The directors present the strategic report for the year ended 31 December 2023.
The directors are pleased with the performance of the group during the year, reporting operating profit of £2.6m (2022: £3.8m) and net profit of £0.6m (2022: £2.0m). Revenues saw a 13% increase from the prior year, benefitting from a higher value sales mix, with volumes and market lead prices in line with the prior year.
The principal risks and uncertainties faced by the group in the view of the directors are as follows:
Price risk
The industry in which the group operates is greatly affected by the price of lead and other metals which is outside the control of the group as it is dictated by market forces. The directors therefore undertake daily reviews of the price of lead and other metals. The directors believe that the group has the appropriate controls in place to ensure that the group can react in a timely fashion to any significant changes in these prices.
Energy cost risk
Wholesale energy costs have seen increased volatility over recent years. The directors are taking a number of actions to manage the impact of price increases, including engaging market experts to offer advice, regular monitoring of the market and fixing some forward energy costs to reduce uncertainty.
Supply chain network uncertainty
Any delays in securing materials due to issues with global supply chains can cause problems. In particular, the group supplies the construction sector which is susceptible to delays and dependent on materials from different geographical locations. The directors seek to ensure that adequate levels on stock are held to meet the requirements of its customers.
Liquidity risk
There is a significant level of investment in fixed assets held by the group which is required to provide the plant and machinery that the group needs to be able to deliver its products. The level of funds held in stock is kept to an acceptable minimum whilst the remaining funds are held either within short term debtors or the bank, offset by short term creditors. The board manages liquidity risk by a combination of controls such as the monitoring of gearing levels and ensuring that the group has sufficient available funds for its operations.
Interest rate risk
The group finances its operations in the main through bank loans and asset based financing and the resulting interest costs are reviewed by the directors. The board accepts that a certain amount of third party funding is required and therefore accepts the risk attached to interest rate fluctuations.
Credit risk
The group undertakes credit checks for new accounts and sets credit limits for its customers. The level of debtor days is reviewed for significant accounts and procedures are in place if an account falls outside the set parameters. Due to the market conditions prevailing within the industry sector the group makes an adequate and realistic provision against trade debts.
Cash flow risk
The board continually monitors the cash requirements of the group to ensure that there is the appropriate level of cover. There are adequate facilities readily available to support the group's cash flow requirements at the balance sheet date.
Foreign currency risk
Whilst the greater part of the group’s revenues and expenses are denominated in sterling, the group is exposed to some foreign exchange risk. The group constantly reviews its exposure to limit the adverse effects of such risks on its financial performance.The use of forward foreign exchange contracts and other derivatives assist the directors in managing the risk.
Development and Performance
The directors consider the level of business and the year end position to be satisfactory. EBITDA for the year was £6.24m before exceptional costs.
The directors review various key performance indicators during the year to measure the performance of the group both compared to budget and against the industry as a whole. A summary of these indicators are as follows:-
Turnover
The directors review the pricing of products in line with metal input prices. This means that the prices offered by the group to its customers are continually updated and remain competitive. Turnover for the period was £128.6m (2022: £113.4m).
Gross profit
As a result of the continued review of the sales prices the directors continually take steps to ensure that the group maintains its gross margin. This is reviewed throughout the year. Gross margin achieved was 23.4% (2022: 25.8%).
Debtor days
The directors review the average debtor days throughout the year to ensure that any collection problems are swiftly identified and resolved. Debtor days in 2023 was 73 days (2022: 73 days).
Stock turnover
The directors strive to hold stock levels to ensure that any short term fluctuation in lead and metal prices can be covered whilst not tying up excessive funds in stock holdings. Stock turnover days for 2023 was 63 days (2022: 74 days).
In accordance with section 172 of the Companies Act, each of our directors acts in the way he considers, in good faith, would most likely promote the success of the company for the benefit of its members as a whole. Our directors have regard, amongst other matters, to the:
likely consequences of any decisions in the long term;
interests of the company's employees;
need to foster the company's business relationships with suppliers, customer and others;
impact of the company's operations on the community and environment;
desirability of the company maintaining a reputation for high standards of business conduct; and
need to act fairly as between members of the company
As is normal for large companies, we delegate authority for day to day management of the company to senior managers and then engage management in setting, approving and overseeing the execution of strategy and related policies. During the year, we reviewed the company's financial and operational performance; key transactions; regulation; funding and pension matters, mechanisms of stakeholder engagement and diversity and inclusion. The Board review , discuss and approve, as necessary, all of these matters.
As set out above, decisions taken by the Board consider the interests of our key stakeholders and the impacts of these decisions.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid. 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:
The group uses financial instruments comprising of bank loans and asset based financing facilities, together with various items such as trade debtors and trade creditors that arise directly from its operations. It is the objective of the board to ensure that the group has ready access to the level of funds that the board deems necessary at any time during the year. The board reviews future projections to highlight any times when requirements may exceed current levels of funding to ensure that facilities are in place and available.
The main risks arising from the financial instruments used by the group are credit risk, interest rate risk, liquidity risk and cash flow risk. The group reviews and agrees policies for managing these risks, as detailed in the strategic report to minimise exposure
The group invests in the development of new technology. During the period the group incurred approximately £1m (2022: £0.2m) of development expenditure which includes a significant labour cost. The directors believe this will lead to future profits of the group.
The group's policy is to consult and discuss with employees, through staff councils and 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.
General economic conditions remain difficult, with factors including Russia's ongoing invasion of Ukraine and the global recovery from the Covid-19 pandemic contributing to increased energy cost volatility, general high cost inflation and historically high interest rates. The directors have taken action to mitigate these impacts where possible and expect financial performance to remain satisfactory.
Rayner Essex LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The directors recognises the importance of their environmental responsibilities, monitors its impact on the environment and designs and implements policies to reduce any damage that might be caused by the Group's activities.
The Group operates in accordance with group policies. The Group's strategy is shaped to to respond to the risks and opportunities faced and climate change related risks and opportunities are built into this strategy.
The information below is in relation to the entities who use over 40,000 kwh only.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the 2023 UK Government’s Conversion Factors for Company Reporting.
The Group continually looks to improve energy efficiency and reduce emissions. This is done through a mix of operational improvements and improvements to equipment and machinery.
During 2023 a number of older employee vehicles were replaced with new hybrid low-emission vehicles. In addition, new processes were put in place to review energy usage over time, with a view to identifying further opportunities to improve operating processes and reduce emissions.
Other projects of note in the period include: the renewal of group commercial vehicles, providing a lower emission fleet; revisions to the furnace smelt processes to optimise energy usage; improvements to refinery processes to reduce gas consumption; and optimisation of the battery breaker processes to reduce operational hours on power. Further work is expected in the next period as part of the group’s commitment to continuous improvement.
We have audited the financial statements of International Metal Industries Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company and group 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.
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 extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the group through discussions with the directors and other management, and from our commercial knowledge and experience of the manufacturing and distribution sectors;
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, taxation legislation and data protection, anti-bribery, employment and other relevant regulations;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the group's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC and relevant regulators.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
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 £271,276 (2022 - £2,711,913 profit).
International Metal Industries Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Faulkner House, Victoria Street, St.Albans, Hertfordshire. AL1 3SE.
The group consists of International Metal Industries Limited and all of its subsidiaries as disclosed in note 16 to the financial statements.
The administrative office of the parent company is Rassau Industrial Estate, Ebbw Vale, Gwent, NP23 5SD
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The directors have taken advantage of the exemptions available to not disclose details of its carbon and energy usage within the the directors report.
The consolidated group financial statements consist of the financial statements of the parent company International Metal Industries Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 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.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
In adopting the going concern basis for preparing the financial statements, the directors have considered the business activities and the group's principal risks and uncertainties. The group meets its day-to-day working capital requirements through use of its cash and banking facilities.
In assessing the appropriateness of the going concern assumption, the directors have prepared detailed cash flow forecasts using the latest information available which show that the group can continue to meet its obligations as they fall due. The directors are therefore satisfied that the group will continue to operate within facilities agreed with the group’s bankers.
Turnover represents amounts receivable for goods and services net of VAT and trade discounts, including sales rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The 'percentage of completion method' is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets depending on their nature, and provided it is probable they 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.
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, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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 group enters into foreign exchange forward contracts in order to manage its exposure to foreign exchange risk.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
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.
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
One of the subsidiary companies included in the consolidation operates a defined benefit scheme. As a result of implementing FRS 102.28 'Retirement Benefits' in full, the group is required to recognise a pension obligation as disclosed in the notes to the financial statements.
The regular cost of providing retirement pensions and related benefits is charged to the profit and loss account over the employees' service lives on the basis of a constant percentage of earnings. Any difference between the charge to the profit and loss account and the contributions paid to the scheme is shown as an asset or liability in the balance sheet.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
All other pension schemes operated by the group are defined contribution schemes. Contributions payable are charged to the profit and loss account in the year they are payable.
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 asset's 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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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.
Product waranties
Provision is made for customers' claims arising in the product warranty periods based on management's assessment of costs to be incurred. In case of certain large contracts, provision is made as a percentage of sales value. Costs of warranty work are written off against the provision 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 directors have undertaken an impairment review on the groups’ related party receivables. The impairment review comprised a high-level assessment of the likelihood of the counterparties meeting the repayment of monies owed to the group in the foreseeable future. The high-level review relied on discussion with management of the related party entities and the directors own knowledge of the businesses involved. The high-level review showed that the book value of the related party balances, net of impairments brought forward from previous years, was recoverable. The directors concluded that a provision of £1.2m brought forward from previous years remained appropriate. The directors consider this a realistic provision, based on the work undertaken, and shall review the remainder balance on an ongoing basis as the situation going forwards still retains a high degree of uncertainty.
As part of a group reorganisation process in 2020 the company assumed responsibility for certain cross guaranteed borrowings that were extant in subsidiary undertakings (sub group), that do not form part of the current group structure. An estimate of the liability in relation to this guarantee is recorded in the balance sheet of the group. The estimate of this liability reflects the latest view at the time of the liquidator's success or otherwise in recovering outstanding monies owed to the sub group. The initial estimate of the potential total liability when first recorded in 2020 was £3.5m. This was subsequently reduced to £2.75m in 2022 based on the latest available information, and was retained at this level (before taking repayments into account) in 2023. Subsequent to the 2023 year end the liquidation of the sub group has completed and the liability has been reduced by a further £0.4m.
The group incurred restructuring, re-organisation and settlement costs which meet the criteria to classify as one-off and exceptional in their nature.
During the prior year certain non trading debtors of the company underwent an impairment review and consequently management concluded a significant revaluation of the debtors was required.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Investment income includes the following:
The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
The group has estimated tax losses of £16.5m available after utilising any current period group relief to carry forward against future trading profits of the group.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
The depreciation charge in respect of such assets amounted to £586,569 (2022: £639,115).
When the group was formed tangible fixed assets were consolidated at depreciated replacement cost, which was considered to be fair value.
The fair value of the investment property has been arrived at on the basis of a valuation carried out by Knight Frank Chartered Surveyors, who are not connected with the group. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments.
Forward exchange contracts were in place at the year end to sell $1,361,000 and €1,250,000, and purchase ZAR 13,000,000 (2022: Sell €2,700,000 and purchase ZAR 5,000,000).
The nature of the risks being hedged is that of exchange rate risk, in particular adverse movements on the exchange rate to purchase USD, Euros or Rand for highly probable future sales and purchases.
Included in other creditors is £25,128,128 (2022: £25,400,767) in respect of HSBC asset based financing facilities. These are secured against the assets of the group.
Further fixed charges have been registered in favour of the Welsh Ministers securing the assets of all group companies providing cross guarantees in respect of the group's debt facilities.
Included in other creditors of £5,577,000 is £150,000 (2022: £5,627,000 is £200,000) owing to to the Welsh Ministers which is secured against the assets of the group. Also included is an amount of £5,427,000 (2022: £5,427,000) from the shareholder and director which is subordinate to the bank debt.
The banking facilities provided to the group by HSBC PLC and HSBC Invoice Financing (UK) Limited are secured by way of fixed and floating charge over the assets of the group. Legal mortgages are held over property and cross guarantees exist for all group companies which include certain former group companies.
The loan facilities provided are wholly repayable within 60 months. The loans bear interest at various rates between 2.25-3.5% above the Bank Base Rate.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is expected to reverse within the foreseeable future and relates to the utilisation of tax losses against future expected profits of the same period.
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.
A subsidiary company operates a defined benefit pension scheme for qualifying employees. The most recent full actuarial valuation was as at 1 January 2023 carried out by a qualified independent actuary and issued on 25 March 2024. This showed a deficit of £148,000.
FRS102 valuations were undertaken by a qualified independent actuary and these show a deficit of £109,000 at 31 December 2023 and a deficit of £87,000 at 31 December 2022. The movement in the deficit is shown below.
The scheme is closed to new members and as a result the current service costs (as a percentage of pensionable earnings) is expected to increase in future years as the members of the scheme approach retirement.
The Sponsoring Employer has increased the annual contributions to the Scheme to £32,000 pa from 1 July 2018 through to 31 October 2027.
Assumed life expectations on retirement at age 65:
The amounts included in the balance sheet arising from obligations in respect of defined benefit plans are as follows:
Amounts recognised in the profit and loss account
Of the total expenses for the year, £37,000 is included in investment income (2022: £18,000) and £41,000 (2022: £23,000) in finance costs.
Amounts taken to other comprehensive income
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans funded as follows:
Movements in the fair value of plan assets
The actual return on plan assets was a deficit of £44,000 (2022: £37,000).
Fair value of plan assets at the reporting period end
The banking facilities provided to the group are secured by way of a fixed and floating charge over the assets of the company and its subsidiary companies which include certain former group companies.
Further fixed charges have been registered in favour of the Welsh Ministers securing the assets of all group companies providing cross guarantees in respect of the groups debt facilities.
A subsidiary company provides a bankers guarantee for £106,835 in favour of Nature Resource Wales.
Operating lease commitments for the group include motor vehicles and plant and equipment on leases of an average of 36 months and two properties based in Hoddesdon, Hertfordshire. The remaining lease period for both properties range from 3 to 7 years.
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 remuneration of key management personnel is as follows.
Group
During the year the following expenditure was incurred from the following related entities which share a common director and/or shareholder. All transactions were entered into at arm's length:
Brandyford Group £134,234 (2022: £197,093)
March Capital Limited £0 (2022: £233,750)
Omar Enterprises Limited 579,455 (2022: £594,310)
Hill Dickinson LLP £322,166 (2022: £0)
During the year the following sales were made to the following related entities which share a common director and/or shareholder. All transactions were entered into at arm's length:
Brandyford Group £23,598 (2022: £22,225)
Envirobatt Limited £18,707 (2022: £0)
At the balance sheet date the following balances were owed from/(to) the following entities which share a common director and/or shareholder:
Brandyford Group £1,407,695 (2022: £2,120,093)
Enviro Belgium £862,121 (2022: £0)
Envirotech Composites Limited £138,219 (2022: £138,219)
Omar Enterprises Limited (£2,723,704) (2022: (£2,554,438))
Envirobatt Limited £68,132 (2022: £0)
Company
There were no transactions with related entities entered into during the current or prior year.
The following balances were owed from related entities which share a common director and/or shareholder:
Envirotech Composites Limited £94,219 (2022: £94,219)