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 Group proved equal to the challenge, allowing the Board to report this record-breaking set of results.
Consequently, the Group remain in a strong financial position at the end of the year with shareholders’ funds up from £61,044,401 to £66,446,776. Return on capital employed has changed from 11% to 43%. 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 & gascontinued, 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 Steels Ltd (SSL) had an excellent year, with both its subcontract heat treatment services and full supply bar division exceeding plan in turnover and profitability, for similar reasons as outlined above. However, the markets served by SSL are more diversified and with its stringent quality approvals like Nadcap, we were able to capitalise on the higher demands from the aerospace and defence sectors.
Having worked hard to reduce the operational cost base during two years of Covid, we were better positioned to face the new headwinds of energy, manpower and consumables inflation, but this took considerable effort from the very lean team we have.
Nevertheless, we continued a busy programme of plant maintenance, refurbishments, and upgrades and the company continues to make excellent progress in its quality, technical and operational performance. The board have several ongoing I.T. projects with a specific focus to streamline and unify daily operations across its three sites in a drive to improve efficiencies. Finally, its low-cost service provider, VHT, continues to preform to plan.
Whilst still managing to meet its turnover plan, Special Testing Ltd (STL), came in slightly behind profit expectations as it was impacted more than other Group companies by a dramatic rise in manpower and energy costs.
Due to historical ‘custom & practice’ pricing methods, the business was not immediately able to respond to these higher operational costs. Consequently, the Board took the necessary steps to reorganise the commercial approach, resulting in a mid-term correction of financial performance more inline with expectations.
Further investments were made in state-of-the-art equipment, along with a robust recruitment campaign to ensure the business remains at the forefront of its technical capability along with high levels of customer service. The business is well positioned for profitable growth, benefiting from numerous internationally recognised and third-party OEM specific approvals.
Having noted a strengthening market at the end of the previous fiscal year, Special Machined Products Ltd (SMP), were optimistic for continuing growth, and started 2022 / 23 with an aggressive business plan.
Subsequently, the Board are pleased to report a strong increase in both turnover and profitability from the pervious year. The company benefited from ongoing investment in new CNC machines, but with a targeted move into 5 axis operations to upscale its technical capabilities.
The business continues to expand and diversify its customer base across a wide range of markets whilst remaining key to supporting our overall Group wide product offerings. Emphasis remains on balancing the purely subcontract aspect of the business with a focus on meeting customer demand for a more ‘full supply’ product service.
The Board are pleased to report that 2022 / 23 was a record year for the Group, and our well-defined strategy of continued capital investment in key areas, coupled with strong financial discipline allowed us to deliver on our plans. The business outlook remains very positive. However, as always, any plans for future development of the businesses and longer-term financial performance may be subject to unforeseen global economic and political events outside of our control.
Irrespective of prevailing market conditions, our goal remains on outperforming the sectors within which we operate.
In accordance with section 172 of the Companies Act 2006, each of our directors acts in a way they consider, in good faith would promote the success of the Group for the benefit of its shareholders and stakeholders. The directors have taken into consideration, amongst other matters:
• the likely consequences of any decisions in the long-term.
• the interests of the Group’s employees.
• the need to foster the Group’s business relationships with suppliers, customers, and others.
• the impact of the Group’s operations in the community and environment.
• the absolute need of the Group to maintain a reputation for high standards of business conduct; and
• the need to act fairly between members of the Group.
By considering the Group’s purpose, vision, and values, together with its strategic priorities and having a process in place for decision making the Board aims to make sure that its decisions are consistent with its overriding historical approach to careful and prudent fiscal management which have proved critical to the ongoing sustainability and profitability of the Group.
Stakeholder engagement
The Board believe that considering our stakeholders in key business decisions is fundamental to our ability to drive value creation. The Board seeks to understand the respective interest of such stakeholders through various methods, including direct engagement by Board members; receiving of reports and updates from members of management who engage with such groups. The directors consider the following to be the Group’s key stakeholders:
Employees
The strength of our business is built on the hard work and dedication of our employees.
Employees are kept informed of performance and strategy through regular presentations and updates from members of the Board. These updates are further supported by management briefings. The directors attend key business meetings throughout the year and receive monthly commercial, operational, and financial reports as well as daily trading updates across all Group companies.
Key focus of the Board includes employee health, safety, and wellbeing, with action taken to increase the number of qualified on-site Mental Health First Aid (MHFA) practitioners. The Board encourages personal development though supported educational programmes and has a prime focus to ‘promote from within’ whenever possible.
Customers
The profitability of the business is underpinned by ensuring effective communication with customers to understand their needs and requirements. In recognition of this, a core principle of the business is to be customer focused, building relationships, and engaging at all levels of seniority, providing high levels of service through the expert knowledge of our employees, and ensuring a quality product.
The Board receives regular customer feedback and wider market intelligence through multiple communication channels including personal visits and presentations. Many international customers provide regular score card reports covering critical performance KPI’s which are reviewed by directors and Board members. The insight received is used to inform decision making, understand customer needs and tailor our capital investments and stock profiles to maximise our performance.
Suppliers
The Board recognizes that relationships with suppliers are important to the Group’s long-term success and is actively involved in both onsite and external supplier visits and engagements. The Board seeks to balance the benefit of maintaining these strong relationships with the need to evaluate any potential trade off between cost today and ongoing product quality and service for our customers in the longer term. Key areas of focus are product development and quality, including internationally recognised quality approvals and systems, on time delivery and robust financial strength.
Communities
The Board supports both internal and external (local government) initiatives with regards to reducing the adverse impacts on the environment of our operations. Consequently, the Board has initiated a significant investment in renewable energy across key sites. We maintain globally recognised environmental approvals throughout all our UK businesses. We actively support local charities and healthcare providers and create opportunities to recruit and develop local people.
Government and regulations
We engage with the government and regulators through a range of industry forums and meetings to communicate our views to policy makers relevant to our business, included but not limited to, MAKE UK, the AMRC, The Contract Heat Treatment Association (CHTA), The Confederation of British Metalforming (CBM) and our Member of Parliament. We focus on compliance with laws and regulations, health and safety, energy supply and local infrastructure. The Board is updated on legal and regulatory developments and takes these into account when considering future actions.
Investors
The Group relies on our shareholders to manage and direct investment funding to support directors in achieving their business objectives and aims to avoid external debt funding wherever possible. Investor involvement in the decision-making process includes representation on the Group Board. Consequently, all operational directors have open dialogue with the main shareholders due to the nature of our ownership structure. This allows for major shareholders to be fully involved in regular meetings, with direct input into a wide range of topics including financial performance, strategy, outlook, and governance.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 May 2023.
The results for the year are set out on page 10.
Dividends paid during the year are shown in note 11 to the accounts.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
As no single entity within the group is classified as large, it is not required to report on its emissions, energy consumption or energy efficiency activities.
We have audited the financial statements of Special Steel Co. Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 May 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the group through discussions with management, and from our commercial knowledge and experience of the steel manufacturing and treatment of metals sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the group, including Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environments and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the groups financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining accounting estimates were indicative of potential bias;
investigated the rationale behind significant or unusual transactions; and
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
enquiring of management as to actual and potential litigation and claims.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £56,935 (2022 - £899,802 profit).
Special Steel Co., Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Bacon Lane, Sheffield, S9 3NH.
The group consists of Special Steel Co., Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Special Steel Co. Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 May 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the group 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.
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.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The group tests goodwill, other intangible assets and tangible fixed assets annually for impairment, or more frequently if there are indications that an impairment may be required.
The annual depreciation charge for tangible fixed assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values of all asset categories are reviewed on an annual basis to ensure appropriate charges are made for depreciation.
Stocks are stated at the lower of cost and net realisable value. The Directors will assess the requirement for any provision for obsolete stock or value deterioration based on historical transactions, stock utilisation patterns, regular inspection and counting of physical items.
An analysis of the group's turnover is as follows:
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.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Remuneration of key management personnel in the year is £4,418,456 (2022: £2,006,258)
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:
Investment property has been valued at fair value by the Directors.
Details of the company's subsidiaries at 31 May 2023 are as follows:
Deferred tax assets and liabilities are offset where the group or 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:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
On 27 January 2023, Special Steel Co Limited repurchased 30,000 Ordinary shares of £1 each for consideration of £12,000,000.
Amounts contracted for but not provided in the financial statements:
The group has taken advantage of the exemption provided by FRS 102 from the requirement to report transactions with other group companies that are 100% subsidiaries of Special Steel Co. Limited.
Special Steel Co. Limited received management charges of £24,000 (2022: £24,000) from S.T.W (Non-Destructive) Limited which is a company controlled by the directors.
Special Steel Co. Limited made loans of £1,100,000 (2022: £nil) to Jam Developers LLP, in which A K Beardshaw is a designated member.
Dividends paid to shareholders are outlined in note 11.