Company registration number 01985443 (England and Wales)
SPECIAL QUALITY ALLOYS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
SPECIAL QUALITY ALLOYS LIMITED
COMPANY INFORMATION
Directors
A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
D M Pryce
D J Matthews
J Miller
M J Greensmith
(Appointed 1 August 2022)
N A Bury
(Appointed 1 July 2023)
Secretary
A C Beardshaw
Company number
01985443
Registered office
Bacon Lane
Sheffield
S9 3NH
Auditor
BHP LLP
2 Rutland Park
Sheffield
S10 2PD
Bankers
National Westminster Bank plc
42 High Street
Sheffield
S1 2GE
SPECIAL QUALITY ALLOYS LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 21
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2023
- 1 -

The directors present the strategic report for the year ended 31 May 2023.

With Covid and Brexit well behind us, the Board targeted a more robust performance for 2022 / 23, based on significant increases in demand for its products and services seen towards the end of the preceding fiscal year.

 

However, in certain areas those increases were unprecedented, but the combined abilities of our Company proved equal to the challenge, allowing the Board to report this record-breaking set of results.

 

Consequently, the Company remains in a strong financial position at the end of the year with shareholders’ funds up from £31,162,908 to £48,691,890. Return on capital employed has changed from 18% to 70%. Return on capital employed is calculated as profit before tax divided by opening capital employed.

 

With a strong focus on suppling the energy (oil & gas) sector, it may seem obvious that a post covid recovery, combined with the fallout from Russia’s attempted, and now ongoing invasion of Ukraine, would be the demand drivers. However, we also consider the actions of Russia only bought into sharp focus the dramatic contraction in fossil fuel energy investment since the oil price crash of 2014 – one of the three largest since WW II. This, combined with several years of a Western / European political narrative against oil & gas leading up to the Russian / Ukrainian war, has left an ‘exploration and production’ void from perceived stable regions that the world is now racing to fill – in the face of ongoing geopolitical risks and uncertainty.

 

So, for Special Quality Alloys Ltd (SQA), they were particularly well placed to service the ramp in demand having been the recipient of large capital investment programmes by the Group over the last several years. The Board wrote an aggressive plan – and executed it. Our historical actions of transforming SQA have exceeded expectations, with turnover increasing 112% over the previous fiscal period.

 

However, raw material prices and availability were a significant challenge, with both the aerospace and defence sectors recording major spikes in demand, leaving SQA fighting for the same mill capacity as used in these competing industries. Again, our long-term relationships with key global suppliers paid dividends, as they appreciated our technical and financial professionalism, rewarding us with critical ‘partnership status’, providing a ‘win win’ scenario for all parties.

 

We also continued to see a focus from some domestic customers on reshoring to provide better protection from international supply chain disruption. Security of supply became more relevant than just a low price.

 

However, like all our Group businesses, SQA was not immune to cost increases, driven by wage inflation and energy.

 

To offset electricity price rises, and meet demand for growing electricity consumption, the Board took the decision to invest in a major solar project across its entire SQA site, designing and commissioning a 524kWp (Kilowatt Peak) installation that would commence operating towards the end of this fiscal year.

 

As a key supplier to global OEM’s, the Board also acknowledges the need to meet and exceed customer expectation on our carbon footprint and the long-term sustainability of our operations. We consider the solar project will enhance our environmental and financial performance and have a positive impact on the wider community within which we operate.

 

Our efforts to accelerate market diversification beyond oil and gas continued, and good progress was made in integrating revised business systems to meet specific alternative industry requirements.

 

Finally, having been awarded the Queens Award for Enterprise for International Trade in 2022, we welcomed Professor Dame Hilary Chapman DBE, His Majesty’s Lord-Lieutenant of South Yorkshire to SQA in September to present the award and celebrate the achievement with the entire workforce.

 

To complete this outstanding year, we were particularly fortunate to receive our first Royal visit in March 2023, when, as part of a wider Sheffield visit, we hosted HRH The Princess Royal. Her Royal Highness met many employees and was given a tour of our facility, including a demonstration of our forging and ring rolling operations. A truly memorable day for the company and the entire SQA team.

SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 2 -

On behalf of the board

A K Beardshaw
Director
16 November 2023
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2023
- 3 -

The directors present their annual report and financial statements for the year ended 31 May 2023.

Principal activities

The principal activities of the company continue to be the manufacture and supply of nickel based super-alloys and special steels.

Results and dividends

The results for the year are set out on page 8.

Ordinary dividends were paid amounting to £3,000,000. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
R Wood
(Resigned 30 June 2023)
D M Pryce
D J Matthews
J Miller
M J Greensmith
(Appointed 1 August 2022)
N A Bury
(Appointed 1 July 2023)
Auditor

The auditor, BHP LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have 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 directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 4 -
Statement of disclosure to auditor
So far as the directors are aware, there is no relevant audit information of which the company's auditor are unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditors are aware of that information.
On behalf of the board
A K Beardshaw
Director
16 November 2023
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 5 -
Opinion

We have audited the financial statements of Special Quality Alloys Limited (the 'company') for the year ended 31 May 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's 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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 7 -

We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

 

To address the risk of fraud through management bias and override of controls, we:

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing Standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

 

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Lisa Leighton
Senior Statutory Auditor
For and on behalf of BHP LLP
20 November 2023
Chartered Accountants
Statutory Auditor
2 Rutland Park
Sheffield
S10 2PD
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2023
- 8 -
2023
2022
Notes
£
£
Turnover
2
60,131,222
28,309,741
Cost of sales
(34,815,868)
(21,945,551)
Gross profit
25,315,354
6,364,190
Distribution costs
(110,370)
(29,578)
Administrative expenses
(3,278,507)
(2,941,714)
Other operating income
-
0
113,403
Operating profit
3
21,926,477
3,506,301
Interest receivable and similar income
6
26,358
1,524,073
Profit before taxation
21,952,835
5,030,374
Tax on profit
7
(4,423,853)
(662,556)
Profit for the financial year
17,528,982
4,367,818

The profit and loss account has been prepared on the basis that all operations are continuing operations.

SPECIAL QUALITY ALLOYS LIMITED
BALANCE SHEET
AS AT 31 MAY 2023
31 May 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
9
3,870,791
4,016,203
Investments
10
1,097,866
1,097,866
4,968,657
5,114,069
Current assets
Stocks
12
23,467,429
15,651,217
Debtors
13
23,734,340
11,253,132
Cash at bank and in hand
5,131,952
8,838,606
52,333,721
35,742,955
Creditors: amounts falling due within one year
14
(10,312,788)
(8,468,419)
Net current assets
42,020,933
27,274,536
Total assets less current liabilities
46,989,590
32,388,605
Provisions for liabilities
Provisions
15
688,700
700,697
Deferred tax liability
16
609,000
525,000
(1,297,700)
(1,225,697)
Net assets
45,691,890
31,162,908
Capital and reserves
Called up share capital
18
100,000
100,000
Profit and loss reserves
45,591,890
31,062,908
Total equity
45,691,890
31,162,908
The financial statements were approved by the board of directors and authorised for issue on 16 November 2023 and are signed on its behalf by:
A K Beardshaw
Director
Company Registration No. 01985443
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2023
- 10 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 June 2021
100,000
28,217,364
28,317,364
Year ended 31 May 2022:
Profit and total comprehensive income for the year
-
4,367,818
4,367,818
Dividends
8
-
(1,522,274)
(1,522,274)
Balance at 31 May 2022
100,000
31,062,908
31,162,908
Year ended 31 May 2023:
Profit and total comprehensive income for the year
-
17,528,982
17,528,982
Dividends
8
-
(3,000,000)
(3,000,000)
Balance at 31 May 2023
100,000
45,591,890
45,691,890
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
- 11 -
1
Accounting policies
Company information

Special Quality Alloys Limited is a private company limited by shares incorporated in England and Wales. The registered office is Bacon Lane, Sheffield, S9 3NH.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

 

 

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

 

Special Quality Alloys Limited is a wholly owned subsidiary of Special Steel Co. Limited and the results of Special Quality Alloys Limited are included in the consolidated financial statements of Special Steel Co. Limited which are available from Bacon Lane, Sheffield, S9 3NH.

1.2
Going concern

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.3
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 12 -
1.4
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Land and buildings Leasehold
Over term of lease
Plant and machinery
10% or 20% straight line
Fixtures, fittings & equipment
20% straight line
Computer equipment
20% straight line
Motor vehicles
25% straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

1.5
Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

1.6
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

1.7
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

1.8
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 13 -
1.9
Financial instruments

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

 

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 14 -
1.10
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.11
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax
Deferred taxation is provided at appropriate rates on all timing differences using the liability method.
1.12
Provisions

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

1.13
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.14
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.15
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 15 -
1.16
Government grants

Grants are credited to deferred revenue. Grants towards capital expenditure are released to the profit and loss account over the expected useful life of the assets. Grants towards revenue expenditure are released to the profit and loss account as the related expenditure is incurred.

 

Grants received in relation to the government's Coronavirus Job Retention Scheme have been recognised within other operating income. The grant is accounted for on the accruals basis once the related payroll return has been submitted.

1.17
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.
2
Turnover and other revenue

An analysis of the company's turnover is as follows:

2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
32,979,396
21,291,161
Other markets
27,151,826
7,018,580
60,131,222
28,309,741
2023
2022
£
£
Other revenue
Interest income
26,358
1,799
Dividends received
-
1,522,274
Grants received
-
113,403

No further geographical split of sales is presented as in the opinion of the directors this would be prejudicial to the interests of the entity.

3
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(1,058,555)
(294,207)
Government grants
-
(113,403)
Fees payable to the company's auditor for the audit of the company's financial statements
14,500
12,410
Depreciation of owned tangible fixed assets
776,544
817,523
Profit on disposal of tangible fixed assets
(9,185)
(42,435)
Operating lease charges
106,000
106,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 16 -
4
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Production
67
69
Admin
20
18
Directors
5
5
Total
92
92

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
3,647,792
2,975,046
Social security costs
379,262
305,841
Pension costs
162,563
154,599
4,189,617
3,435,486
5
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
437,554
412,181
Company pension contributions to defined contribution schemes
46,310
44,298
483,864
456,479
6
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
26,358
1,799
Income from fixed asset investments
Income from shares in group undertakings
-
0
1,522,274
Total income
26,358
1,524,073
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 17 -
7
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
3,871,197
750,556
Adjustments in respect of prior periods
4,916
-
0
Group tax relief
463,740
-
0
Total current tax
4,339,853
750,556
Deferred tax
Origination and reversal of timing differences
84,000
(88,000)
Total tax charge
4,423,853
662,556

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Profit before taxation
21,952,835
5,030,374
Expected tax charge based on the standard rate of corporation tax in the UK of 20.00% (2022: 19.00%)
4,390,567
955,771
Tax effect of expenses that are not deductible in determining taxable profit
279
319
Adjustments in respect of prior years
4,916
-
0
Effect of change in corporation tax rate
17,188
(20,981)
Fixed asset differences
9,880
17,255
Deferred tax not recognised
1,023
(574)
Group income
-
0
(289,234)
Taxation charge for the year
4,423,853
662,556
8
Dividends
2023
2022
£
£
Final paid
3,000,000
1,522,274
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 18 -
9
Tangible fixed assets
Land and buildings Leasehold
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 June 2022
989,915
6,978,386
451,059
350,858
437,503
9,207,721
Additions
315,232
127,775
17,848
9,417
167,670
637,942
Disposals
-
0
-
0
-
0
-
0
(45,914)
(45,914)
At 31 May 2023
1,305,147
7,106,161
468,907
360,275
559,259
9,799,749
Depreciation and impairment
At 1 June 2022
796,094
3,459,130
346,801
327,777
261,716
5,191,518
Depreciation charged in the year
97,089
547,952
36,171
9,884
85,448
776,544
Eliminated in respect of disposals
-
0
-
0
-
0
-
0
(39,104)
(39,104)
At 31 May 2023
893,183
4,007,082
382,972
337,661
308,060
5,928,958
Carrying amount
At 31 May 2023
411,964
3,099,079
85,935
22,614
251,199
3,870,791
At 31 May 2022
193,821
3,519,256
104,258
23,081
175,787
4,016,203
10
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
11
1,097,866
1,097,866
11
Subsidiaries
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Special Quality Alloys Inc
United States of America
Ordinary
100.00
12
Stocks
2023
2022
£
£
Finished goods and goods for resale
23,467,429
15,651,217
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 19 -
13
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
15,430,607
7,653,377
Corporation tax recoverable
129,411
-
0
Amounts owed by group undertakings
7,724,926
3,448,415
Other debtors
-
0
4,285
Prepayments and accrued income
449,396
147,055
23,734,340
11,253,132
14
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
7,816,803
5,857,722
Amounts due to group undertakings
629,319
536,929
Corporation tax
-
0
438,576
Other taxation and social security
775,964
624,080
Other creditors
330
-
0
Accruals and deferred income
1,090,372
1,011,112
10,312,788
8,468,419
15
Provisions for liabilities
2023
2022
£
£
Other liabilities
688,700
700,697
Deferred tax liabilities
16
609,000
525,000
1,297,700
1,225,697
Movements on provisions apart from retirement benefits and deferred tax liabilities:
Other liabilities
£
At 1 June 2022
724,398
Utilisation of provision
(23,701)
At 31 May 2023
688,700

The other provision relates to customer credit provisions.

SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 20 -
16
Deferred taxation

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Liabilities
Liabilities
2023
2022
Balances:
£
£
ACAs
609,000
562,000
Other timing differences
-
(37,000)
609,000
525,000
2023
Movements in the year:
£
Liability at 1 June 2022
525,000
Charge to profit or loss
84,000
Liability at 31 May 2023
609,000
17
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
162,563
154,599

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

18
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
100,000
100,000
100,000
100,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
- 21 -
19
Capital commitments

Amounts contracted for but not provided in the financial statements:

2023
2022
£
£
Acquisition of tangible fixed assets
35,026
-
20
Ultimate controlling party

The immediate and ultimate parent undertaking and controlling party is Special Steel Co Limited, which prepares group financial statements.

The registered office of Special Steel Co Limited is Bacon Lane, Sheffield, South Yorkshire, S9 3NH.

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