Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their Strategic Report for the year ended 31 December 2023.
The company executes defence contracts in both the Maritime and Land domains. These contracts can be performed either direct with the Ministry of Defence or as sub-contracts into the large tier one Primes. Drumgrange Operates from its two sites in Chertsey, and Portland.
The company is typically engaged in the design, development, integration and qualification of designated projects in the areas of Sonar, Communications and Signature Management. As part of the project delivery the highly qualified and experienced teams will be asked to deliver innovative solutions. Revenue is also generated from on-going support contracts which provides some stability for future years. The company takes advantage of the Research and Development tax credit scheme, not only for qualifying designated projects, but also for private venture work (effectively the team will search for targeted innovative solutions, which may result in future marketable products). During the year the company benefited from several major contracts resulting in higher revenue levels and a healthy pipeline of work. As shown in the company's statement of income and retained earnings on page 10, the company's turnover increased by 47.7% (2022 – 18.8%) compared to the previous year which has resulted in a profit before tax of £2,246,692 (2022 – profit before tax of £570,301). The directors anticipate continued profitability in the foreseeable future as the company continues to retain a healthy pipeline of work, with future orders in excess of £20m already secured. The statement of financial position on page 11 of the financial statements shows an increase in net assets due to excess profits over dividends in the year to a value of £8,145,257 and the balance sheet remains healthy and solvent. In response to the company’s recent growth trend, the company has introduced a more appropriate senior team structure over the last couple of years. This included recent appointments to the management board, which hold regular strategic sessions, as well as the hire of a new head of engineering. The company has also invested in upgrading its core systems, which has resulted in improved connectivity and financial outputs.
The company's revenue is largely from the undertaking of naval and military defence contracts, it remains exposed to increased risk that defence spending may reduce or delayed. However, given the increase global uncertainty and the recognition by government of the need to retain higher deference spend, this risk has reduced.
The company operates in a niche industry, with several larger competitors and competition remains challenging. Staff risks The key barrier to further growth remains retaining and recruiting experienced and qualified staff in a competitive market. The company continues to engage with the market, offering targeted internship programs through strategic alliances, as well as the development of a competency framework to ensure that staff remain both engaged and appropriate for the role. There continues to be a disparity between wage inflation expectations and building in higher inflationary increases into existing and future contracts.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Interest rate risk
The company finances its operations through cash held from retained profits. It does have borrowings in respect of its Portland site. The company currently borrows at a fixed rate of interest above the Bank of England base rate which in the director's opinion is sustainable for the next 12 months however they actively monitor the market in conjunction with the bank to manage the company's exposure to interest rate fluctuations.
Liquidity and cash flow risk
The company manages its liquidity risk by structuring their borrowings to ensure repayments are made over a suitable period. Cash flow risk is managed through daily monitoring of working capital requirements.
Financial risk management, objectives and policies
There are no matters concerning financial risk which are material for the assessment of the assets, liabilities, financial position and profit or loss of the company.
The directors will continue to review the operating performance of the company on a regular basis.
The main key performance indicators the directors used to monitor performance during 2023 were;
Gross profit margin
The gross profit margin for the year was 22.44% (2022 – 20.54%), this was higher than last year, but consistent with historical levels.
Whilst the company is confident that gross margins will be maintained in the future, it continues to be challenged through a combination of higher wage inflation and pressures to cap inflationary increases in its contracts.
Cashflow
The company’s cash reserves had fallen to £1.9m at the year-end (2022: £4.2m), due to spend commitments immediately before the year end, however increased back to similar levels after the year-end, as receivables were collected.
The company generates consistent cash inflows from operations and has liabilities that are known and are usually discharged without recourse to external funding. The company regularly pays dividends but will only do so where adequate cash reserves are maintained. It was noted that no dividends (2022 - £533,050) were paid in the period. The company operated throughout the period within the overall facilities provided by the bank.
Going concern
The business retains sufficient reserves and cash to manage periodic slow downs, and therefore the accounts should be prepared on a going concern basis.
The company continues to invest in Research and Development, and continues to win long term projects, as well as continuing to receive income from reoccurring support work.
The new management team are also now well established and continue to evolve the business to meet new technological and commercial challenges.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
The directors who served during the year were:
The directors are responsible for preparing the Strategic Report, Directors' Report and the financial statements inaccordance 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 year.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The 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.
The profit/loss for the year, after taxation, amounted to £1,990,576 (2022 - £432,615).
Dividends paid in the year amounted to £nil (2022 - £533,050).
Drumgrange provides Research and Development activities in a number of specialist areas. These include Sonar signal processing, VLF communications and Training and Simulation. Core to these activities is the provision of mathematical modelling and simulation services, Technical and Feasibility Studies, System Prototyping and Evaluation and the Provision of System Simulators and Stimulators.
The company has chosen in accordance with Section 414C(11) of the companies Act 2006 (Strategic Report and Directors' Report) regulations 2013 to set out within the company's Strategic Report, the Company's Strategic Report Information required by Schedule 7 of the large and Medium Sized Companies and Groups (Accounts and Report) Regulation 2008. This includes information that would have been included in the business review and details of the principal risks and uncertainties and future developments.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Each of the persons who are directors at the time when this Director's Report is approved has confirmed that:
Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DRUMGRANGE LIMITED
We have audited the financial statements of Drumgrange Limited (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position, the Statement of Cash Flows and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
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.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DRUMGRANGE LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the 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 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DRUMGRANGE LIMITED (CONTINUED)
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 Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant including UK Companies Act, employment law and tax legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
∙We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary.
∙The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area.
∙We assessed the susceptibility of the Companys financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
°Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
°Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process; and
°Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
∙As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
°Posting of unusual journals out of the normal course of business that may inflate revenue;
°Estimates used in calculating amounts recoverable on long term contracts in relation to final costs to complete.
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 is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DRUMGRANGE LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditor
Magna House
18-32 London Road
TW18 4BP
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2023
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 24 form part of these financial statements.
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STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
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ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
These financial statements have been prepared in compliance with FRS 102, 'The Financial Reporting Standard
applicable in the UK and the Republic of Ireland.
Drumgrange Limited is a private company limited by shares, incorporated and domiciled in England and Wales. The
address of its registered office which is it's principal place of business, is disclosed on the company information page.
3.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
Functional and presentation currency
Transactions and balances
In respect of long-term contracts and contracts for on-going services, revenue represents the value of work done in the year, including estimates of amounts not invoiced. Revenue from the rendering of these services are measured by reference to the stage of completion of the service transaction at the end of the reporting period provided that the outcome can be reliably estimated. When the outcome cannot be reliably estimated, revenue is recognised only to the extent that expenses recognised are recoverable based on costs incurred to date.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Accounting policies (continued)
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, on both a straight line and reducing balance basis.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Accounting policies (continued)
Amounts recoverable on contracts represent the excess of the value of work carried out to the balance sheet
date over cumulative payments on account.
Payments on account included in creditors represent the excess of payments on account received over the
value of work carried out to the balance sheet date.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Accounting policies (continued)
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only. that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The judgements (apart from those involving estimations) that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are as follows:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
11.Taxation (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Profit and loss account
The company is controlled by G. Howe, a director, by virtue of his majority interest in the issued ordinary share
capital of the company.
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