The directors present the strategic report for the year ended 30 April 2024.
As shown in the group statement of comprehensive income, this has been another successful year for the group with a further increase in the net asset position. Underlying trading profit has been successful for the transport business.
The wellboats operated by the company have continued to trade successfully during the year, the trucks have also produced a better financial result due to increased activity. The smolt business has reduced operating costs by selling the stock ex farm, thus increasing profitability.
The Group has had a slow start to trade in the first couple of months due to delays with the wellboats completing their annual maintenance, but business is again very busy, and expectations are for another successful year.
The principal risks and uncertainties facing the group are broadly as follows:
Business risk: The management of the business and our strategy are, like any business, subject to a few risks. These include competition from other fish transport operators, fluctuations in fish food and fuel costs and the effects on the fish farming industry from external matters.
Liquidity risks: The group maintains a cautious cash management policy and is confident of being able to continue servicing its bank loans in line with agreed repayment profiles. Liquidity does not pose a risk to the group.
Interest rate risk: Interest rates are not considered to pose a significant risk to the group and the group has in place an interest rate swap regarding part of its borrowing to protect against any unforeseen movements in interest rates.
Credit risk: The groups policy is to minimise exposure to losses of defaulting customers. A robust credit control policy is operated to minimise exposure to customers where there have been incidences of an imperfect collection history.
Management Accounts being reviewed regularly by the board and compared to budgets.
Cashflow projections being compared, monitored and updated regularly.
Longer term contracts are in place for both companies, so income is known.
Costs are reviewed regularly.
Level of cash held deemed reasonable to meet any unforeseen irregular expenses or cover any income losses.
No regulatory or legal issues currently that could impact trade.
Adequate insurance cover in place for any unforeseen losses/claims etc.
The group monitors business performance of its different segments, specifically wellboats and road transport (transport services up 15.2%) and smolt production (sales up 8.9%) through monthly reporting of results. We use a variety of KPI's to monitor and drive the performance of the business, in addition to sales profit and free cash. These include gross profit percentage (down 9.4%), with group cash and cash decreasing in the year by £767,496
As indicated above the directors are pleased with business during the first months of the financial year and of the anticipated outcome for the remainder of the year. The wellboat and smolt businesses have performed well and the group intends to continue to invest in these businesses should attractive opportunities arise.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 April 2024.
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £280,000. The directors have recommended payment of a final dividend amounting to £140,000. This is subject to shareholder approval and has not been included as a liability in the accounts.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditors A9 Accountancy Limited are deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group has chosen in accordance with Companies Act 2006, s.414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments.
We have audited the financial statements of Migdale Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2024 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, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which our procedures are capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud is detailed below.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
United Kingdom Generally Accepted Accounting Practice
Companies Act 2006
Corporation Tax legislation
VAT legislation
Health and safety
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management including management. We corroborated these enquiries through our review of external inspections, relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur, by meeting with management to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk.
The following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness via data analytics for specific types of entries, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias.
Procedures to confirm the existence and completeness of revenue ensuring recognised in line with the company’s accounting policies.
Testing the basis for calculating the quantities and carrying value of the biological assets, including a sample review of purchase and sales invoices as part of the biological asset reconciliation and to ensure management had correctly reported these assets at the lower of cost and net realisable value.
Enquiries with management regarding the compliance with laws and regulations, including health and safety requirements.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material risk due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed noncompliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £291,352 (2023 - £136,581 profit).
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities as follows:
Depreciation - useful lives of tangible assets
The useful life of any residual values of tangible fixed assets are considered and depreciation rates applied accordingly. Details of the depreciation policies applied can be found on page 18 of the financial statements. The depreciation charge for the year amounts to £1,513,549 (2023 - £1,425,215) and the carrying value of tangible fixed assets at the year end amounts to £21,209,385 (2023 - £19,937,538).
Biological assets
Biological assets totalling £391,559 (2023 - £641,891) are valued as detailed on page 28 of the financial statements. Valuation of biological assets requires judgements to be made on various aspects of the assets held and is assessed based on the directors' extensive knowledge of the industry and the economic environment they are operating in. As with any estimate, this is subject to events proving otherwise, but the directors do not consider that this amounts to significant risk.
Migdale Group Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Dornoch Road, Bonar Bridge, IV24 3EB.
The group consists of Migdale Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value.
The consolidated financial statements incorporate those of Badbea Crofters Limited 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 are consolidated using the purchase method. Their results are incorporated from the date that control passes.
The parent 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 parent company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 of Financial Position - Reconciliation of the opening and closing number of shares;
Section 7 of Cash Flows - Presentation of a statement of cash flows and related notes and disclosures.
Badbea Crofters Limited has acquired the share capital of its subsidiaries on a piecemeal basis. All goodwill on the business combination, to the date that control is obtained on each subsidiary, is fully amortised. Goodwill was assessed as having a useful economic life of 4 years.
All financial statements are made up to 30 April 2024. 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, due to the strength of the group's and the company's balance sheet and the group's ability to generate sufficient cash from its operations, 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.
Turnover comprises 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.
The group recognises revenue when:
The amount of revenue can be reliably measured;
it is probable that future economic benefits will flow to the entity;
and specific criteria have been met for each group's activities.
Turnover is recognised on the charter of boats and hire of vehicles based on the company's right to consideration aligned to the period of hire, on the accruals basis. Turnover for smolts is recognised when legal title passes to the customer. Turnover for management services is recognised on an accruals basis.
Also included within tangible fixed assets are the following depreciation policies:
Leasehold property: 5% straight line
Leasehold improvements: straight line over life of the asset
Fixtures and fittings: 20% to 25% straight line
Wellboat survey costs: Capitalised and amortised periods of up to 5 years
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).
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
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.
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.
Derivatives, including foreign exchange forward contracts, are initally recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. the resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument in which the event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
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.
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.
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.
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.
The company makes contributions into the personal pension funds of certain directors and employees. Contributions payable are charged to the profit and loss account in the year they are payable,
Leases are classed as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit and 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.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rate on the date when the fair value is re-measured.
Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.
Biological assets
The group rears smolts and as a result holds fish as biological assets within current assets.
In accordance with FRS 102 these assets are defined as biological assets and are held at the lower of cost and estimated selling price less costs to complete and sell.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.
Dividends
Dividend distribution to the group’s shareholders is recognised as a liability in the financial statements in the reporting period in which the dividends are declared.
During the prior year an uninsured loss occurred resulting in a compensation payment to a customer of £184,000.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Included with directors' remuneration above are payments to directors of the subsidiary companies.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 5 (2023 - 3).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The proposed final dividend for the year ended 30 April 2024 is £140,000.
The proposed final dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.
Investment property comprises land and buildings. The fair value of the investment properties have been arrived at by the directors and are deemed appropriate at 30 April 2024.
Details of the company's subsidiaries at 30 April 2024 are as follows:
The long-term loans are secured by fixed charges over the group's wellboats and a floating charge over the whole assets of the company.
The bank loan is repayable in monthly instalments over 10 years with interest being charged at a variable rate of base rate plus 1.9%.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Rights, preferences and restrictions
Ordinary £1 shares have the following rights, preferences and restrictions:
Ordinary shares carry full voting rights but no right to fixed income or repayment of capital. Distributions are at the discretion of the company.
Retained earnings represent accumulated profits less losses and distributions.
Amounts contracted for but not provided in the financial statements:
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The operating leases represent leases of a Wellboat to third parties. The leases are negotiated over terms of five years and rentals are fixed for five years subject only to increases in line with the Norwegian Consumer Price Index. The lease will be extended by a further two years unless the Charterer notifies the Contractor in writing no later than 31st August 2027.
At the reporting end date the group had contracted with customer for the following minimum lease payments:
During the year the group recognised £2,437,208 of total payments as an expense in the profit and loss account in relation to the above lease agreements.
Dividends totalling £154,000 (2023 - £143,000) were paid in the year in respect of shares held by the company's directors.
The group and parent company are taking advantage of the relevant exemptions within section 33 of FRS 102 not to disclose related party transactions.
During the year a director of one of the subsidiary companies purchased a property from the group for £200,000 which was deemed to be market value at the time of the purchase,
With effect from 5th August 2024, the name of the parent company was changed from Badbea Crofters Limited to Migdale Group Limited.