Company registration number 01985443 (England and Wales)
SPECIAL QUALITY ALLOYS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
SPECIAL QUALITY ALLOYS LIMITED
COMPANY INFORMATION
Directors
A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
D M Pryce
D J Matthews
M J Greensmith
N A Bury
(Appointed 1 July 2023)
Secretary
A C Beardshaw
Company number
01985443
Registered office
Bacon Lane
Sheffield
S9 3NH
Auditor
BHP LLP
2 Rutland Park
Sheffield
S10 2PD
Bankers
National Westminster Bank plc
42 High Street
Sheffield
S1 2GE
SPECIAL QUALITY ALLOYS LIMITED
CONTENTS
Page
Strategic report
1 - 4
Directors' report
5 - 7
Independent auditor's report
8 - 10
Statement of comprehensive income
11
Balance sheet
12
Statement of changes in equity
13
Notes to the financial statements
14 - 26
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2024
- 1 -
The directors present the strategic report for the year ended 31 May 2024.
Review of the business
Having reported record financial results for the preceding year, the Board again wrote an aggressive plan for the business for the 2023 / 24 fiscal period, with the consideration that the continuing geopolitical uncertainties and conflicts arising in previous years remain ongoing and baked into our market demand expectations for the critical products and services we supply.
The Board is pleased to report that the company exceeded their targets in respect of both turnover and net profit.
Consequently, the company remains in a strong financial position at the end of the year with shareholders’ funds up from £45,691,890 to £59,368,936. Return on capital employed has changed from 68% to 47%. Return on capital employed is calculated as profit before tax divided by opening capital employed.
Special Quality Alloys Ltd (SQA), had another highly successful year, setting a new record for turnover. Having experienced strong demand during the last fiscal period, the management were well positioned on stock levels, manning, and production capacity to capitalise on the opportunities presented.
The company continues to focus on delivering technically challenging, high grade specialised nickel and stainless materials to customers in demanding markets where it can leverage its in house production capabilities and metallurgical knowledge to achieve critical end-product performance.
Whilst remaining a key supplier to the global energy sector, market diversification beyond oil & gas continued, and new approvals and orders were won in the defence sector.
However, profit margins came under pressure during the second half of the year as raw material costs increased and market demand from the energy sector eased off from the record highs. This ultimately impacted the company’s ability to match profit levels from the previous year, despite the record turnover.
Nevertheless, the Board remain optimistic that the company will continue its strong performance into the following year.
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 2 -
Section 172 Statement
In accordance with section 172 of the Companies Act 2006, each of our directors acts in a way they consider, in good faith would promote the success of the Company for the benefit of its shareholders and stakeholders. The directors have taken into consideration, amongst other matters:
• the likely consequences of any decisions in the long-term.
• the interests of the Company’s employees.
• the need to foster the Company’s business relationships with suppliers, customers, and others.
• the impact of the Company’s operations in the community and environment.
• the absolute need of the Company to maintain a reputation for high standards of business conduct; and
• the need to act fairly between members of the Company.
One of the key aims for the introduction of this section 172 report is to provide better transparency for investors. However, in recognition of the fact that all of our shareholders are fully employed, operational directors, working within the Company, we can state with a high degree of certainty that they are entirely informed and knowledgeable of all key matters in respect of the long-term success of the Company.
All shareholders chair and attend all Board meetings, both at Group and subsidiary level, and consequently, all operational directors have open dialogue with the shareholders. This access allows for well informed, and rapid decision making for investment funding to support directors in achieving their business objectives and aims. The shareholders take a prudent approach to financing and continue to avoid external debt funding wherever possible.
To support the obvious goal for the business to succeed in the long-term through profitable growth the board also believes that considering our stakeholders in key business decisions is fundamental to our ability to drive value creation. The Board seeks to understand the respective interests of such stakeholders through various methods, including direct engagement and the receiving of reports and updates from members of management who also engage with such groups. The directors consider the following to be the Company’s key stakeholders:
Employees
The strength of our business is built on the hard work and dedication of our employees.
Having successfully navigated the pandemic event, the company continues to invest and develop its health, safety, and environmental team across the Company. Consideration to workforce wellbeing, work-life balance, and fair remuneration have become more prevalent as the recruitment and retention challenge increases. We have qualified on-site Mental Health First Aid (MHFA) practitioners, and we have been adapting working hours and flexible working throughout the Company.
We continue to inform all employees on business performance and strategy through regular presentations and updates from the management team. However, our overriding goal remains the provision of secure employment along with the provision of personal development opportunities though supported educational programmes to encourage a ‘promote from within’ approach whenever possible.
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 3 -
Customers
Whilst our employees are necessary to operate the companies, we cannot sustain our companies without customers. Consequently, the profitability, growth and long-term success of the business is underpinned by ensuring effective communication with customers to understand their needs and requirements. In recognition of this, a core principle of the business is to be customer-driven, building relationships, and engaging at all levels of seniority, providing high levels of service, and ensuring a quality product.
The Board receives regular customer feedback and wider market intelligence through multiple communication channels including personal visits and presentations. Many international customers provide regular score card reports covering critical performance KPI’s which are reviewed by directors and Board members. The insight received is used to inform decision making, understand customer needs and tailor our capital investments and stock profiles to maximise our performance.
To underpin our commitment to the provision of a quality service and product, the Company operates to a variety of internationally recognised standards including ISO 9001, PED / AD2000 Code, ISO 17025 and Nadcap, and these standards provide an external, independent vehicle to benchmark our daily quality performance.
Suppliers
Suppliers are important to the Company’s ongoing success and senior management is actively involved in both onsite and external supplier visits and engagements. The Board seeks to establish, maintain, and build strong relationships with world class suppliers that allow us to provide our technically challenging products and services. Consideration to a supplier’s product development and quality, including internationally recognised quality approvals and systems, technical capacity, on time delivery, robust financial strength and ethical behaviour being paramount. In return, and to the best extent possible, we actively operate a ‘pay on time’ philosophy which we consider to be a vital ingredient of the relationship building process, a practice not always prevalent within our specific market sector.
Communities (and environmental considerations)
The Board supports both internal and external (local government) initiatives with regards to reducing the adverse impacts on the environment of our operations. Consequently, the Board has initiated a significant and ongoing investment in renewable energy from solar across key sites. We are certified to the globally recognised environmental approval ISO 14001 throughout all of our UK businesses, and we were an early adopter of the standard back in 2002. In recognition of the newly introduced Sheffield Clean Air Zone for commercial vehicles, (our main base of operations), we immediately acted to replace our HGV fleet with newly complaint, EURO 6 vehicles. Additionally, we have a programme to transition to electrically powered handling equipment throughout the production departments to maximise the use of our solar power and minimise emissions from daily operations, clearly demonstrating our proactive approach to reducing our environmental impact when making equipment and infrastructure investments. Finally, we actively support local charities and healthcare providers and create opportunities to recruit and develop local people.
Government and regulations
As a business headquartered in the UK, we are subject to some of the most transparent and accountable financial reporting regulations anywhere in the world, and we ensure we comply with all current UK legislation. We also engage with the government and regulators through a range of industry forums included but not limited to, MAKE UK, the AMRC, The Contract Heat Treatment Association (CHTA), The Confederation of British Metalforming (CBM) and our Member of Parliament. The Board is updated on legal and regulatory developments and takes these into account when considering future actions to ensure compliance.
We operate the business with a defined Code of Conduct & Compliance Policy that all employees sign up to. Due to the nature of our work, we have several employees working within the guidelines (and signed acceptance of), the UK Official Secrets Act. We perform annual surveys of suppliers for compliance to Section 1502 of the United States (U.S.) Dodd-Frank Act in respect of companies needing to disclose their use of 3TG conflict minerals. We comply with all international legislation on tax & reporting for those other countries within which we operate, and finally we comply with all sanctions recently introduced by UK / EU Governments following the Ukraine / Russian conflict.
Overall, as a private, family owned and managed business, we consider family members’ long-term commitment, and intimate knowledge of its culture, vision and values provides for complete financial and operational transparency for investors, and a platform for sound decision making for the wider benefit of all stakeholders.
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 4 -
A K Beardshaw
Director
2 December 2024
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2024
- 5 -
The directors present their annual report and financial statements for the year ended 31 May 2024.
Principal activities
The principal activities of the company continue to be the manufacture and supply of nickel based super-alloys and special steels.
Results and dividends
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £3,919,218. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
R Wood
(Resigned 30 June 2023)
D M Pryce
D J Matthews
J Miller
(Resigned 5 July 2024)
M J Greensmith
N A Bury
(Appointed 1 July 2023)
Auditor
The auditor, BHP LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Energy and carbon report
2024
Energy consumption
kWh
Aggregate of energy consumption in the year
10,112,692
2024
Emissions of CO2 equivalent
metric tonnes
Scope 1 - direct emissions
- Gas combustion
1,508.93
1,508.93
Scope 2 - indirect emissions
- Electricity purchased
292.42
Scope 3 - other indirect emissions
- Fuel consumed for transport not owned by the company
20.24
Total gross emissions
1,821.59
Intensity ratio
Kg CO2e per £million turnover
26,020.56
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 6 -
Quantification and reporting methodology
The method used for the calculation of Greenhouse gas emissions (GHG) is the "UK Government GHG Conversion Factors for Company Reporting". This reporting document is suitable for UK-based organisations of all sizes for reporting on operations within the UK and is relevant to emissions reporting.
Intensity measurement
The chosen intensity measurement ratio is total gross emissions in kg CO2e per £M turnover.
Measures taken to improve energy efficiency
Special Quality Alloys Limited recognises that climate change is one of the most serious problems facing the planet and that all businesses are responsible, where possible, for reducing their greenhouse gas emissions and being as energy efficient as possible.
Special Quality Alloys Limited during the reporting period has aimed to improve its energy efficiency through several initiatives. These have included:
Solar Panels - The core aim was to offset the rising energy prices and the electrical demands of SQA. Subsequently, this has led to a reduction in carbon emissions as we are purchasing less electricity and exporting excess into the national grid. This became operational towards November 2023.
Company Vehicles - The company vehicles are starting to reach the end of their useful life resulting in high running costs and fuel usage. These vehicles are now starting to be replaced with more efficient vehicles with lower running costs and fuel usage.
Electric FLTs - During the reporting period, SQA have started to replace diesel forklift trucks with electric power ones to link with solar panel installation. This allows electricity generated to be used within our vehicles and reduces our need for diesel fuels.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
So far as the directors are aware, there is no relevant audit information of which the company's auditor are unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditors are aware of that information.
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 7 -
On behalf of the board
A K Beardshaw
Director
2 December 2024
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 8 -
Opinion
We have audited the financial statements of Special Quality Alloys Limited (the 'company') for the year ended 31 May 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity 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).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 May 2024 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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 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 company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our 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.
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED (CONTINUED)
- 9 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
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 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 company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
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 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 company through discussions with management, and from our commercial knowledge;
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 company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environments and health and safety legislation;
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.
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED (CONTINUED)
- 10 -
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;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
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 accounting estimates were indicative of potential bias;
investigated the rationale behind significant or unusual transactions; and
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;
enquiring of management as to actual and potential litigation and claims;
reviewing correspondence with HMRC
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.
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.
Lisa Leighton
Senior Statutory Auditor
For and on behalf of BHP LLP
2 December 2024
Chartered Accountants
Statutory Auditor
2 Rutland Park
Sheffield
S10 2PD
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2024
- 11 -
2024
2023
Notes
£
£
Turnover
3
69,862,446
60,131,222
Cost of sales
(47,918,692)
(34,815,868)
Gross profit
21,943,754
25,315,354
Distribution costs
(183,277)
(110,370)
Administrative expenses
(3,602,950)
(3,278,507)
Other operating income
16,000
Operating profit
4
18,173,527
21,926,477
Interest receivable and similar income
8
4,025,822
26,358
Interest payable and similar expenses
9
(11,471)
Profit before taxation
22,187,878
21,952,835
Tax on profit
10
(4,591,614)
(4,423,853)
Profit for the financial year
17,596,264
17,528,982
The profit and loss account has been prepared on the basis that all operations are continuing operations.
SPECIAL QUALITY ALLOYS LIMITED
BALANCE SHEET
AS AT 31 MAY 2024
31 May 2024
- 12 -
2024
2023
Notes
£
£
£
£
Fixed assets
Tangible assets
12
3,756,750
3,870,791
Investments
13
1,097,866
1,097,866
4,854,616
4,968,657
Current assets
Stocks
15
29,257,865
23,467,429
Debtors
16
29,864,250
23,734,340
Cash at bank and in hand
10,945,121
5,131,952
70,067,236
52,333,721
Creditors: amounts falling due within one year
17
(14,243,899)
(10,312,788)
Net current assets
55,823,337
42,020,933
Total assets less current liabilities
60,677,953
46,989,590
Provisions for liabilities
Provisions
18
662,017
688,700
Deferred tax liability
19
647,000
609,000
(1,309,017)
(1,297,700)
Net assets
59,368,936
45,691,890
Capital and reserves
Called up share capital
21
100,000
100,000
Profit and loss reserves
59,268,936
45,591,890
Total equity
59,368,936
45,691,890
The financial statements were approved by the board of directors and authorised for issue on 2 December 2024 and are signed on its behalf by:
A K Beardshaw
Director
Company registration number 01985443 (England and Wales)
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2024
- 13 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 June 2022
100,000
31,062,908
31,162,908
Year ended 31 May 2023:
Profit and total comprehensive income
-
17,528,982
17,528,982
Dividends
11
-
(3,000,000)
(3,000,000)
Balance at 31 May 2023
100,000
45,591,890
45,691,890
Year ended 31 May 2024:
Profit and total comprehensive income
-
17,596,264
17,596,264
Dividends
11
-
(3,919,218)
(3,919,218)
Balance at 31 May 2024
100,000
59,268,936
59,368,936
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
- 14 -
1
Accounting policies
Company information
Special Quality Alloys Limited is a private company limited by shares incorporated in England and Wales. The registered office is Bacon Lane, Sheffield, S9 3NH.
1.1
Accounting convention
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. The principal accounting policies adopted are set out below.
This 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:
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: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;
Section 26 ‘Share based Payment’: Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
Special Quality Alloys Limited is a wholly owned subsidiary of Special Steel Co. Limited and the results of Special Quality Alloys Limited are included in the consolidated financial statements of Special Steel Co. Limited which are available from Bacon Lane, Sheffield, S9 3NH.
1.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company 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.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
1
Accounting policies
(Continued)
- 15 -
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Land and buildings Leasehold
Over term of lease
Plant and machinery
10% or 20% straight line
Fixtures, fittings & equipment
20% straight line
Computer equipment
20% straight line
Motor vehicles
25% straight line
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 credited or charged to profit or loss.
1.5
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.6
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible 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).
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.8
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
1
Accounting policies
(Continued)
- 16 -
1.9
Financial instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
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
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.
Impairment of financial assets
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.
Derecognition of financial assets
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, 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.
Classification of financial liabilities
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 company after deducting all of its liabilities.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
1
Accounting policies
(Continued)
- 17 -
Basic financial liabilities
Basic financial liabilities, including creditors and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.10
Equity instruments
Equity instruments issued by the company 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 company.
1.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred taxation is provided at appropriate rates on all timing differences using the liability method.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
1
Accounting policies
(Continued)
- 18 -
1.12
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
1.13
Employee benefits
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.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15
Leases
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 leases asset are consumed.
1.16
Government grants
Grants are credited to deferred revenue. Grants towards capital expenditure are released to the profit and loss account over the expected useful life of the assets. Grants towards revenue expenditure are released to the profit and loss account as the related expenditure is incurred.
1.17
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.
2
Judgements and key sources of estimation uncertainty
In the application of the company’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.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 19 -
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2024
2023
£
£
Turnover analysed by geographical market
United Kingdom
31,043,000
32,979,396
Other markets
38,819,446
27,151,826
69,862,446
60,131,222
2024
2023
£
£
Other revenue
Interest income
106,604
26,358
Dividends received
3,919,218
-
Grants received
16,000
-
No further geographical split of sales is presented as in the opinion of the directors this would be prejudicial to the interests of the entity.
4
Operating profit
2024
2023
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(918,684)
(1,058,555)
Government grants
(16,000)
-
Depreciation of owned tangible fixed assets
835,941
776,544
Profit on disposal of tangible fixed assets
(57,738)
(9,185)
Operating lease charges
106,000
106,000
5
Auditor's remuneration
2024
2023
Fees payable to the company's auditor:
£
£
For audit services
Audit of the financial statements of the company
18,305
14,500
For other services
Taxation compliance services
2,250
2,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 20 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2024
2023
Number
Number
Production
74
67
Admin
19
20
Directors
4
5
Total
97
92
Their aggregate remuneration comprised:
2024
2023
£
£
Wages and salaries
3,851,034
3,647,792
Social security costs
380,346
379,262
Pension costs
196,903
162,563
4,428,283
4,189,617
7
Directors' remuneration
2024
2023
£
£
Remuneration for qualifying services
347,647
437,554
Company pension contributions to defined contribution schemes
59,411
46,310
407,058
483,864
Remuneration disclosed above include the following amounts paid to the highest paid director:
2024
2023
£
£
Remuneration for qualifying services
97,645
90,172
Company pension contributions to defined contribution schemes
39,853
15,425
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 21 -
8
Interest receivable and similar income
2024
2023
£
£
Interest income
Interest on bank deposits
106,604
26,358
Income from fixed asset investments
Income from shares in group undertakings
3,919,218
Total income
4,025,822
26,358
9
Interest payable and similar expenses
2024
2023
£
£
Other interest
11,471
10
Taxation
2024
2023
£
£
Current tax
UK corporation tax on profits for the current period
3,950,037
3,871,197
Adjustments in respect of prior periods
4,916
Group tax relief
603,577
463,740
Total current tax
4,553,614
4,339,853
Deferred tax
Origination and reversal of timing differences
38,000
84,000
Total tax charge
4,591,614
4,423,853
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
10
Taxation
(Continued)
- 22 -
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:
2024
2023
£
£
Profit before taxation
22,187,878
21,952,835
Expected tax charge based on the standard rate of corporation tax in the UK of 25.00% (2023: 20.00%)
5,546,970
4,390,567
Tax effect of expenses that are not deductible in determining taxable profit
615
279
Adjustments in respect of prior years
4,916
Effect of change in corporation tax rate
17,188
Fixed asset differences
24,316
9,880
Deferred tax not recognised
(483)
1,023
Group income
(979,804)
Taxation charge for the year
4,591,614
4,423,853
11
Dividends
2024
2023
£
£
Final paid
3,919,218
3,000,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 23 -
12
Tangible fixed assets
Land and buildings Leasehold
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 June 2023
1,305,147
7,106,161
468,907
360,275
559,259
9,799,749
Additions
35,026
517,642
24,219
21,802
202,009
800,698
Disposals
(95,018)
(159,166)
(254,184)
At 31 May 2024
1,340,173
7,528,785
493,126
382,077
602,102
10,346,263
Depreciation and impairment
At 1 June 2023
893,183
4,007,082
382,972
337,661
308,060
5,928,958
Depreciation charged in the year
117,854
559,757
40,197
8,955
109,178
835,941
Eliminated in respect of disposals
(16,220)
(159,166)
(175,386)
At 31 May 2024
1,011,037
4,550,619
423,169
346,616
258,072
6,589,513
Carrying amount
At 31 May 2024
329,136
2,978,166
69,957
35,461
344,030
3,756,750
At 31 May 2023
411,964
3,099,079
85,935
22,614
251,199
3,870,791
13
Fixed asset investments
2024
2023
Notes
£
£
Investments in subsidiaries
14
1,097,866
1,097,866
14
Subsidiaries
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Special Quality Alloys Inc
United States of America
Ordinary
100.00
15
Stocks
2024
2023
£
£
Finished goods and goods for resale
29,257,865
23,467,429
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 24 -
16
Debtors
2024
2023
Amounts falling due within one year:
£
£
Trade debtors
16,234,618
15,430,607
Corporation tax recoverable
41,068
129,411
Amounts owed by group undertakings
13,408,701
7,724,926
Prepayments and accrued income
179,863
449,396
29,864,250
23,734,340
Amounts owed by group undertaking are unsecured, interest free and repayable on demand.
17
Creditors: amounts falling due within one year
2024
2023
£
£
Trade creditors
12,542,224
7,816,803
Amounts owed to group undertakings
325,251
629,319
Taxation and social security
364,990
775,964
Other creditors
490
330
Accruals and deferred income
1,010,944
1,090,372
14,243,899
10,312,788
Amounts owed to group undertakings are unsecured, interest free and repayable on demand.
18
Provisions for liabilities
2024
2023
Notes
£
£
Other liabilities
662,017
688,700
Deferred tax liabilities
19
647,000
609,000
1,309,017
1,297,700
Movement on provisions apart from retirement benefits and deferred tax liabilities:
Other liabilities
£
At 1 June 2023
688,700
Utilisation of provision
(26,683)
At 31 May 2024
662,017
The other provision relates to customer credit provisions.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 25 -
19
Deferred taxation
Deferred tax assets and liabilities are offset where the 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:
Liabilities
Liabilities
2024
2023
Balances:
£
£
ACAs
647,000
609,000
2024
Movements in the year:
£
Liability at 1 June 2023
609,000
Charge to profit or loss
38,000
Liability at 31 May 2024
647,000
20
Retirement benefit schemes
2024
2023
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
196,903
162,563
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
21
Share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
100,000
100,000
100,000
100,000
22
Capital commitments
Amounts contracted for but not provided in the financial statements:
2024
2023
£
£
Acquisition of tangible fixed assets
-
35,026
23
Related party transactions
At the year end, the company was a wholly owned subsidiary of Special Steel Co. Limited and has taken advantage of the exemption conferred by paragraph 33.1A of FRS 102 not to disclose transactions with Special Steel Co. Limited or other wholly owned subsidiaries within the group.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2024
- 26 -
24
Ultimate controlling party
The immediate and ultimate parent undertaking and controlling party is Special Steel Co Limited, which prepares group financial statements.
The registered office of Special Steel Co Limited is Bacon Lane, Sheffield, South Yorkshire, S9 3NH.
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