The directors present the strategic report for the year ended 31 December 2023.
Review of the business
The primary activities of the business centre around the provision of environmental services including the transport, treatment, transfer and disposal of both hazardous and non-hazardous wastes and the provision of specialist industrial cleaning services with national coverage and across all industry sectors in across the United Kingdom.
Waste management is an important and specialised sector in the economy. Our business is fully invested to provide a full spectrum service that our customers rely upon and ensures their waste is transported, handled, processed and disposed of in accordance with the strictest regulatory requirements and highest standards of safety, compliance and corporate governance. Our business has evolved to satisfy our clients’ needs to the extent we offer a total service – access to everything from waste recycling to industrial cleaning, from complete laboratory services to sample analysis. We work with companies of every size, covering every commercial category and industry sector. Our customers operations are located throughout the United Kingdom and so we work across the country - bringing a uniquely personalised and adaptable approach to all of our client base with the guarantee of consistently high service levels from our in-house transport function and waste facilities in Stoke on Trent, Brownhills and Dudley.
The business has also invested in the delivery of specialist industrial cleaning services including site clearances, decommissioning, spills, and inspections, across the full spectrum of industry and manufacturing. Our expert teams use specialist equipment and techniques to remove hazardous and non-hazardous contamination and materials from equipment and infrastructure across a wide variety of process, production and manufacturing industries. Operating from our industrial services base at Wednesbury in the West Midlands, we offer our services nationwide to our waste services customers.
This is how, in 18 years, we have grown into one of the United Kingdom’s largest independent waste management services companies focussed on hazardous wastes, but we have no intention of pausing there. We’re ambitious. Determined to continue growing by offering better, more practical, more relevant, and sustainable solutions in a market which is constantly evolving.
Our primary focus for investment during 2023 has been the implementation of the new ERP system into the Brownhills operation which was completed successfully during the year. Already embedded within our other group companies, this represents a departure from the previous system operating since business acquisition to a much-improved specific operating system using a new software framework. Introducing the new system has embraced every part of our business being rolled out into our finance function at the start of the year and extended to our to our sales, technical and operations departments at from May onwards.
Successful implementation has required focus and cooperative working across all areas and promises to deliver a system which complements and regularises our processes and procedures, is realising operating efficiencies across all business areas over time and with continued use whilst providing us with unprecedented monitoring and reporting capability. This investment has been a key development objective for the business in 2022 and 2023 and one which will support future organic growth through greater overall operational efficiency and financial reporting capability and in future acquisitions supporting more effective, rapid and full business integration. The potential for disruption to the business whilst the transition takes place was recognised during foundation work in 2022 and during inception in 2023 allowing us to achieve the outcomes which minimised adverse impact and achieved rapid assimilation.
This work coincided with us moving to a new Head Office location in Burntwood which now sees centralised all our sales, technical, accounts and central support sited in one location to realise efficiency and optimisation in all our business functions. This has also freed up valuable office space at Brownhills allowing a major refurbishment which has seen welfare and accommodation for site operations located under one roof and completely overhauled.
Across both Sneyd Hill and Brownhills, our business continued to successfully export wastes for energy recovery within Europe as we maintained our positive relationships with the respective environmental regulators and across all our offtake supply chain which allowed us to work during the year to grow our network which during the latter part of the year and into 2024 has provided us with additional capacity for new and existing wastes streams improving our service offering to our customers and the wider waste market.
This activity and the resultant treatment processes align strongly with sustainable development and the principles of the waste hierarchy. The result of our efforts in 2023 will continue to be seen in 2024 and beyond as additional capacity has come on stream, and we have successfully concluded the permissions process.
At Sneyd Hill we continued to develop our new aerosol recycling plant which saw initial commissioning within 2022 and in doing so we are successfully furthering our strategy of broadening processing capability within the business and bringing cutting edge technology to the recycling of aerosols in the UK. Our development work has seen us partner with specialist engineers to deliver process efficiencies and improvements which increases potential throughput and capacity whilst retaining the highest standards of process safety. Delivering 100% recycling of all components of redundant and used aerosols, we can deal sustainably with aerosol waste which otherwise would pass down less sustainable and inappropriate disposal routes. This process now not only supports the wider business as it’s portfolio of assets moves further towards more sustainable waste management but represents a high return activity; driving the business towards further niche and highly profitable small-scale processing where the technology to deal with a disposal problem is established and the current market can be better served.
Further developments regarding the plant are being introduced and trialled, the objective of which is to improve sustainability and the operations commercial dynamics.
Our investment in previous periods in the establishment of facilities for the bulk handling of hazardous and non-hazardous wastes has introduced greater flexibility into waste treatment operations allowing materials to be delivered to site in a variety of bulk containers including bulk haulage vehicles and then be segregated and packaged in numerous ways for onward recovery, treatment and disposal activities through allied on site or downstream processes. This has broadened the capability and appeal of the site and continued to deliver new and additional opportunities including larger-scale project work.
These facilities were intensively utilised during the year allowing us to be responsive to our customers’ demands in dealing with some challenging wastes which were otherwise intractable within the UK market. We were at the forefront and able to move large volumes of physically and chemically difficult materials and with safe and effective processing at our facilities were able to produce outputs which were suitable for further beneficial downstream treatment and disposal which would otherwise be unavailable to them. These activities supported our client base in relieving them of some enduring problematic waste streams whilst generating higher revenues for the business. Our work in this area was particularly directed towards waste streams arising from brownfield development projects where historic contamination had left behind legacy material which was particularly challenging with their removal a high priority to allow project work to continue without disruption and in line with established timelines.
Our drive for continual improvement in the way we work saw us continuing to focus on our objective of achieving a self-generative safety culture across our business with many new initiatives and processes aimed at better communication, performance and individual participation across all functional areas being applied and embedded. Much has been achieved during 2023 and this aspect of our work will continue to remain a key part of what we do as we move into the future.
As we move to 2024, we continue to follow our strategic growth plan and work to introduce new technology and processes within the operations across all our sites and further develop our industrial services capability to enter new markets and grow market share. We have started 2024 strongly with results being encouraging and holding as the year progresses.
High inflation and rising prices was an ongoing challenge for most of the year which manifested itself in upward pressure on wages and higher prices from our supply chain; and seen in the costs of downstream waste disposal, one of our major operating costs. In addition, the United Kingdom saw weak economic growth during the year which impacted most of the sectors we serve.
Against this challenging economic backdrop, we continued to increase efficiency and sales drive to improve revenues significantly on the previous year which boosted cash profit generated by the company's operations in line year-on-year. Being able to rapidly and accurately identify upward cost variances and act upon these swiftly softened the impact of rising prices and was key to maintaining and improving gross margins in a market which saw consistent upward pressure. We were able to soften the blow through our strong customer relationships and the unique place we occupy within their supply chains which allowed us to review pricing dynamically across a broad section of our service offering, whilst maintaining our position and their custom.
We have not been immune to the ongoing challenges in the employment market - which we saw signs of easing towards the latter stages of 2023 - however, we have been successful in retaining key staff at all levels in the organisation which allows us to continue to develop our people programme to attract keep staff.
We invest in them as our most valuable resource. So, our new, innovative ideas are created and researched by some of the industry’s most highly trained and skilled experts. They are delivered day-to-day by our nationwide network of experienced, professional technical and support staff. It’s a constantly growing and developing team who bring a positive, imaginative, ‘can-do’ attitude to every project. Always co-operative, always collaborative - from eager graduate trainees to committed operators and technical staff and our seasoned and professional managers and directors, everyone shares a pride and passion for all we do.
In common with our supply chain, we have seen upward pressure on costs throughout 2023 from wage inflation to the cost of energy and a price volatile waste market which has impacted our Year on year performance but despite this, we have continued to operate profitably and maintain our revenue position with the expectation that 2024 will see improvements across both these performance measures as we capitalise on the investments in additional process capability, resource and introduction of a new ERP system we have made in this and previous periods and the external economic environment starts to stabilise.
Our commitment is to continue to broaden our service offering and grow our business with strategic direction clearly supporting this. During 2023 we consolidated our position and laid the ground for additional investment in new process capability at the Brownhills site which will allow waste services business to grow organically and sustainably into the future. We shall continue to follow this path despite any challenges along the way and seek viable and sustainable to continue to invest in viable and sustainable technology solutions to continue and leverage our existing assets whilst remaining active in respect of complementary and related acquisitions.
It’s about creating a more safely managed, more sustainable future – where our work continually benefits our people, customers, the UK our communities and our environment.
The group's key financial performance indicators are Turnover, LTM EBITDA and Profitability.
Turnover for the year was £52.4m (2022 - £48.3m) and Profit after tax was £4.8m (2022- (£2.9m loss)).
Gross profit increased by £7.4m on 2022 levels and LTM EBITDA increased by £6.1m driven by Sales increases, Operating improvements and Cost control. Cash balances increased by over £5m on 2022 levels.
The group closely monitors its disposal costs, environmental regulations and overhead costs with a continuing cost improvement programme being undertaken to reduce and maintain costs of waste disposal.
The group has prepared forecasts detailing their ongoing ability to trade profitably. These forecasts take into account the key business risks including sterling exchange rate, the competitive marketplace, the macro-economic climate, changing environmental legislation and increasing costs of operating.
The group retains suitable adequate finance facilities, including loans, an agreed invoice discounting facility if required and continuing shareholder support. The directors are not aware of any reason why these might be withdrawn and as a result have adopted the basis of going concern.
Regulatory environment
The group operated within its environmental permits in those companies where they are required, being regularly audited and inspected by the Environmental Agency.
The company retains its triple BSI accreditation (BSI 9001, ISO 14001 and ISO 45001) and undergoes extensive audit checks to provide external certification and verification of system robustness.
Financial Instruments
Credit
Credit risk is managed via an integrated credit control function. Credit checking is carried out using external credit agency services with rigorous credit scoring and credit management systems being implemented within the company.
Cash Flow
Cash flow forecasts are prepared regularly and monitored closely to cover any foreseeable funding requirements and are also used for bank covenant forecasting. The business satisfied all banking commitments in 2023.
Liquidity
The group has adequate funding facilities in place should the need arise for any reason.
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 12.
Ordinary dividends were paid amounting to £Nil. 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:
In accordance with the company's articles, a resolution proposing that DJH Audit Limited be reappointed as auditor of the group will be put at a General Meeting.
As Oliver Grace Ltd is a large group, it is required to report on its emissions, energy consumption and energy efficiency by way of Streamlined Energy and Carbon Reporting in this Directors' report.
The group has consumed more than 40,000 kWh of energy in this reporting period, and it therefore does not qualify as a low energy user under these regulations.
However, no energy reporting information has been disclosed in these financial statements as the group has taken exemptions available in the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, Part 7A, Paragraph 20E which allows a group to exclude information for subsidiary companies that would not be required to report in their own right. All subsidiaries of Oliver Grace Ltd are small or medium sized company's and so are not required to include energy reporting information in their own financial statements. On this basis, no information is required to be included in the group report.
We have audited the financial statements of Oliver Grace Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
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 company through discussions with directors and other management, and from our commercial knowledge and experience of the company;
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 company’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; and
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias.
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, relevant regulators and the company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company's profit for the year was £2,775,312 (2022 - £1,392,337 loss).
Oliver Grace Ltd (“the company”) is a limited company domiciled and incorporated in England and Wales. The registered office is Unit 4 Newlands Court, Attwood Road, Burntwood Business Park, Burntwood, Staffordshire, WS7 3GF.
The group consists of Oliver Grace Ltd and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties at deemed cost on transition and to include 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.
Related party exemption
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with other group entities where the relationship is one of being wholly owned.
The consolidated financial statements incorporate those of Oliver Grace Ltd and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the period are consolidated using the purchase method. Their results are incorporated from the date that control passes.
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.
The following subsidiaries have been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows includes the results and cash flows of the subsidiaries for the 12 month period and comparative 12 period. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Share Properties Limited
Red Industries Ltd
Red Industries (Stoke) Limited
Red Industries (Scotland) Ltd
Linkwaste Limited
Red Innovations Limited
Walleys Quarry Ltd
Environmental Resource Group Limited
Red Industries (Brownhills) Ltd
Envirosol Limited
Boxclever Total Waste Management Limited
Chemtech Industrial Services Limited
Blendcheck Limited
Perks Patel Holdings Limited
Haz Holdings Limited
Haz Industrial Services Limited
Red Industries IS Ltd
Accordingly, the group profit and loss account and statement of cash flows includes the results and cash flows of the subsidiaries for the period from acquisition. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
The group’s Strategic Report, set out on pages 1 to 5, details group business activities, together with the factors likely to affect its future development, performance and position. It also details the financial position of the group, its cash flows, liquidity position and borrowing facilities. In addition, notes to the financial statements include the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposure to credit risk and liquidity risk.
The group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities.
The parent company which holds the group's borrowing facilities will open renewal negotiations with the bank in due course. The company has held initial discussions with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal may not be forthcoming on acceptable terms. The company maintains strong relationships with its bankers.
The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual 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.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
Revenue from rentals of property, plant and machinery are recognised when the amount of revenue can be measure 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.
Electricity revenue is recognised on an accruals basis, at the point that it is generated.
Freehold land and assets in the course of construction are not depreciated.
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 income statement.
Landfill sites
Acquisition, site engineering works and the cost of final site restoration and aftercare are capitalised. These costs are written off over the operational life of the site, based on the amount of void space consumed. The assessments made for this purpose are base upon periodic independent survey of the site.
Provision for for landfill site restoration and after-care costs
Full provision is made for the estimated costs of restoring the completed landfill site together with estimated post-closure monitoring and after-care and maintenance costs. This value is capitalised within tangible fixed assets and is expensed to the profit and loss account on the basis of the void space consumed in each period.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
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 statement of financial position 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, cash and bank balances and amounts due from felllow group companies, 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 and amounts due to 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.
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 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 income statement 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.
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 income statement, 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.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
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 statement of financial position 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.
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.
Management estimate the value of the waste stock accrual using experience of the industry and a review of after-date costs incurred.
Depreciation of the landfill site and restoration and aftercare asset is subject to a calculation based on the estimates of the amount of useable void space used in the period. An expert opinion is used to support the annual volumetric of the site.
Management recharges are made between fellow subsidiaries on the basis of the estimated benefit received of the overhead.
An analysis of the group's turnover is as follows:
Exceptional items relate to restructuring and exit costs due to head office relocation in the period, settlement and legal costs for a concluded court case and management fees.
Subsidiary audit exemption
The following subsidiaries are claiming exemption from audit under Section 479A of the Companies Act 2006:
Environmental Resource Group Limited - Company number 05103488
Red Industries Ltd - Company number 07099708
Share Properties Limited - Company number 05760903
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2022 - 4).
The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement.
The carrying value of land and buildings comprises:
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The bank loan is secured by a fixed and floating charge over the assets of the group.
Included within bank loans and overdrafts are amounts of £Nil (2022 - £1,168,615) in respect of invoice discounting facilities. These amounts are secured by a fixed charge on all purchased debts, leasehold improvements, plant and equipment of the business.
Amounts due under finance lease and hire purchase contacts are secured on the assets to which they relate.
The bank loan is secured by a fixed and floating charge over the assets of the group.
Amounts due under finance lease and hire purchase contacts are secured on the assets to which they relate.
The long-term loans are secured by fixed and floating charges over the assets of the group.
Debt is in the form of bank loans which are secured on the freehold property and assets of the group and unsecured fixed rate loan notes.
Bank loan one is a monthly repayment (capital and interest) instrument, maturing in December 2024, with a varying interest rate of interest based on an aggregate of the LIBOR rate and HSBC margin rate.
Bank loan two is a monthly repayment (capital and interest) instrument, maturing in December 2024, with a varying interest rate of interest based on an aggregate of the LIBOR rate and HSBC margin rate.
Bank loan three is a monthly repayment (capital and interest) instrument, maturing in December 2024, with a varying interest rate of interest based on an aggregate of the LIBOR rate and HSBC margin rate.
Loan notes carry an fixed rate of interest at 12% per annum, maturing at varying future dates.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Restoration and aftercare provision
The restoration element of the provision relates to the costs of the final capping and covering of the landfill site, which have been assessed based upon an independent survey, given current best practice and technology available. The dates of payment of these restoration costs are uncertain but will start being paid at the point of the site closure.
The aftercare element of the provision relates to total post closure costs of landfill site including such items as monitoring, leachate management and licensing that have been assessed based upon an independent survey, given current best practice and technology available. The dates of payment of these aftercare costs are uncertain but are anticipated to be over a period of up to 60 years from the years from closure of the landfill site.
The restoration and aftercare provision is shown at net present value £1,651,493. The current cost has been discounted using the real rate of interest of 9.70% (2022 - 11.53%). The unwinding of the discount on the provision was not considered material to adjust in 2022.
The Environment Agency requires security in respect of the provision. This security has been provided in the form of a bond amounting to £2,208,046 (2022 - £1,890,826).
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company has issues share options to key employees under an Enterprise Management Incentive share option agreement. Share options have been granted as follows:
The shares vest to the option holders on a change of control based on the rules of the scheme. This is an equity-settled share based payment arrangement and the maximum term of the options granted is 10 years. We have estimated the share options to vest to the option holders over 10 years.
The Company is unable to directly measure the fair value of employee services received. Instead the fair value of share options granted is determined using the Black-Scholes model. The model is internationally recognised as being appropriate to value employee share schemes similar to this scheme.
The key assumptions used are the exercise price set out in the option agreement, a share price based on a valuation of the company, the government risk free interest rate and the life of the option from the date of grant to the estimated date of exercise. The volatility of the share price was determined by utilising historic variations in earnings.
The total carrying amount at the end of the period for liabilities arising from the share-based payment transactions is £nil (2022 - £nil).
No expense has been recognised in the current or prior period on the basis that amounts are not material.
Ordinary shares carry full voting, dividend (subject to the priority rights of dividend attaching to Ordinary A shares) and capital distribution rights but no rights of redemption.
Ordinary A shares carry full voting, dividend (priority to the holders of Ordinary and Ordinary B shares) and capital distribution rights but no rights of redemption.
Ordinary B shares carry full voting, dividend (subject to the priority rights of dividend attaching to Ordinary A shares) and capital distribution rights but no rights of redemption.
Includes any premiums received on issue of share capital.
Includes any revaluation excess.
The retained earnings reserve holds the retained earnings of the group, after the deduction of any dividends paid in the period.
Company
A debenture including fixed charge over all present freehold and leasehold property; first fixed charge over book and other debts, chattels, goodwill and uncalled capital, both
present and future; and first floating charge over all assets and undertaking both present and future dated 08 November 2016.
An unlimited multilateral guarantee was given to HSBC Bank plc by the company and its fellow group companies, dated 11 September 2019, against the company and group's combined bank facilities.
Group
A cumulative guarantee totalling £501,555 (2022 £805,665) was given to The Environmental Agency.
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:
On 31st May 2024 Walleys Quarry Ltd was de-merged from the Oliver Grace Group of Companies as the landfill operation with its finite life is no longer a strategic fit with the short and long term plans for the rest of the Group.
From this date Renewacore Ltd is now the ultimate parent of Walleys Quarry Ltd.
Post the year end, due to a Group re-organisation, the ultimate parent company is Red Industries Holdings Ltd, incorporated in England and Wales, registered office, Unit 4 Newlands Court Attwood Road, Burntwood Business Park, Burntwood, Staffordshire, WS7 3GF.
The remuneration of key management personnel is as follows.