The directors present their strategic report for the year ended 31 March 2023.
These accounts include the trading periods from 1 April 2021 to 31 March 2023 for 7 subsidiaries. The comparative figures for the period ended 31 March 2022 include 12 months of 7 subsidiaries, and 5 months for 1 subsidiary disposed of on 2 September 2021.
The operating structure
In the past 7 years, 9 acquisitions and 1 disposal have been completed and, in each case, a focused program of enhancing the core expertise and capabilities has been implemented. These companies form the current group structure brought together in the Aero Services Global Group Limited (ASGG) group, as disclosed in the notes to the financial statements. These companies are grouped into two distinct segments:
ASG Aerospace, primarily offers complex machining of detailed components and assemblies, treatments, and other associated services to the Airframe, AeroEngine, defence and medical sectors. Its customers are predominantly OEMs and Tier 1 suppliers to those OEMs.
ASG Tooling offers turnkey design and manufacture of tooling for composite, transportation media, jigs, and fixtures to the aerospace civil and defence sectors.
The constituent members of each division are as follows:
ASG Aerospace
Phoenix CNC Engineering Limited (Phoenix)
Techni-Grind (Preston) Machining Limited (TGM)
Arrowsmith Engineering Limited (Arrowsmith)
Ludolph Bremerhaven GmbH (Ludolph)
AMF Precision Engineering Limited (AMF)
King and Fowler UK Limited (K&F)
Produmax Limited (Produmax) (Acquired September 2023)
ASG Tooling
B&H.PT. Limited (B&H)
The individual companies form an integrated strategy with the coordinated operations of ASGG through its key functions of sales, customer liaison and service, technical expertise enhancement conducting as one integrated group.
Growth Strategy
We remain committed to our sustainable growth strategy by adopting a “partnership” approach with our customers, suppliers, funders and other stakeholders. We are pleased that the build rate of aircraft by Airbus and Boeing are stable and increasing incrementally.
Within this context we endeavour to extend our reach through ongoing discussions with a “low” cost joint venture in India and enhancing our footprint in Germany and the EU.
On 29 September 2023, the Group acquired Produmax Limited; a highly respected aerospace engineering business focusing on flight control components. The acquisition complements the existing ASG Group, bringing additional diversification of core competencies and customers. The existing management team remains with the business focused on a significant upward trajectory in line with customer demands and needs.
We are also focused on a few highly selective acquisitions in the UK and Europe with a view to further enhancing the Group’s core competencies, customer reach and operational efficiencies.
Alongside this, the Group has continued to invest in capital expenditure in supporting our growth, with £1.5m invested in the financial period ending March 2023. Further investment of over £2.6m has been earmarked for the financial year ending March 2024.
The results for 7 of the subsidiaries owned prior to 31st March 2022 are included for 12 months with only 5 months of pre-disposal results for Datum Tooling Design Ltd included, which are presented as a discontinued operation in the period ending 31st March 2022.
The results for the year under review reflect the continuing recovery of the Aerospace Industry following the “devastating” impact of global lockdowns and the resultant severe reduction in travel. We endeavour to gain a higher market share during the recovery of the Aerospace industry. Sales achieved for the year ending 31 March 2023 of £47.5m represent a 57.8% increase on the prior year.
The turnover for the year to 31st March 2024 is expected to be significantly higher than the reported turnover in these accounts, with the acquisition of Produmax in September 2023. This continues our strategy to take opportunities to further enhance the group’s foothold in the market.
The group managed to make a profit at EBITDA level of £6.0m, in the year under review. Depreciation of £1.7m and non-cash amortisations of £0.9m are recurring costs, with non-recurring exceptional/reorganisation costs of £0.9m, resulting in an operating profit of £2.5m. After interest paid of £1m and interest accrued of £2.7m, the Statutory Loss amounted to £1.2m.
The Group’s uses financial instruments including cash, 3rd party borrowings and other items including trade debtors and trade creditors that arise directly from its operations. The existence of these financial instruments exposes the Group to a number of financial risks, which are described in further detail below.
Liquidity Risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash safely and profitably.
Interest Rate Risk
The Group does have 3rd party borrowings primarily in relation to the monies provided by Realta Investments DAC Limited. There are certain protections in place to mitigate the risk of any small base rate increases by c.2%. In the event that an increase in base rate occurs then the Board of Directors intend to put in hedging contracts to protect the Company from any significant rate increases.
Credit Risk
The Group’s principal financial assets are cash deposits, cash and trade debtors. The credit risk associated with cash is limited. The principal credit risk therefore lies with trade debtors. In order to manage the credit risk, the directors actively review payment history and debtor performance and in certain instances ensure that insured credit limits are put in place and actively managed.
Currency Risk
The Group is exposed to transaction foreign currency risk trading and holding in Sterling, Euros and US Dollars. In order to mitigate the risk, the Board of Directors naturally focus on managing receipts and payments in currencies to minimise any significant foreign exchange losses.
Supply Chain Risk
The Group’s products and services are delivered through the effective operation of its facilities and key capabilities, including its supply chain. While the Group’s strategy is to improve integration and simplify the internal and external elements of its supply chain by building long-term strategic links with fewer, stronger suppliers, it remains at risk of disruption. The Board of Directors have applied an increased focus to understanding and addressing sources of risk arising in the external supply chain, particularly those associated with financial instability.
The Board of Directors utilise key performance indicators including but not limited to:
Revenue perfromance;
Gross margin achieved;
Operational trading EBITDA (Earnings before interest, tax, exceptional items, depreciation and amortisation) and;
Cash collections and working capital management
These are contained within the financial statements and Strategic Report.
The directors of the Company, as those of all UK companies, must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006, summarised as follows:
“A director of a company must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:
the likely consequences of any decisions in the long term;
the interests of the company's employees;
the need to foster the company's business relationships with suppliers, customers and others;
the impact of the company's operations on the community and environment;
the desirability of the company maintaining a reputation for high standards of business conduct and;
the need to act fairly as between shareholders of the company"
The following paragraphs summarise how the directors fulfill their duties:
The board of directors and shareholders and investors meet regularly to discuss strategy and objectives and the board report regularly on the progress against the key objectives. The board’s intention is to behave responsibly and ensure that management operate the business in a responsible manner and portray responsible behaviours which the employees then reflect. The board of directors also review the principal risks and uncertainties affecting the business on a regular basis.
Our employees are fundamental to the delivery of the company’s goals. The company has a structure through which is engages with its employees, with directors of the individual trading businesses liaise between employees and the board regularly. This works effectively since the number of employees at each business is small enough for there to be a high degree of visibility by the directors who are then able to provide the two-way dialogue with the board. Employees’ behaviour and performance is monitored and addressed where any such behaviour is not deemed to be in line with the values of the company.
Our aim is to provide the “Best in Class” service to our customers, it is therefore important to develop and maintain strong client relationships. We have ongoing contracts with our key suppliers and key customers. The strength of these supplier and customer relationships and the regular communications with customers and suppliers have been crucial in ensuring that the businesses objectives are met.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2023.
The results for the year are set out on page 11.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
As the parent company of the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities. Each of the group's subsidiary companies is outside the scope of the requirements to report on energy and carbon.
We have audited the financial statements of Aero Services Global Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including 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.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because 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. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £1,585,748 (2022 - £1,691,158 loss).
Aero Services Global Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is C/O A2e Industries, No. 1 Marsden Street, Manchester, United Kingdom, M2 1HW.
The group consists of Aero Services Global Group 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 £000.
The financial statements have been prepared under the historical cost convention. 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.
Prior period restatement is to better reflect the performance of the business and also the correct split across different categories.
The consolidated group financial statements consist of the financial statements of the parent company Aero Services Global Group Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 March 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The directors have prepared detailed profit and cash flow forecasts for the period to March 2026. These show that based on the forecast trading position and use of its currently agreed invoice discounting facility and borrowings, the group will have sufficient liquidity to meet its liabilities as they fall due.
The directors have also completed a reverse stress test exercise which indidcates that a significant change in fortunes would have to be suffered by the group for it not to be a going concern. There are no indiciators that this would be the case. In such circumstances additional options may be available to mitigate the impact on the group’s liquidity and cash flow including:
(i) further reductions in operating and capital expenditure;
(ii) additional support from the UK Government;
(iii) extension of debt facilities
The group was in compliance with its loan covenants in respect of borrowings at the year end, relating to EBITDA performance, leverage and capex spend. The directors have continued a regular dialogue with the lenders and have made appropriate enquiries in respect of the lender’s position regarding future covenant assessments.
The group closed the financial year with net cash at bank of £3.4m. In addition, the group had £0.4m of headroom in the invoice discounting facility that will be available in line with forecasted turnover growth. In September, this facilty was increased to £14m to provide further headroom.
No other financial support has been included in the forecasts, although the directors understand that the group would qualify for this support if required.
The group has traded in line with budget forecasts for the year.
Based on the above, the directors did not consider there to be material uncertainties regarding the going concern assessment. They also believe that the group is able to meet its liabilities as they fall due, and therefore it is appropriate to adopt the going concern basis of preparation for 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.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investment in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less 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).
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.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, 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.
Where applicable the component parts of compound instruments issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Exceptional items
Exceptional items are unusual or non-recurring in nature and are recognised as incurred.
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 redeemable preference shares have guaranteed returns and varying termination periods. The dividends qualify as a non-basic financial instrument and require management to estimate the expected future dividend payments and an appropriate rate at which to discount the payments.
Management consider whether investments in subsidiaries are impaired on an annual basis. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash-generating units (CGUs). This requires estimation of the future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cash flows.
Where evidence exists that investments in subsidiaries are impaired, management consider whether the intercompany debtors due from the subsidiary are recoverable based on future profitability of the subsidiary undertakings.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Stock provision
The company makes an estimate of the recoverable value of stocks. When assessing impairment of stocks, management considers factors including the current aging of the stocks held and the budgeted sales volumes in the next 12 months of certain products.
WIP valuation
WIP is calculated using a rate to absorb the amount of labour used.
Management experience of their product lines are essential to determine the amount labour absorbed and thus the value of the WIP. Management's experience of their product lines is essential to determine the amount of labour absorbed and thus the value of WIP.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Factors that may affect future tax charges
There were no factors that may affect future tax charges.
Exceptional items relate to one-off professional fees in respect of ad-hoc projects, staff remuneration and other ad-hoc restructuring costs.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 March 2023 are as follows:
The difference between purchase price or production cost of stocks and their replacement cost is not material.
Amounts owed by group undertakings are non-interest bearing and repayable on demand.
Obligations under finance lease and hire purchase contracts are secured against the assets to which they relate to.
Invoice financing facility is secured by a fixed and floating charge over the group's assets.
Amounts owed to group undertakings are non-interest bearing and repayable on demand.
Disclosure of the terms and conditions attatched to the non-equity shares is made in the share capital note.
On 7 April 2020 Realta Investments Ireland DAC converted £6,000,000 of the previous loan funding into nonredeemable preference shares in Aero Services Global Group Limited. The remaining £19,000,000 was charged interest at 7% plus LIBOR subject to a minimum floor of 2% payable every 6 months. Interest charged on the loan in the year was capitalised.
Realta Investments Ireland DAC loan is secured by the loan amount and any accrued interest.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
All ordinary shares apart from the Z shares are non-redeemable and entitle the holders to 1 vote per share and an equal share of dividends declared by the group.
The Z shares are non-redeemable and carry no voting or dividend rights.
The A preference shares are non-redeemable and entitle the holders to 15% of the total voting rights of the group and 15% of dividends declared by the group.
The B2 (D) preference shares are non-redeemable, carry no voting rights and enable the holders to an equal share of dividends declared by group.
The B1 (B) preference shares are non-redeemable, carry no voting rights and enable the holders to a non-discretionary dividend equal to 5% of the paid up capital on the shares. The dividend rate is increased to 8% from 1 January 2023.
The B2 (C) preference shares are non-redeemable, carry no voting rights and enable the holders to a non-discretionary dividend equal to 8.5% of the paid up capital on the shares.
The Preference shares are non-redeemable, carry no voting rights and entitle the holders to a non-discretionary dividend amounting to £50,000 per annum.
The share premium account represents the total contribution paid by shareholders above the nominal value on issue of the shares.
The merger reserve represents the consideration paid in excess if the carrying value of assets for subsidiaries acquired where there is no change in the ultimate controlling party of the group.
Other reserves include share based payment reserve; the share based payment reserve represents the cumulative charge for all share options issued by the group. Forex reserve; the account represents the gain and losses in exchange rates for overseas subsidiaries of the group.
The profit and loss account represents all current and historic profits or losses of the group.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Heads of terms have been agreed to convert the entire loans provided by Magnetar into equity in January 2024, and as such the shareholder funds will be bolstered by circa £24m, whilst also reducing the cash paid burden of circa £3.6m per annum.
Total Equity as at 31 March 2023 would go from £3.7m to £24.2m by capitalising the amounts due to Magnetar of £21.5m. This would significantly improve the Group Gearing circa 31%.
The Group acquired the entire ordinary share capital of Produmax Limited on 29 September 2023. The initial consideration for the acquisition was funded via a mixture of the group’s existing finance arrangements and extended facilities from existing providers. An element of the consideration is deferred into future periods. At this stage, the financial effect of the acquisition cannot be reliably estimated.
The acquisition of Produmax is a great value, expertise enhancing acquisition for the group.
The group has taken advantage of the exemption available in FRS102 not to disclose transactions between the company and its wholly owned subsidiaries within Aero Services Global Group Limited.
During the period the group incurred fees amounting to £960,000 (2022: £840,000) from A2e Industries Limited, a company having common directorship. At the period end, the amount owed to A2e Industries Limited was £240,000 (2022: £210,000).
The ultimate parent of Aero Services Global Group Limited is Amiri Assets III LP.
The ultimate controlling party of Aero Services Global Group Limited is Said Amin Amiri, who is the controlling party of Pasargad 2 Limited, as the nominee and custodian of the legal title to all of the assets of 'Amiri Assets III LP'.