The directors present the strategic report for the year ended 31 March 2024.
The results for the year are set out on page 11 and the financial position of the group at 31 March 2024 is set out on page 12.
Turnover for the year amounted to £13,030,992 (2022/23, adjusted for removal of Special Project: £14,336,399).
The profit before tax for the year amounted to £832,180 (2022/23 - £56,874).
This has been a period of consolidation and re-positioning as the railway sector continues its recovery from the COVID era. Despite marginally lower like for like turnover, the commencement of new programmes of work, renegotiation of onerous workstreams and the termination of under-performing arrangements, have combined to drive higher efficiency and profitability in the year and strengthen the business outlook going forward.
The high-profile Class 800 ‘A’ train repair programme, that was ramping up at the end of the previous year, has been the standout programme during the year; providing a consistent revenue stream that has achieved a better margin.
The positive cash flows generated in this period have been utilised in the continued reduction of COVID related debt and arrears, such that rent arrears have now been repaid in full and balance sheet debt exposure is back to the pre-COVID norm.
The successful delivery of the Class 800 programme has led to a new paint refinish programme being awarded. This is a multi-year programme that further enhances the business’ profile and reputation in the passenger market. It will drive a significant uplift in volume output from the paint shop facility.
The wheel shop department is also growing a strong reputation for quality work and increasing demand is likely to lead to a second shift, again, driving a sizable increase in volume. Similarly, the coach building team’s successful delivery of a luxury coach overhaul has led to a second coach being received for major refurbishment, with others in the fleet likely to follow.
The business’ offering is very broad and new opportunities are constantly being sought across the full range of capabilities. The Eastleigh Works site, wholly managed by the group, is vast and partnerships that utilise the facility tend to be relatively lucrative.
Equally our expertise covers the full gamut of railway vehicle and component overhaul and positions us well to take advantage of any new opportunities that might arise. The growing market for luxury trains and developing market for sleeper trains has been noted previously and consideration is being given to how the business could participate in this sector.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2024.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £100,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Research and development activities involved the repurposing of railway rolling stock and associated activities. No
R&D claim has been made for the 23/24 year.
The auditor, Sumer Audit, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group operates management policies designed to minimise its exposure to financial risk:
Credit risk
The group operates a number of policies and procedures designed to mitigate credit risk. In particular, before entering into a transaction with a customer a detailed credit review is undertaken to determine whether or not, in the opinion of the directors, the customer has the ability to meet its debts as they fall due.
Liquidity and cash flow risk
The group operates a range of policies to ensure there is sufficient liquidity and cash to meet its liabilities. Regular cash flow forecasts are prepared to ensure the group is able to pay its debts as they fall due.
Price risk
The group has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required to be contained in the directors' report. It has done so in respect of the company's exposure to price risk and disclosure of its principal activity.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Arlington Fleet Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2024 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 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.
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.
Identification and assessment of irregularities including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We designed procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures were capable of detecting irregularities, including fraud is detailed below:
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 the Companies Act 2006;
we obtained an understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework by making appropriate enquiries of management as well as considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations;
we made enquiries of those charged with governance and management concerning:
the risks of fraud;
instances of non-compliance with laws and regulations or knowledge of actual, suspected, or alleged fraud documented during the period;
we allocated an engagement team that we considered collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations.
Audit response to the risk of irregularities including fraud
Based on the results of our risk assessment, our procedures included, but were not limited to:
performing analytical procedures to identify any unusual or unexpected relationships.
evaluating the selection and application of accounting policies by the entity that may be indicative of fraudulent financial reporting resulting from management’s effort to manage earnings.
assessing whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias.
agreeing financial statement disclosures to underlying supporting documentation.
reading the minutes of meetings of those charged with governance.
reviewing the correspondence with relevant regulatory bodies.
testing of journal entries to address the risk of fraud through management override.
incorporating an element of unpredictability in the selection of the nature, timing, and extent of our audit procedures.
corroborating the business rationale for transactions outside the normal course of business.
Conclusions regarding the risks of irregularities including fraud
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.
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.
We considered our audit was capable of detecting irregularities due to:
the effectiveness of the entity’s internal controls;
the nature, timing and extent of audit procedures performed; and
the absence of contradictory evidence.
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.
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 £0 (2023 - £1,086,869 profit).
Arlington Fleet Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Railway Works, Campbell Road, Hampshire, Eastleigh, SO50 5AD.
The group consists of Arlington Fleet 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 £1.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Arlington Fleet Group Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 March 2024.
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.
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. The directors have considered relevant information, including the group’s principal risks and uncertainties, the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. Based on these assessments and having regard to the resources available to the entity, the directors have concluded that there is no material uncertainty and that they can continue to adopt the going concern basis in preparing the annual report and 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 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.
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).
Recoverable amount is the higher of fair value less costs to sell and value in use.
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 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 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..
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, bank loans, loans from fellow group companies, 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 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.
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.
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.
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.
Depreciation, residual values and useful economic lives of all fixed assets are reviewed by the directors.
Income is accrued in respect of amounts recoverable on contracts by reference to the stage of completion.
Arlington Fleet Services Ltd was the principal with Arlington Fleet France in the French luxury hotel train project during 2023. This project has ceased for the current year. Revenue of £nil (2023 - £5,632,584) has been recognised in the year.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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:
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 2024 are as follows:
Obligations under finance lease and hire purchase contracts are secured by fixed charges on the assets concerned.
The other loan is repayable within 5 years and interest is chargeable at 8%. This loan is secured by directors personal guarantees. Natwest Bank hold fixed and floating charges over the property and undertakings of the company to secure potential borrowings.
Deferred income relates to rents received in advance.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
The company has one class of ordinary shares which carry no rights to fixed dividends. The shares rank equally with regard to voting rights, distribution of dividends and repayment of capital.
The group occupies a leased property under a tenancy agreement that includes a dilapidations clause. Under this clause, the company may be required to restore the property to its original condition at the end of the lease term on 31 December 2035.
The directors have concluded it is not possible to reliably estimate the potential liability associated with the dilapidations clause due to the uncertainty of the extent of the required work and the associated costs. Therefore, no provision has been made in these financial statements. However, this potential obligation is considered a contingent liability.
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:
The operating leases represent subleases to third parties. The leases are negotiated over terms of one to five years.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
Mr Barry Stephens is sole director and owns 100% of the shares of Pipe and Steelwork Protection Limited. At 31 March 2024 £nil was owed by this company (2023 - £nil).
Mr John Campbell is sole director and owns 100% of the shares of Technical Construction Limited (TCL). At 31 March 2024 this company was owed £402 (2023 - £1,800). There were engineering consultancy charges of £14,640 from this company (2023 - £25,100).
Mr Barry Stephens is sole director and Mr Barry Stephens, Mrs Jeanne Stephens and Mr John Campbell own the shares of Arlington Fleet Kitchen Limited (AFKL). At 31 March 2024 this company owed £nil (2023 - £11,183). AFKL provides canteen and catering services. AFKL was charged £nil for rent and facilities costs (2023 - £9,324) and charged AFSL £nil (2023 - £nil) for food subsidy for employees and employee costs.
The hire purchase liabilities are also guaranteed by Arlington Fleet Services Limited, Arlington Rail Services Limited and Arlington Fleet Workshops Limited.
Arlington Fleet Group Limited is surety for the premises lease.