged. |
The group has prepared forecasts and projections for this scenario that are again considered reasonable in the context of the current economic and business environment. |
The forecasts show ongoing cash generation and financial headroom hence, under this scenario, the group again considers that it is in a position to continue operations for the foreseeable future. |
In addition, it is noted that the lenders to the group and voting owners of the parent company (those holding the voting shares) have indicated that they are in a position to provide additional funding should this be required for day-to-day, development or other purposes. |
Covenants |
As discussed in the loans note below the company and wider group are required to assess compliance with a number of key financial covenants on the existing loan facilities. |
Allowing for the prevailing covenants the group expects, based on current forecasts, that it should continue to satisfy the indicated requirements for the foreseeable future. |
Following discussions, the lenders have confirmed to the Director of the company (and the Director of Highfield Environmental Limited) that they do not intend that the unitranche facilities would be recalled in any event if any financial or other covenant tests were not satisfied going forward. |
As such, in the context of covenants, the group does not consider that the principal of the loans extant at the balance sheet date will now fall due for repayment until the updated termination date of 31 March 2026. |
Future Developments |
In the unlikely event that the transaction outlined under Possible Change of Control above does not complete then the Director considers that the baseline position is that the business (the group and parent company) will continue operating under its existing ownership and funding arrangements for the foreseeable future (with the updated termination date of the other loan facilities being 31 March 2026 as noted above). |
The current lenders to the group and voting owners of the parent company may continue to review possible other options regarding the future development of the business in this scenario however they have indicated that they do not expect the outcome from this process (if any) to impact the ability of the group and/or the parent company to continue as a going concern for the foreseeable future. |
As noted above it is noted that the lenders to the group and voting owners of the parent company have indicated that they are in a position to provide additional funding should this be required for day-to-day, development or other purposes. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
BASIS OF CONSOLIDATION |
The consolidated financial statements consolidate the financial statements of Highfield Environmental Holdco Limited and all of its subsidiary undertakings drawn up to 31 December 2022. No profit and loss account is presented for Highfield Environmental Holdco Limited as permitted by section 408 of the Companies Act 2006. |
Subsidiaries are consolidated from the date of their acquisition, being the date on which control is obtained and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investees so as to obtain benefits from its activities. The date of acquisition (and disposal as applicable) of each of the subsidiaries of Highfield Environmental Holdco Limited is provided in note 13. |
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY |
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the period. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the consolidated financial statements. |
Leases |
The group obtains the use of property, plant and machinery and equipment as a lessee. The classification of lease arrangements as operating or finance leases requires the group to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains or acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position. |
Financial Instruments |
The classification of certain financial instruments as basic financial instruments or other financial instruments requires the Director to assess the terms of the relevant loan agreements, in particular as regards contingent prepayments. |
Provisions and Contingencies |
The group may be exposed to actual or possible claims in connection with its operations. The classification of such matters as provisions, contingent liabilities and so forth requires the group to evaluate various matters including for example the nature of applicable obligations and the likelihood of an outflow of resources occurring. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY - continued |
The following are the group's key sources of estimation uncertainty: |
Fair Values |
Business combinations are accounted for using the purchase method unless the combination constitutes a group reconstruction that may be accounted for using the merger accounting method. |
The assets acquired and liabilities or contingent liabilities assumed in a business combination are measured at fair values subject to the requirements of section 19 of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, with the excess of the cost of the business combination over the net assets acquired being treated as goodwill. The calculation of fair values can involve the use of valuation techniques and estimates including discount rates. |
Goodwill |
The group estimates the useful life of goodwill arising on business combinations. This estimate is based on a variety of factors such as the expected use of the acquired business and any legal, regulatory or contractual provisions that can impact useful life. |
Useful Economic Lives and Landfill Voids |
Certain tangible fixed assets are depreciated on the basis of usage of the relevant landfill void, including restoration and aftercare assets and elements of landfill site infrastructure. The available void tonnage is assessed on a periodic basis with reference to surveys of void space and estimated waste densities, but the rate at which void space is actually consumed is dependent on a number of factors including the nature and the actual density of the waste deposited. As such the useful economic lives of relevant assets are inherently subject to review and updating. At the end of 2022 the calculated estimated useful economic lives ranged from 9 years to more than 100 years (2021: from 10 years to more than 100 years). |
Impairment of Non-Financial Assets |
Where there are indicators of impairment of individual assets impairment tests are carried out based on fair value less costs to sell or a value in use calculation, with the latter being based on a discounted cash flow model. The recoverable amount (and hence any impairment adjustment) is sensitive to the discount rate used for the discounted cash flow model as well as expected future cash flows and any growth rates used for extrapolation purposes. |
Taxation |
Estimates can be required in the calculation of the level of current and deferred tax assets and liabilities to reasonably allow for income tax related uncertainties. Factors that may have favourable or adverse impacts on current or deferred tax assets and liabilities could include changes in tax legislation, tax rates and allowances, future levels of spending and the timing and level of future taxable profits. |
Provisions |
As part of its normal activities the group undertakes to reinstate its landfill sites at the end of their operational life (restoration) and to engage in subsequent monitoring and control activities (aftercare). |
The Director uses third party guidance (where applicable) plus judgement and internal experience to provide for these estimated costs. As is discussed further in note 22 the timing and level of costs are inherently uncertain because of the presence of a range of factors, and in addition the present value is impacted by assumptions made regarding inflation and discount rates. Changes in these assumptions could significantly impact the provisions recognised in the consolidated financial statements. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
REVENUE RECOGNITION |
Revenue is recognised to the extent that the group obtains the right to consideration in exchange for performance of its obligations. Turnover is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. |
The following specific points may be noted: revenue from landfill operations, which includes landfill tax, is recognised when the waste has been delivered to one of the group's landfill sites and deposited by the customer; revenue from landfill gas operations is recognised as the associated electricity is generated; and revenue from waste composting activities is recognised once the waste has been accepted at the group's processing facility, at which point the is group responsible for the waste. |
ACCRUED INCOME |
Accrued income comprises revenue relating to the current period which will not be invoiced until after the balance sheet date. |
TANGIBLE FIXED ASSETS |
Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses, with cost including such costs as are directly attributable to making the asset usable as intended. |
Depreciation is provided as follows in order to write off the cost, less the estimated residual value, of each asset over its estimated useful life. |
Landfill site infrastructure - | on a straight line basis over a period of up to 10 years or as the relevant landfill void is utilised. |
Long leasehold property - | in line with the profile of expected landfill gas generation. |
Restoration and aftercare asset - | as the relevant landfill void is utilised. |
Plant and machinery - | on a straight line basis over a period of up to 10 years. |
Fixtures and fittings - | on a straight line basis over a period of up to 3 years. |
Motor vehicles - | on a straight line basis over a period of up to 5 years. |
Landfill site infrastructure assets relate to the cost of infrastructure, bund and cell engineering works at the group's landfill sites. |
Restoration and aftercare assets relate to the discounted present value of estimated environmental costs (restoration and aftercare) that are provided for on the acquisition of landfill sites (net of any earmarked investment funds acquired) together with any reassessments of estimated costs that occur after acquisition. |
At each balance sheet date, the group reviews the carrying amounts of its tangible fixed assets to determine whether there is any indication that any such assets have suffered an impairment loss. If any such indication exists, the recoverable amount of an 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 the asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. |
INVESTMENTS |
As discussed further in note 13 below investments in landfill trust arrangements are carried at fair value. |
Investments in subsidiary undertakings are recognised at cost less impairment. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
STOCKS |
Stocks are stated at the lower of cost and net realisable value except that inventories held for distribution at no or nominal consideration are measured at the lower of cost adjusted, when applicable, for any loss of service potential and replacement cost. Cost includes all costs incurred in bringing each product to its present location and condition as follows: |
- raw materials and consumables: purchase cost on a first-in, first-out basis. |
Net realisable value is based on estimated selling price less any further costs expected to be incurred in connection with completion and disposal. |
SHARE CAPITAL AND SHARE BASED PAYMENTS |
Ordinary shares are classified as equity with further details regarding the rights attaching to the two classes of ordinary share in issue being provided in note 23 below. |
For equity-settled share-based payments the increase in equity and any associated cost re transactions with employees are measured by reference to the fair value of equity instruments issued at the date of issue or grant as applicable. Further details are provided in note 23 below. |
TAXATION |
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 period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and 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 end of the reporting period. |
Deferred tax is recognised on timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible timing differences but only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. |
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. |
Current or deferred tax for the year is recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. |
HIRE PURCHASE AND LEASING COMMITMENTS |
Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease. |
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. |
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. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
EMPLOYEE BENEFITS |
The group provides a range of benefits to employees, including bonus arrangements, paid holiday arrangements and defined contribution pension plans. |
Short term benefits |
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. |
Defined contribution pension plans |
The group contributes to defined contribution pension schemes in respect of certain employees. The contributions payable by the group are charged to the consolidated statement of comprehensive income on an accruals basis, with any outstanding contributions being included in creditors. |
BUSINESS COMBINATIONS |
Business combinations are accounted for using the purchase method unless the combination constitutes a group reconstruction that may be accounted for using the merger accounting method (with none of the latter having arisen). |
Under the purchase method the cost of a business combination is the aggregate of: the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer; plus any costs that are directly attributable to the business combination. |
On acquisition of a business, fair values are attributed to the identifiable assets, liabilities and contingent liabilities unless the fair value cannot be measured reliably, in which case the value is incorporated in goodwill. Where the fair value of contingent liabilities cannot be reliably measured they are disclosed on the same basis as other contingent liabilities. |
Goodwill recognised represents the excess of the fair value and directly attributable costs of the purchase consideration over the fair values of the identifiable net assets, liabilities and contingent liabilities acquired. |
On acquisition, goodwill is allocated to cash-generating units that are expected to benefit from the combination. |
The goodwill that arose on the business combination in the period ended 31 December 2017 is amortised on a straight line basis over a useful economic life of ten years. Goodwill is assessed for impairment when there are indicators of impairment and any impairment is charged to the consolidated income statement. No reversals of impairment are recognised. |
PROVISIONS |
Provisions are recognised when the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount of the obligation can be estimated reliably. |
In respect of environmental costs the discounted present value of the estimated cost of reinstating landfill sites at the end of their operational life (restoration) and subsequent monitoring and control activities (aftercare) is provided for in full on the acquisition of landfill sites. |
Any reassessment of estimated costs that occurs after the acquisition of a landfill site is provided for in the period of the reassessment (see also tangible fixed assets above re restoration and aftercare assets). |
The unwinding of the discounting is charged to finance costs in the consolidated statement of comprehensive income, and costs incurred in connection with land reinstatement and environmental control activities are charged against the provision balance when incurred. |
CONTINGENT LIABILITIES |
A contingent liability is either a possible but uncertain obligation or a present obligation that is not recognised because a transfer of economic benefits is not probable. A contingent liability also arises if a present obligation exists but the amount required to settle it cannot be reliably estimated. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
FINANCIAL INSTRUMENTS |
The group has adopted Sections 11 and 12 of FRS 102 in respect of financial instruments. |
Financial assets |
Basic financial assets, including trade and other receivables and cash and bank balances are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, in which case the transaction is measured at the present value of the future receipts discounted at a market rate of interest. |
Such assets are subsequently carried at amortised cost using the effective interest method and at the end of each reporting period are assessed for objective evidence of impairment. |
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 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. |
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 liabilities |
Basic financial liabilities, including trade and other payables, and certain bank loans, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the instrument is measured at the present value of the future payments discounted at a market rate of interest. |
Such items, including basic debt instruments, are subsequently carried at amortised cost using the effective interest rate method. Fees paid on the establishment of debt facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. |
Other items (including other loans that are not considered to qualify as basic financial instruments) fall into Section 12 of FRS 102. Such items are initially measured at fair value, which is normally the transaction price. If payment for an asset is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate the asset is initially measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. |
At the end of each reporting period non-basic financial instruments are measured at fair value with changes in fair value being recognised in profit or loss. This is however subject to the exemptions in paragraphs 12.8 and 12.9 of FRS 102, the application of which results in the other loans held by the group being subsequently measured at amortised cost. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
3. | TURNOVER |
Turnover is derived solely from UK operations and from the following revenue streams: |
2022 | 2021 |
£ | £ |
Rendering of services (Landfill operations) | 18,183,187 | 15,083,273 |
Rendering of services (Landfill gas) | 535,564 | 385,319 |
Rendering of services (Composting) | 2,562,812 | 2,545,900 |
21,281,563 | 18,014,492 |
4. | OTHER OPERATING INCOME |
2022 | 2021 |
£ | £ |
Other income | 17,994 | 164,757 |
Other operating income includes various sundry charges (along with income from sales of clay in 2021 only). |
5. | EMPLOYEES AND DIRECTORS |
2022 | 2021 |
£ | £ |
Wages and salaries | 1,140,433 | 1,102,953 |
Social security costs | 128,773 | 117,297 |
Other pension costs | 82,137 | 95,157 |
1,351,343 | 1,315,407 |
The average number of employees during the year was as follows: |
2022 | 2021 |
Directors | 1 | 1 |
Administration | 7 | 8 |
Operational | 14 | 11 |
2022 | 2021 |
£ | £ |
Director's remuneration | 226,707 | 323,225 |
Director's pension contributions to money purchase schemes | 37,617 | 40,000 |
The number of directors to whom retirement benefits were accruing was as follows: |
Money purchase schemes | 1 | 1 |
Information regarding the highest paid director is as follows: |
2022 | 2021 |
£ | £ |
Emoluments etc | 226,707 | 323,225 |
Pension contributions to money purchase schemes | 37,617 | 40,000 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
6. | OPERATING PROFIT |
The operating profit is stated after charging/(crediting): |
2022 | 2021 |
£ | £ |
Depreciation (owned assets) | 1,144,817 | 1,189,827 |
Depreciation (assets acquired under hire purchase contracts) | 87,350 | 57,350 |
Profit on disposal of tangible fixed assets | (8,312 | ) | (756 | ) |
Amortisation | 756,983 | 756,983 |
Auditor's remuneration (audit of these financial statements) | 2,000 | 2,000 |
Auditor's remuneration (audit of subsidiary's financial statements) | 43,000 | 30,885 |
7. | PROFIT/LOSS ON DISPOSAL OF INVESTMENTS |
2022 | 2021 |
£ | £ |
Profit/(loss) on disposal of investments | - | (1 | ) |
In the comparative period the loss arose on the disposal of the shares that the group held in Impetus Trading Limited, which entered into a creditor's voluntary liquidation process on 30 September 2020 and was dissolved on 10 August 2021. |
8. | INTEREST PAYABLE AND SIMILAR EXPENSES |
2022 | 2021 |
£ | £ |
Unwinding of discount on provi sions | - | 258,128 |
Other interest payable | 10,807 | - |
Interest on other loans | 1,662,954 | 1,464,691 |
Hire purchase | 10,486 | 1,786 |
1,684,247 | 1,724,605 |
Interest on other loans includes £751,039 in connection with the reversal of loan measurement adjustments (see note 18 below) [2021: £507,366]. |
9. | TAXATION |
Analysis of the tax charge |
The tax charge on the profit for the year was as follows: |
2022 | 2021 |
£ | £ |
Current tax: |
UK corporation tax | 407,302 | 452,836 |
Prior year tax adjustments | 330 | (28,184 | ) |
Total current tax | 407,632 | 424,652 |
Deferred tax | 183,340 | (394,564 | ) |
Tax on profit | 590,972 | 30,088 |
UK corporation tax has been charged at 19 % (2021 - 19 %). |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
9. | TAXATION - continued |
RECONCILIATION OF TOTAL TAX CHARGE INCLUDED IN PROFIT AND LOSS |
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: |
2022 | 2021 |
£ | £ |
Profit before tax | 775,033 | 542,742 |
Profit multiplied by the standard rate of corporation tax in the UK of 19 % (2021 - 19 %) |
147,256 |
103,121 |
Effects of: |
Expenses not deductible for tax purposes | 265,705 | 97,401 |
Income not taxable for tax purposes | - | (74,022 | ) |
Depreciation in excess of capital allowances | 338,632 | 359,895 |
Adjustments to tax charge in respect of previous periods | 330 | (28,184 | ) |
Restoration expenses and payments | (57,416 | ) | (275,259 | ) |
Site preparation relief claim | (45,945 | ) | (90,891 | ) |
Allowable depreciation | (24,517 | ) | (19,725 | ) |
Other timing and rate differences | (33,073 | ) | (42,248 | ) |
Total tax charge | 590,972 | 30,088 |
The deferred tax charge of £183,340 for the year ended 31 December 2022 relates to the origination and reversal of timing differences [£205,004] and changes in tax rates [£(21,664)]. |
The deferred tax credit of £(394,564) for the year ended 31 December 2021 related to the origination and reversal of timing differences [£(136,264)] and changes in tax rates [£(258,300)]. |
The change in tax rates reflects changes in the rate at which deferred tax elements have been assessed given the 25% corporation tax rate that is expected to apply after 31 March 2023. |
10. | INDIVIDUAL STATEMENT OF COMPREHENSIVE INCOME |
As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the parent company is not presented as part of these financial statements. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
11. | INTANGIBLE FIXED ASSETS |
Group |
Goodwill |
£ |
COST |
At 1 January 2022 |
and 31 December 2022 | 7,569,825 |
AMORTISATION |
At 1 January 2022 | 3,911,076 |
Amortisation for year | 756,983 |
At 31 December 2022 | 4,668,059 |
NET BOOK VALUE |
At 31 December 2022 | 2,901,766 |
At 31 December 2021 | 3,658,749 |
12. | TANGIBLE FIXED ASSETS |
Group |
Restoration |
Landfill | Long | and |
site | leasehold | aftercare |
infrastructure | property | asse t |
£ | £ | £ |
COST |
At 1 January 2022 | 7,732,753 | 1,400,000 | 5,706,180 |
Additions | 210,006 | - | - |
Disposals | - | - | - |
Provision reassessment | - | - | 424,188 |
At 31 December 2022 | 7,942,759 | 1,400,000 | 6,130,368 |
DEPRECIATION |
At 1 January 2022 | 2,889,491 | 1,123,693 | 1,402,376 |
Charge for year | 371,792 | 197,100 | 423,139 |
Eliminated on disposal | - | - | - |
At 31 December 2022 | 3,261,283 | 1,320,793 | 1,825,515 |
NET BOOK VALUE |
At 31 December 2022 | 4,681,476 | 79,207 | 4,304,853 |
At 31 December 2021 | 4,843,262 | 276,307 | 4,303,804 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
12. | TANGIBLE FIXED ASSETS - continued |
Group |
Fixtures |
Plant and | and | Motor |
machinery | fittings | vehicles | Totals |
£ | £ | £ | £ |
COST |
At 1 January 2022 | 1,629,137 | 146,915 | 7,670 | 16,622,655 |
Additions | 409,945 | 13,208 | - | 633,159 |
Disposals | (75,744 | ) | - | (7,670 | ) | (83,414 | ) |
Provision reassessment | - | - | - | 424,188 |
At 31 December 2022 | 1,963,338 | 160,123 | - | 17,596,588 |
DEPRECIATION |
At 1 January 2022 | 854,504 | 100,839 | 7,286 | 6,378,189 |
Charge for year | 205,069 | 34,939 | 128 | 1,232,167 |
Eliminated on disposal | (65,729 | ) | - | (7,414 | ) | (73,143 | ) |
At 31 December 2022 | 993,844 | 135,778 | - | 7,537,213 |
NET BOOK VALUE |
At 31 December 2022 | 969,494 | 24,345 | - | 10,059,375 |
At 31 December 2021 | 774,633 | 46,076 | 384 | 10,244,466 |
Included in the amounts for plant and machinery above are the following amounts relating to assets acquired under hire purchase contracts: |
Total |
£ |
COST |
At 1 January 2022 | 573,500 |
Additions | 399,995 |
Transfer to ownership | (573,500 | ) |
At 31 December 2022 | 399,995 |
DEPRECIATION |
At 1 January 2022 | 233,900 |
Charge for year | 87,350 |
Transfer to ownership | (291,250 | ) |
At 31 December 2022 | 30,000 |
NET BOOK VALUE |
At 31 December 2022 | 369,995 |
At 31 December 2021 | 339,600 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
13. | FIXED ASSET INVESTMENTS |
Group |
Landfill |
trust |
arrangements | Totals |
£ | £ |
COST OR VALUATION |
At 1 January 2022 | 7,543,589 | 7,543,589 |
Additions | - | - |
Disposals | - | - |
Changes in fair value | (520,918 | ) | (520,918 | ) |
At 31 December 2022 | 7,022,671 | 7,022,671 |
NET BOOK VALUE |
At 31 December 2022 | 7,022,671 | 7,022,671 |
At 31 December 2021 | 7,543,589 | 7,543,589 |
Company |
Shares in |
group |
undertakings |
£ |
COST |
At 1 January 2022 | 1 |
Disposals | - |
At 31 December 2022 | 1 |
NET BOOK VALUE |
At 31 December 2022 | 1 |
At 31 December 2021 | 1 |
Company (shares in group undertakings) |
In the company accounts shares in group undertakings comprise 100% of the ordinary share capital of Highfield Environmental Limited which was acquired on incorporation of that entity on 20 October 2016. |
Highfield Environmental Limited is the trading entity of the Highfield Group - its registered address is the same as that of Highfield Environmental Holdco Limited. |
Group (landfill trust arrangements) |
In the group accounts the landfill trust arrangements relate to three trusts that were established in 2011 and 2016 in connection with the restoration and aftercare commitments for the landfill sites that the group acquired as part of the business combination in the period ended 31 December 2017. |
The trusts were established with the consent of the Environment Agency as regulator of the landfill operations, the intention being that funds are accessible by beneficiaries to meet eligible environmental costs as incurred (albeit funds cannot be withdrawn without the consent of the regulator). |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
FIXED ASSET INVESTMENTS - continued |
The subsidiary company, Highfield Environmental Limited, acquired the right to be named as a beneficiary of the trusts as part of the business combination. |
The trusts are managed separately from Highfield Environmental Limited by independent professional trustees with the group having no control or right to day-to-day involvement. |
The trust fund assets are held in cash and other portfolio investment assets with the fair value recognised by the group at each balance sheet date being based on summary information that is provided to the group by the trustees. It is noted that the group does not hold the investments or other assets directly and as such does not generally receive detailed information regarding asset holdings and values. |
Based on the summary information provided by the trustees the closing fair values of trust assets at the balance sheet date was composed as follows: |
2022 | 2021 |
£ | £ |
Cash | 2,918,443 | 2,872,709 |
Other portfolio investments | 4,104,228 | 4,670,880 |
During 2020 the Environment Agency commenced a review of the performance of the trust arrangements. The review process has been concluded since the balance sheet date with the Environment Agency confirming that the group is required to make additional cash contributions totalling circa £1,150,000. The group has agreed with the Environment Agency that the cash contributions will be paid with an approximate even split across September 2023 and September 2024. |
14. | STOCKS |
Group |
2022 | 2021 |
£ | £ |
Stocks | 22,554 | 33,603 |
Stocks comprise raw materials and consumables. The difference between purchase price or production cost of inventories and their replacement cost is not material. In the group accounts inventories recognised as expenses in the period were £489,422 [2021: £220,237]. |
No stocks are held by the parent company. |
15. | DEBTORS |
Group | Company |
2022 | 2021 | 2022 | 2021 |
£ | £ | £ | £ |
Amounts falling due within one year: |
Trade debtors | 951,992 | 1,232,729 |
Amounts owed by group undertakings | - | - |
Other debtors | 643 | 43,992 |
Deferred tax asset | 148,581 | 146,651 |
Prepayments and accrued income | 326,289 | 257,088 |
1,427,505 | 1,680,460 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
15. | DEBTORS - continued |
Group | Company |
2022 | 2021 | 2022 | 2021 |
£ | £ | £ | £ |
Amounts falling due after more than one | year: |
Deferred tax asset | 1,016,670 | 1,162,108 |
Aggregate amounts | 2,444,175 | 2,842,568 |
16. | CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
Group |
2022 | 2021 |
£ | £ |
Hire purchase contracts (see note 19) | 71,999 | 104,433 |
Trade creditors | 314,898 | 311,066 |
Tax | 415,233 | 422,034 |
Social security and other taxes | 65,867 | 99,655 |
VAT | 407,917 | 368,476 |
Other creditors | 14,002 | 25,959 |
Landfill tax and similar | 2,946,359 | 2,866,410 |
Accruals and deferred income | 456,085 | 127,311 |
4,692,360 | 4,325,344 |
17. | CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR |
Group |
2022 | 2021 |
£ | £ |
Other loans (see note 18) | 15,716,805 | 18,591,836 |
Hire purchase contracts (see note 19) | 239,997 | - |
15,956,802 | 18,591,836 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
18. | LOANS |
An analysis of the maturity of loans is given below: |
2022 | 2021 |
£ | £ |
Amounts falling due within one year or on demand: |
Other loans | - | - |
Amounts falling due between one and five years: |
Other loans - 1-5 years | 15,716,805 | 18,591,836 |
At the group level other loans comprise amounts drawndown - by the subsidiary company Highfield Environmental Limited - under two unitranche facilities provided by entities that are either shareholders in the parent company or else are connected to shareholders of the parent company. |
The cash interest rate applying to the loans has been 5% per annum fixed payable quarterly in arrears since 1 January 2020. |
The original termination date for the facilities was 15 December 2020. The facilities continued on a rolling basis after that date until an agreement to extend the termination date of the facilities to 31 March 2023 was finalised and formally approved on 26 January 2021. |
In August 2022 the lenders agreed to further extend the termination date of the facilities from 31 March 2023 to 31 March 2026. The agreement formally came into effect on 31 August 2022 at the same time as the group repaid £3,000,000 of the headline loan principal of circa £19,300,000 that was outstanding at that date. It is noted that the other key terms (including interest) remained unchanged. |
The facilities agreement contains a number of mandatory prepayment clauses that could result in earlier repayment of all or part of the outstanding amount. |
The clauses are considered to fall outside of the exceptions in section 11.9(c) of FRS 102 such that the loans cannot be categorised as basic financial instruments. |
The group does not consider that these clauses have been activated as at 31 December 2022 or as at the date of approval of these accounts. |
It is noted however that, if the transaction that is outlined under Possible Change of Control in the Post Balance Sheet Events note below completes, then the full other loans balance will become repayable in full. |
For further information regarding this eventuality see the referenced section of the Post Balance Sheet Events note. |
The other loans are secured by security agreements dated 10 November 2016. |
The agreements contain security interests including a first legal mortgage, a first fixed equitable charge, a first fixed charge and a first floating charge over all the property, undertaking and assets (both present and future) of Highfield Environmental Holdco Limited and Highfield Environmental Limited. |
Loan Amendments |
As discussed above, following the original termination date of the facilities on 15 December 2020, the group and the lenders agreed that the termination date of the facilities would be extended to March 2023. |
The sum of £1,201,196 - being the assessed difference between the headline value of the loan principal at the time the termination date was extended (£19,290,820) and the initial measurement value under FRS 102 (£18,089,624) - was debited against loans and credited to other reserves at the group level in the accounts for the year ended 31 December 2020. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
LOANS - continued |
The use of other reserves reflected the fact that, as noted above, the other loans comprise amounts drawndown from entities that are either shareholders in the parent company or else are connected to shareholders of the parent company. |
This debit against loans partly reversed during the comparative year ended 31 December 2021, with £507,366 having been recognised as part of the interest on other loans expense (see note 8). |
Following the repayment of £3,000,000 of loan principal on 31 August 2022 and the further extension of the termination date of the facilities on the same date the residual brought forward measurement adjustment was released in full, with £693,830 having been recognised as part of the interest on other loans expense (see note 8). |
A further measurement adjustment has then been recognised in respect of the assessed difference between the headline value of the loan principal at 1 September 2022 (£16,285,666) and the initial measurement value (£15,659,596). |
As previously the measurement adjustment of £626,070 has been debited against loans and credited to other reserves, with the use of other reserves reflecting the fact that, as noted above, other loans comprise amounts drawndown from entities that are either shareholders in the parent company or else are connected to shareholders of the parent company. |
The further debit against loans has partly reversed during the year ended 31 December 2022, with £57,209 having been recognised as part of the interest on other loans expense (see note 8). |
If the transaction that is outlined under Possible Change of Control in the Post Balance Sheet Events note below does not complete then the residual measurement of £568,861 would be expected to reverse through to the termination date of the facilities on 31 March 2026. If the transaction completes however then the residual measurement adjustment is instead expected to reverse in full by completion. |
Covenants |
In addition to the mandatory prepayment conditions mentioned above, the unitranche facilities contain a number of financial covenants that the borrower (Highfield Environmental Limited) and the wider group are required to assess and satisfy on a quarterly basis. A failure event in respect of the assessments would permit the loan to be immediately recalled in full. |
The group considers that there were no issues regarding the satisfying of applicable loan covenants for the quarters ended 31 March 2022, 30 June 2022, 30 September 2022 and 31 December 2022. |
The group also considers that it complied with the relevant covenants for the post year end quarters ended 31 March 2023, 30 June 2023 and 30 September 2023. |
Allowing for the prevailing covenant thresholds - which were unchanged in the August 2022 extension agreement - the group expects, based on current forecasts, that it should continue to satisfy the indicated requirements albeit there are some inherent uncertainties present. |
Following discussions, the lenders have confirmed to the Director of the company (and the Director of Highfield Environmental Limited) that they do not intend that the unitranche facilities would be recalled in any event if any financial or other covenant tests were not satisfied going forward. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
19. | LEASING AGREEMENTS |
Hire Purchase (as lessee) |
The group uses hire purchase contracts to acquire certain plant and machinery assets. The hire purchase contracts contain options to purchase the assets for nominal amounts at the end of the contract period. The future minimum lease payments due under hire purchase contracts are as follows: |
2022 | 2021 |
£ | £ |
Amounts repayable: |
Within one year | 82,092 | 107,470 |
In two to five years | 273,642 | - |
Less finance charges allocated to future periods | (43,738 | ) | (3,037 | ) |
311,996 | 104,433 |
The parent company holds no hire purchase agreements. |
20. | SECURED DEBTS |
See note 18 above for details of the security given in respect of the other loan balances - in addition hire purchase balances are secured on related assets. |
21. | FINANCIAL INSTRUMENTS |
Group | 2022 | 2021 |
£ | £ |
Financial assets at fair value through profit and loss |
Fixed asset investments (landfill trust arrangements) | 7,022,671 | 7,543,589 |
Financial assets that are debt instruments measured at amortised cost |
Trade debtors and other | 952,635 | 1,276,721 |
Financial liabilities measured at amortised cost |
Other loans | 15,716,805 | 18,591,836 |
Hire purchase | 311,996 | 104,433 |
Trade and other creditors | 328,900 | 337,025 |
Accruals | 456,085 | 127,311 |
Company | 2022 | 2021 |
£ | £ |
Financial assets that are equity instruments measured at cost less impairment |
Fixed asset investments (shares in group undertakings) | 1 | 1 |
Financial assets that are debt instruments measured at amortised cost |
Amounts owed by group undertakings | 2,631 | 2,631 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
22. | PROVISIONS FOR LIABILITIES |
Group |
2022 | 2021 |
£ | £ |
Deferred tax | 189,124 | 149,292 |
Other provisions |
Environmental costs | 10,772,887 | 11,389,024 |
Aggregate amounts | 10,962,011 | 11,538,316 |
Group |
Deferred | Other |
tax | provisions |
£ | £ |
Balance at 1 January 2022 | 149,292 | 11,389,024 |
Utilised during year | - | (1,040,325 | ) |
Accelerated capital allowances | 63,421 | - |
Other timing differences | (40,839 | ) | - |
Reassessment during the year | - | 424,188 |
Changes in tax rate | 17,250 | - |
Balance at 31 December 2022 | 189,124 | 10,772,887 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
22. | PROVISIONS FOR LIABILITIES - continued |
Group (Other Provisions re Environmental Costs) |
As part of its normal activities the group undertakes to reinstate its landfill sites at the end of their operational life (restoration) and to engage in subsequent monitoring and control activities (aftercare). |
As regards restoration costs these are generally expected to be incurred in phases up to and shortly after site closure. It is noted that the timing and level of costs are inherently uncertain with key factors including the assessed void and assumed waste density, the assumed rate at which waste is deposited and any site specific regulatory requirements. |
Restoration costs are provided for in full on a net present value basis with current cost estimates at the end of 2022 being inflated at 4.5% for 2023 and 2.0% per annum thereafter and discounted at 4.5% per annum (for the comparative period cost estimates at the end of 2021 were inflated at 4.5% for 2022 and 2.0% per annum thereafter and discounted at 4.5% per annum). |
As regards aftercare costs these are generally expected to be incurred for a period of up to 60 years from site closure. It is noted that the timing and level of costs are again inherently uncertain and can vary significantly from site to site depending on factors including the date of site closure, the type of waste and speed of decomposition, and any site specific regulatory requirements. |
Aftercare costs are provided for in full on a net present value basis with current cost estimates at the end of 2022 being inflated at 4.5% for 2023 and 2.0% per annum thereafter and discounted at 4.5% per annum (for the comparative period cost estimates at the end of 2021 were inflated at 4.5% for 2022 and 2.0% per annum thereafter and discounted at 4.5% per annum). |
It is noted that as - when the group reassessed provisions for the 31 December 2021 accounts - an inflation rate of 4.5% and a discount rate of 4.5% was applied for the year ending 31 December 2022, then no unwinding of discounting has been recognised in these consolidated accounts for the year ended 31 December 2022. |
Following a review of expected restoration and aftercare activities at the end of 2022 the group has reassessed the estimated net present value of future environmental costs as at 31 December 2022. |
The outcome was an overall increase in other provisions (and restoration and aftercare assets) across the various landfill sites of £424,188, which is shown as reassessments during the year in the table above (see also note 12). |
As noted above the timing of costs is inherently uncertain but based on current expectations the group anticipates incurring restoration costs in the region of circa £1,360,000 across 2023 and 2024 with circa 45% of the costs falling into the former year. |
Group (Deferred Tax) |
Further information regarding deferred tax is outlined in note 30 below. |
23. | CALLED UP SHARE CAPITAL |
Allotted, issued and fully paid: |
Number: | Class: | Nominal | 2022 | 2021 |
value: | £ | £ |
A Ordinary | £0.01 | 100 | 100 |
B Ordinary | £0.01 | 8 | 8 |
108 | 108 |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
23. | CALLED UP SHARE CAPITAL - continued |
The A Ordinary shares are not redeemable and confer on each holder the right to receive notice of and to attend, speak and vote at all general meetings of the company and to receive and vote on proposed written resolutions of the company. In addition the A Ordinary shares carry rights to receive dividends and distributions as outlined in the Articles of Association. |
The 830 B Ordinary shares issued on 31 October 2018 do not carry the right to receive notice of, to attend, to speak or to vote at any general meeting of the company nor to receive or vote on, or otherwise constitute an eligible member for the purposes of, proposed written resolutions of the company. In addition the B Ordinary shares are not redeemable and shall not carry any right to receive any dividends or distributions other than in accordance with Article 54 of the Articles of Association. |
The B Ordinary shares were issued in the year ended 31 December 2018 pursuant to a Management Incentive Plan that involved certain key members of staff of the Highfield Environmental Holdco group of companies, including the serving director of Highfield Environmental Holdco. |
Each £0.01 B Ordinary share was issued at a cash premium of £3.16. In the absence of observable market prices for the shares the assessed fair value of £3.17 per share was determined by the company with reference to a report prepared by external valuers, which adopts a growth shares model based on the rights that attach to the shares. |
24. | RESERVES |
Group |
Retained | Share | Other |
earnings | premium | reserves | Totals |
£ | £ | £ | £ |
At 1 January 2022 | (3,759,770 | ) | 2,623 | 693,830 | (3,063,317 | ) |
Profit for the year | 184,061 | - | - | 184,061 |
Measurement adjustment re loans | - | - | 626,070 | 626,070 |
Transfer between reserves | 751,039 | - | (751,039 | ) | - |
At 31 December 2022 | (2,824,670 | ) | 2,623 | 568,861 | (2,253,186 | ) |
Company |
Retained | Share |
earnings | premium | Totals |
£ | £ | £ |
At 1 January 2022 | 2,623 |
Profit for the year |
At 31 December 2022 | 2,623 |
At the group level the £693,830 brought forward balance on other reserves reflects the residue of the £1,201,196 measurement adjustment regarding loans that was recognised in the year ended 31 December 2020 (with £507,366 of this initial measurement having been transferred from other reserves to retained earnings in the comparative year ended 31 December 2021). |
As discussed in note 18 above a further measurement adjustment of £626,070 has been recognised against other reserves in the year ended 31 December 2022. |
Following the unwinding of the brought forward residual measurement adjustment and part of the further loan measurement recognised in the year ended 31 December 2022 via finance costs in profit or loss a transfer of £751,039 has been recorded between other reserves and retained earnings. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
25. | PENSION COMMITMENTS |
The group contributes to defined contribution pension schemes for relevant employees. The charge incurred for contributions payable in respect of the year ended 31 December 2022 was £82,137 [2021: £95,157] of which £4,533 was outstanding as at 31 December 2022 [2021: £16,425]. |
It is noted that the parent company itself does not contribute to any pension schemes. |
26. | CONTINGENT LIABILITIES |
Company (cross guarantee) |
Pursuant to a Security Agreement dated 10 November 2016, Highfield Environmental Holdco Limited became a guarantor of certain loans drawn down by its subsidiary company, Highfield Environmental Limited. The guarantee is secured by security interests including a first legal mortgage, a first fixed equitable charge, a first fixed charge and a first floating charge over all the property, undertaking and assets (both present and future) of Highfield Environmental Holdco Limited. |
As at 31 December 2022 the total amount drawn down on the relevant loan facilities by Highfield Environmental Limited was £16,285,666 (carrying value £15,716,805 - see note 18 above) [2021: £19,285,666 (carrying value £18,591,836 - see note 18 above)]. |
Group (Gas Contract) |
The landfill gas generation contract under which the wholly owned subsidiary company - Highfield Environmental Limited - earns royalties and other income in conjunction with a third-party gas generator contains termination clauses under which Highfield Environmental Limited may be requested to purchase selected assets from the gas generator at a cost calculated as specified in the contract if certain conditions arise. |
In light of the calculation methods outlined in the agreement the group does not consider that it is in a position to reliably quantify the possible transfer cost. |
It is noted that the gas generation contract continued to operate during the year ended 31 December 2022 and, post year end in March 2023, the third-party gas generator extended the term of the agreement by five years so that it is now due to end in 2028. |
As the third-party gas generator has chosen to extend the term of the agreement then the group considers it is highly unlikely (given the calculation methods outlined in the agreement) that any significant cost will crystallise going forward in connection with a requirement to purchase the selected assets. |
The circumstances surrounding the contract and the above opinion will be kept under review going forward as applicable. |
Group (Clay Management) |
The group has a finite amount of clay available at one of its landfill sites and balances the material available against requirements for current and foreseen engineering projects or sales to third parties where market prices are attractive. There is a scenario whereby the clay might need to be moved and stockpiled for later use however the group considers that there is only a remote likelihood of this situation arising such that an overall net cost to the business results. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
CONTINGENT LIABILITIES - continued |
Group (Bonus Scheme) |
During the comparative year to 31 December 2021 the subsidiary, Highfield Environmental Limited, introduced a bonus scheme for the Director and certain other employees. |
Under the terms of the bonus scheme amounts become payable to eligible persons if certain exit events occur while the scheme remains active. |
As no relevant exit event had occurred by the balance sheet date then the group considers that no amounts fall to be provided for in the consolidated accounts for the year ended 31 December 2022 (or fell to be provided for as at 31 December 2021). |
As the amounts that are payable under the scheme if a relevant exit event occurs are dependent on the nature and value of the event then the group does not consider that it is in a position to reliably quantify the possible obligation that could crystallise going forward, albeit it is noted that the baseline position is expected to be an obligation of circa £550,000 (2021: £550,000). |
It is noted that, if the transaction that is outlined under Possible Change of Control in the Post Balance Sheet Events note below completes, then all entitlements to bonuses under the 2021 bonus scheme will lapse for all eligible persons. |
Group (Contingent Fees) |
As at 31 December 2022, a possible obligation exists in respect of contingent fees that will be incurred from a third party if the transaction that is outlined under Possible Change of Control in the Post Balance Events note below completes. It is expected that the cost of the contingent fees will ultimately be incurred by Highfield Environmental Limited. |
As completion of the transaction had not occurred by the balance sheet date then the group considers that no amount is required to be provided for in the consolidated accounts for the year ended 31 December 2022. |
The quantum of the fee is dependent on the value and circumstances that attach to completion of the transaction however, based on latest information, it is expected that a fee of circa £450,000 will be incurred on completion. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
27. | RELATED PARTY DISCLOSURES |
Company |
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. |
Group |
Transactions between group entities which have been eliminated on consolidation are not disclosed within the financial statements. |
During the year ended 31 December 2022 and the year ended 31 December 2021 the group entered into other transactions with related parties as shown in the table below: |
Loan received from related party |
Interest payable to related party |
Loan repaid to and interest paid to related party |
Balance outstanding from/(to related party at 31 December in other loans |
) |
Entities with control, joint control or significant influence over the group |
2022 | - | £911,915 | £3,911,915 | £(16,285,666 | ) |
2021 | - | £957,325 | £1,205,596 | £(19,285,666 | ) |
It is noted that the balance of £16,285,666 that was owed at 31 December 2022 was stated before the impact of the £568,861 of loan measurement adjustments carried at the year end (with the carrying value of the loan being £15,716,805 as per note 18 above). |
It is noted that the comparative balance of £19,285,666 that was owed at 31 December 2021 was stated before the impact of the £693,830 residual loan measurement adjustment that was extant in the 2021 accounts (with the carrying value of the loan being £18,591,836 as per note 18 above). |
The other loans balances outstanding with related parties at 31 December 2022 and at 31 December 2021 were secured amounts (see note 18). |
All directors of the parent company and its subsidiaries are considered to be key management personnel. At group level total remuneration in respect of these individuals was £264,324 [2021: £363,225]. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
28. | POST BALANCE SHEET EVENTS |
Possible Change of Control |
In September 2023 the owners of Highfield Environmental Holdco Limited exchanged contracts to dispose of the whole of the issued share capital of the company to an unconnected third party. |
Completion of the transaction is conditional upon a number of conditions being satisfied however these are considered to be essentially administrative in nature with completion hence being expected to occur in the near future. |
As part of the completion of the transaction the other loans outstanding in the subsidiary company, Highfield Environmental Limited, will be repayable in full. |
The amount to be settled is estimated to be circa £16,300,000. |
It is noted that, in the consolidated balance sheet, the carrying value of the loans was circa £15,700,000 as at 31 December 2022. The headline value of the loans was circa £16,300,000 allowing for the residual measurement adjustment outstanding being circa £600,000 at that date. |
As completion of the transaction will bring forward the expected repayment of the other loans from the termination date of March 2026 it will also bring forward the expected release of the residual measurement adjustment, with the full residual measurement being released by completion of the transaction (charged against finance costs). |
It is expected that circa £6,500,000 of the circa £16,300,000 of loans to be settled will effectively be repaid by Highfield Environmental Limited in cash immediately prior to completion of the transaction. |
It is further expected that the remaining circa £9,800,000 of loans to be settled will be cleared by funds to be introduced to the Highfield Environmental Group by the potential purchaser. |
This circa £9,800,000 of funds are expected to be introduced into Highfield Environmental Holdco Limited by the potential purchaser as a capital contribution rather than as an intercompany loan. |
Highfield Environmental Holdco Limited is then expected to effectively transfer the circa £9,800,000 of funds to Highfield Environmental Limited, with this also being a capital contribution rather than an intercompany loan. |
In addition, as part of the SPA, the Highfield Environmental Group entities have agreed to pay bonuses, primarily in favour of the director, following the completion of the transaction. |
The expected gross value of the bonuses is circa £400,000 and it is expected that the cost of the bonuses will ultimately be incurred by Highfield Environmental Limited. |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
POST BALANCE SHEET EVENTS - continued |
Group (Composting Operations) |
In August 2023 the Environment Agency completed a review of the permit that applies to the composting facility operated by the group - via Highfield Environmental Limited - and issued a draft of the proposed updated permit for review by Highfield. |
Following a review of the draft updated permit Highfield considers that, if the proposed changes to eligible waste streams were implemented as outlined, then this could have a significant impact on the commercial or strategic viability of the composting business going forward. |
Highfield has contacted the Environment Agency to request clarification on a number of points however this discussion process remains ongoing at present. |
The group is hence currently unable to make a final assessment of the impacts of the proposed updated permit and - by extension - is not presently in a position to determine whether the composting business will remain commercially and strategically viable going forward. |
It is noted that, for the year ended 31 December 2022, the composting business generated revenues of circa £2,600,000 at the group level and a contribution to group EBITDA of circa £1,700,000. |
It is also noted that, as at 31 December 2022, the site infrastructure assets associated with the composting business had a carrying value of circa £280,000 at the group level with relevant plant and machinery assets showing a carrying value of circa £380,000. |
29. | ULTIMATE CONTROLLING PARTY |
The ultimate parent undertaking and controlling party is considered to be |
Highfield Environmental Holdco Limited (Registered number: 10437934) |
Notes to the Consolidated Financial Statements - continued |
for the Year Ended 31 December 2022 |
30. | DEFERRED TAX |
The table summarises movements in deferred tax assets and liabilities in the period at the group level and the composition of the balances as at 31 December 2022: |
Deferred Tax Assets |
Deferred Tax Provisions |
£ | £ |
Balances at 1 January 2022 | 1,308,759 | (149,292 | ) |
Accelerated capital allowances | - | (63,421 | ) |
Site preparation relief | (3,262 | ) | - |
Unrelieved restoration payments | (179,160 | ) | - |
Other timing differences | - | 40,839 |
Changes in tax rate | 38,914 | (17,250 | ) |
Balances at 31 December 2022 | 1,165,251 | (189,124 | ) |
of which: |
re accelerated capital allowances | - | (169,322 | ) |
re other timing differences (fair value adjustments arising on acquisition) | - | (19,802 | ) |
re unrelieved restoration payments | 981,592 | - |
re site preparation relief | 183,659 | - |
1,165,251 | (189,124 | ) |
The closing deferred tax asset of 1,165,251 [2021: £1,308,759] and deferred tax provision of £(189,124) [2021: £(149,292)] have been recognised separately in the financial statements (see notes 15 and 22 respectively) as it is considered to be uncertain whether the offsetting conditions in paragraph 29.24A of FRS 102 will apply. |
The estimated net reversal of the deferred tax provision re other timing differences during the year ending 31 December 2023 is circa £20,000 with the estimated net reversal of the deferred tax asset re unrelieved restoration payments being circa £150,000 based on forecast expenditure. The estimated net reversals of the other deferred tax items during the year ending 31 December 2023 are considered to be difficult to estimate reliably as they maybe impacted by factors including capital expenditure and activity levels. |
It is noted that the above disclosures relate to the group accounts - there are no deferred tax balances in the parent company. |