REGISTERED NUMBER: |
Strategic Report, Report of the Directors and |
Audited Financial Statements |
for the Year Ended 31 March 2024 |
for |
Orkney Ferries Limited |
REGISTERED NUMBER: |
Strategic Report, Report of the Directors and |
Audited Financial Statements |
for the Year Ended 31 March 2024 |
for |
Orkney Ferries Limited |
Orkney Ferries Limited (Registered number: SC036770) |
Contents of the Financial Statements |
for the Year Ended 31 March 2024 |
Page |
Company Information | 1 |
Strategic Report | 2 |
Report of the Directors | 5 |
Report of the Independent Auditors | 7 |
Income Statement | 11 |
Other Comprehensive Income | 12 |
Statement of Financial Position | 13 |
Statement of Changes in Equity | 14 |
Statement of Cash Flows | 15 |
Notes to the Statement of Cash Flows | 16 |
Notes to the Financial Statements | 17 |
Orkney Ferries Limited |
Company Information |
for the Year Ended 31 March 2024 |
DIRECTORS: |
REGISTERED OFFICE: |
REGISTERED NUMBER: |
AUDITORS: |
Chartered Accountants and Registered Auditors |
1-3 East Road |
Kirkwall |
Orkney |
KW15 1HZ |
BANKERS: |
1 Victoria Street |
Kirkwall |
Orkney |
KW15 1DP |
Orkney Ferries Limited (Registered number: SC036770) |
Strategic Report |
for the Year Ended 31 March 2024 |
The Company operates lifeline ferry services under a Service Level Agreement with Orkney Islands Council. The islands served are: |
The outer north isles of North Ronaldsay, Papa Westray, Westray, Eday, Sanday, and Stronsay |
The inner north isles of Shapinsay, Rousay, Egilsay and Wyre. |
The south isles of Hoy, Flotta and Graemsay. |
Orkney Ferries Limited (Registered number: SC036770) |
Strategic Report |
for the Year Ended 31 March 2024 |
REVIEW OF BUSINESS |
During 2023/24 the Board approved the introduction of a seven day customer facing service and a new shoreside structure. This saw the shore support being split into 4 distinct areas - Marine Superintendents, Administration Support, Finance Service and Customer Service. During this financial year the Finance Service and the Marine Superintendents has been fully integrated. The Customer Service and Administration Support is still being recruited to, with the Supervisors all starting in May 2024 and looking to implement the seven day customer facing service in June 2024. |
The company had some technical and operational challenges throughout the year including bow thruster issues on both the Earl Sigurd and Earl Thorfinn which at one point saw the company down to one outer north isles vessel. Due to the age of our fleet maintenance remains one of the most challenging aspects of operating the lifeline services, with long delivery lead times for the supply of some parts, many of which must be manufactured on an ad hoc bespoke basis. While we are now actively planning the stocking and the supply of such parts in advance of the end of their operational lifespan to increase the resilience of our operation, It remains difficult to plan for every eventuality and the risk of more frequent breakdowns will increase as the vessels age advances. |
As a result of the above and high incidence of weather disruptions, especially in the months of December and January and other technical/operational related disruptions, there were 741 individual sailings affected and 69 additional sailings. The age of the fleet is such that each year the fleet requires more Marine and Technical Superintendent resource to ensure that the vessels are maintained and fit for purpose to deliver the timetabled service. |
MV Golden Mariana that operated the Westray to Papa Westray Service was sold in February 2024 and a procurement exercise commenced to source an additional small ferry for the fleet. The MV Nordic Sea was deployed on the outer north isles route to help relieve capacity pressures during the refit period in January and February. This was a welcomed additional service to the outer north isles residents and the Nordic Sea continues to cover the Graemsay during refit time also with further additional sailings planned for next financial year. |
In July 2023 Orkney Ferries entered into a contract to implement a new booking system. During this financial year there has been a lot of background work taking place building up the system. Work is progressing and a go live date is expected during summer 2024 for online and office bookings and then in autumn 2024 for on board bookings. |
The fare structure did not increase during 2023/24 as per the policy agreed in February 2022 that ferry fares on services operated by Orkney Ferries Limited be increased annually in line with the fare uprating assumptions applied on Transport Scotland's supported ferry services. |
There has been an increase in total income of £201K to £2,869K. Freight and Fares income was £2,619K and has increased by £158K (6.4%) compared to the previous year and was £216K (9%) ahead of budget. Stewards Catering generated an income of £146K compared to the £112K income the previous year. Charter income increased by £9K (21%) to £53K compared to the previous year, overall income was 10.27% above budget. |
The Company faced significant costs in relation to ships refit and repair costs, which at £4,541K was £1,325K (41.2%) higher than the previous year and £737K (19.36%) above budget, the challenges of keeping an aging fleet in service have already been noted and lead times for supply of spares is increasing. |
Additionally, the increase in energy costs and cost of living generally, has increased the costs of shore power and catering. |
Administration costs were 40.5% higher than the previous year, due mainly to pay awards and IT software costs for the new booking system project but was £305K (12.14%) under budget. |
Orkney Ferries Limited (Registered number: SC036770) |
Strategic Report |
for the Year Ended 31 March 2024 |
The subsidy from the Scottish Government Fairer Ferries Funding for 2023/24 was originally advised at £13,402M, however on 16th August 2023 the Scottish Government confirmed that Orkney Islands Council would be awarded a grant of £15,829M for 2023/24, this was an increase of £2,427M. |
On 11 September 2023 Orkney Ferries Ltd were successful in The Zero Emission Vessel and Infrastructure (ZEVI) competition. This project funded by the Department of Transport and Innovate UK is to fund 100% battery electric vessels. The Grant Offer Letter was signed in November 2023 and the project is now underway with the 12m vessel due to arrive in Orkney in August 2024 and the 24m vessel to follow in Spring 2025. |
The Company notes that for the year ahead, trading conditions will continue to be challenging, given the age and condition of the vessels and that there has been no increase in the funding settlement, with the Scottish Government confirming that a flat cash award will apply and that Orkney Islands Council will be awarded a specific grant of £15,829M for 2024/25. The Company recognises that there are ever increasing risks to the reliability and operating efficiency of the service as the age of the fleet of vessels operated increases further. |
A ferries taskforce has been established between Scottish Government and Orkney Islands Council that will work jointly on proposals to support the Council's consideration of options for the long-term renewal of the Orkney internal ferry fleet. The taskforce will consider potential funding models and the funding sources available as well as the business case for replacement. |
PRINCIPAL RISKS AND UNCERTAINTIES |
Due to the age of our fleet maintenance remains one of the most challenging aspects of operating the lifeline services, with long delivery lead times for the supply of some parts, many of which must be manufactured on an ad hoc bespoke basis. While we are now actively planning the stocking and the supply of such parts in advance of the end of their operational lifespan to increase the resilience of our operation, It remains difficult to plan for every eventuality and the risk of more frequent breakdowns will increase as the vessels age advances. |
The high incidence of weather and other technical/operational related disruptions can lead to sailings being affected. The age of the fleet is such that each year the fleet requires more Marine and Technical Superintendent resource to ensure that the vessels are maintained and fit for purpose to deliver the timetabled service. |
Fuel and Energy, major costs to our business, are influenced by demand, supply and costs volatillity which can have a significant impact on the operating costs of the company. |
ON BEHALF OF THE BOARD: |
Orkney Ferries Limited (Registered number: SC036770) |
Report of the Directors |
for the Year Ended 31 March 2024 |
The directors present their report with the financial statements of the company for the year ended 31 March 2024. |
PRINCIPAL ACTIVITY |
The principal activity of the company in the year under review was that of the provision of sea transport to the North and South Isles of Orkney. |
DIVIDENDS |
No dividends will be distributed for the year ended 31 March 2024. |
EVENTS SINCE THE END OF THE YEAR |
Information relating to events since the end of the year is given in the notes to the financial statements. |
DIRECTORS |
The directors shown below have held office during the whole of the period from 1 April 2023 to the date of this report. |
STATEMENT OF DIRECTORS' RESPONSIBILITIES |
The directors are responsible for preparing the Strategic Report, the Report of the Directors 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), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 AS TO DISCLOSURE OF INFORMATION TO AUDITORS |
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information. |
Orkney Ferries Limited (Registered number: SC036770) |
Report of the Directors |
for the Year Ended 31 March 2024 |
AUDITORS |
The auditors, Orcadia, will be proposed for re-appointment at the forthcoming Annual General Meeting. |
ON BEHALF OF THE BOARD: |
Report of the Independent Auditors to the Members of |
Orkney Ferries Limited |
Opinion |
We have audited the financial statements of Orkney Ferries Limited (the 'company') for the year ended 31 March 2024 which comprise the Income Statement, Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Notes to the Statement of Cash Flows, Notes to the Financial Statements, including a summary of 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 March 2024 and of its loss 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. |
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 Auditors' 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. |
Other information |
The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon. |
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. |
In connection with our audit of the financial statements, 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 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. |
Report of the Independent Auditors to the Members of |
Orkney Ferries Limited |
Opinions on other matters prescribed by the Companies Act 2006 |
In our opinion, based on the work undertaken in the course of the audit: |
- | the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and |
- | the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements. |
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 Report of the Directors. |
We have nothing to report in respect of the following matters where 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 directors' 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 Statement of Directors' Responsibilities set out on page five, 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 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. |
Report of the Independent Auditors to the Members of |
Orkney Ferries Limited |
Auditors' 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 a Report of the Auditors 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. |
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: |
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. A summary of the procedures we designed and executed to detect irregularities, including fraud is set out below: |
In identifying and assessing risks of material misstatement in respect of irregularities including fraud and non-compliance with laws and regulations, we considered the following: |
- the nature of the industry and sector, control environment and business performance; |
- results of our enquiries of management about their own identification and assessment of the risks and irregularities; |
- any matters we identified having obtained and reviewed the company's documentation of their policies and procedures relating to: |
- identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; |
- detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; |
- the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. |
As a result of these procedures, we considered the opportunities and incentives that may exit in the organisation for fraud. |
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. |
We also obtained an understanding of the legal and regulatory frameworks that the society operates in, 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 key laws and regulations we considered in this context included the Companies Act 2006, UK tax legislation and FRS102. |
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty. These include the Maritime & Coastguard Agency regulations and employment legislation. |
In addition to the above, our procedures to respond to risks identified included the following: |
- performing analytical procedures to identify unusual or unexpected relationships that may indicate risks of material misstatement due to fraud and tested accordingly; |
Report of the Independent Auditors to the Members of |
Orkney Ferries Limited |
- reading minutes of those charged with governance and reviewing correspondence with regulatory bodies, such as HMRC and the MCA, for indications of non-compliance with laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or avoid a material penalty.; |
- assessing whether the accounting policies, treatments and presentation adopted in the financial statements is in accordance with United Kingdom Generally Accepted Accounting Practice and whether there are instances of potential bias in areas with significant degrees of judgement; |
- in addressing the risk of fraud through management override of controls, testing the appropriateness of a sample of journal entries; |
- assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; |
- vouching balances and reconciling items in management's key control account reconciliations to supporting documentation as at 31 March 2024. |
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentation or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, or the greater the concealment of irregularities, including fraud, the less likely we are to become aware of it. |
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. |
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors. |
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 a Report of the Auditors 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. |
for and on behalf of |
Chartered Accountants and Registered Auditors |
1-3 East Road |
Kirkwall |
Orkney |
KW15 1HZ |
Orkney Ferries Limited (Registered number: SC036770) |
Income Statement |
for the Year Ended 31 March 2024 |
2023 | 2024 |
£ | £ | Notes | £ | £ |
TURNOVER |
Cost of sales |
( |
) | GROSS LOSS | ( |
) |
Distribution costs |
Administrative expenses |
1,565,840 | 2,201,497 |
(14,316,871 | ) | (15,771,648 | ) |
Other operating income |
( |
) | OPERATING LOSS | 4 | ( |
) |
Interest receivable and similar income |
(901,883 | ) | (54,845 | ) |
Interest payable and similar expenses | 6 | ( |
) |
( |
) | LOSS BEFORE TAXATION | ( |
) |
Tax on loss | 7 |
( |
) | LOSS FOR THE FINANCIAL YEAR | ( |
) |
Orkney Ferries Limited (Registered number: SC036770) |
Other Comprehensive Income |
for the Year Ended 31 March 2024 |
2023 | 2024 |
£ | Notes | £ |
( |
) | LOSS FOR THE YEAR | ( |
) |
OTHER COMPREHENSIVE INCOME |
Pension Reserve |
Income tax relating to other comprehensive income |
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
Orkney Ferries Limited (Registered number: SC036770) |
Statement of Financial Position |
31 March 2024 |
2023 | 2024 |
£ | £ | Notes | £ | £ |
FIXED ASSETS |
Tangible assets | 8 |
CURRENT ASSETS |
Stocks | 9 |
Debtors | 10 |
Cash at bank and in hand |
CREDITORS |
Amounts falling due within one year | 11 |
( |
) | NET CURRENT ASSETS/(LIABILITIES) |
( |
) | TOTAL ASSETS LESS CURRENT LIABILITIES |
( |
) | PROVISIONS FOR LIABILITIES | 12 | ( |
) |
ACCRUALS AND DEFERRED INCOME | 13 | ( |
) |
PENSION ASSET | 16 |
NET ASSETS |
CAPITAL AND RESERVES |
Called up share capital | 14 |
Other reserves | 15 |
Pension Reserve | 15 |
( |
) | Retained earnings | 15 | ( |
) |
SHAREHOLDERS' FUNDS |
The financial statements were approved by the Board of Directors and authorised for issue on |
Orkney Ferries Limited (Registered number: SC036770) |
Statement of Changes in Equity |
for the Year Ended 31 March 2024 |
Called up |
share | Retained | Other | Pension | Total |
capital | earnings | reserves | Reserve | equity |
£ | £ | £ | £ | £ |
Balance at 1 April 2022 | ( |
) | ( |
) | ( |
) |
Changes in equity |
Total comprehensive income | - | ( |
) |
Balance at 31 March 2023 | ( |
) |
Changes in equity |
Total comprehensive income | - | ( |
) |
Balance at 31 March 2024 | ( |
) |
Orkney Ferries Limited (Registered number: SC036770) |
Statement of Cash Flows |
for the Year Ended 31 March 2024 |
2023 | 2024 |
£ | Notes | £ |
Cash flows from operating activities |
( |
) | Cash generated from operations | 1 | ( |
) |
- | Finance costs paid | 11,363 |
( |
) | Net cash from operating activities | ( |
) |
Cash flows from investing activities |
( |
) | Purchase of tangible fixed assets | ( |
) |
Sale of tangible fixed assets |
Interest received |
( |
) | Net cash from investing activities | ( |
) |
( |
) | Decrease in cash and cash equivalents | ( |
) |
2,464,664 | Cash and cash equivalents at beginning of year |
2 |
1,044,975 | Cash and cash equivalents at end of year |
2 |
820,892 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Statement of Cash Flows |
for the Year Ended 31 March 2024 |
1. | RECONCILIATION OF LOSS BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS |
2024 | 2023 |
£ | £ |
Loss before taxation | ( |
) | ( |
) |
Depreciation charges |
Profit on disposal of fixed assets | ( |
) | ( |
) |
Government grants |
Finance costs | (11,363 | ) | - |
Finance income | (33,136 | ) | (12,988 | ) |
7,435,372 | (906,813 | ) |
(Increase)/decrease in stocks | ( |
) |
(Increase)/decrease in trade and other debtors | ( |
) |
Increase/(decrease) in trade and other creditors | ( |
) |
Cash generated from operations | ( |
) | ( |
) |
2. | CASH AND CASH EQUIVALENTS |
The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts: |
Year ended 31 March 2024 |
31.3.24 | 1.4.23 |
£ | £ |
Cash and cash equivalents | 820,892 | 1,044,975 |
Year ended 31 March 2023 |
31.3.23 | 1.4.22 |
£ | £ |
Cash and cash equivalents | 1,044,975 | 2,464,664 |
3. | ANALYSIS OF CHANGES IN NET FUNDS |
At 1.4.23 | Cash flow | At 31.3.24 |
£ | £ | £ |
Net cash |
Cash at bank and in hand | 1,044,975 | (224,083 | ) | 820,892 |
1,044,975 | ( |
) | 820,892 |
Total | 1,044,975 | (224,083 | ) | 820,892 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements |
for the Year Ended 31 March 2024 |
1. | STATUTORY INFORMATION |
Orkney Ferries Limited is a |
2. | ACCOUNTING POLICIES |
Basis of preparing the financial statements |
Turnover |
Turnover represents amounts receivable for the operation of passenger and freight ferry services, excluding value added tax, with income being recognised at the point of departure. |
Tangible fixed assets |
Plant and machinery | - |
Fixtures and fittings | - |
Stocks |
Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
2. | ACCOUNTING POLICIES - continued |
Financial instruments |
The company has elected to apply the provisions of Section 11 'Basic Financial Instruments' 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 future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised. |
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. |
Basic financial liabilities |
Basic financial liabilities, including creditors re 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. |
Taxation |
Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. |
Current or deferred taxation assets and liabilities are not discounted. |
Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
2. | ACCOUNTING POLICIES - continued |
Deferred tax |
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date. |
Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference. |
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. |
Hire purchase and leasing commitments |
Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease. |
Pension costs and other post-retirement benefits |
The company employees are eligible to join a defined benefit local government pension scheme. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependent upon several factors including age, length of service and remuneration. The liability recognised in the balance sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the reporting date less the fair value of the plan assets at the reporting date. The defined benefit obligation is calculated using the projected unit credit method. Annually the company engages independent actuaries to calculate the obligation. The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds that are denominated in sterling and that have terms approximating the estimated period of the future payments (‘discount rate’). The fair value of plan assets is measured in accordance with the FRS 102 fair value hierarchy and in accordance with the group’s policy for similarly held assets. This includes the use of appropriate valuation techniques. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensive income. These amounts together with the return on plan assets, less amounts included in net interest, are disclosed as ‘remeasurement of net defined benefit liability’. The cost of the defined benefit plan, recognised in profit or loss as employee costs, except where included in the cost of an asset, comprises: |
• The increase in pension benefit liability arising from employee service during the period. |
• The cost of plan introductions, benefit changes, curtailments and settlements |
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit |
obligation and the fair value of plan assets. This cost is recognised in profit or loss as ‘finance expense’. |
Payments in respect of other post-retirement benefits are charged to profit or loss in the period to which they relate. |
Government grants |
Government grants received are treated as deferred credits and credited to the profit and loss account over the estimated useful life of the relevant fixed assets. Other grants of a revenue nature are credited to the profit and loss account in the year to which they relate. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
2. | ACCOUNTING POLICIES - continued |
Other operating income |
Other operating income represents grant income received from Orkney Islands Council under the Service Level Agreement for the operation of the lifeline ferry services. The grant is the deficit that the Council estimates that the Company is likely to incur in providing the ferry services during the year. |
Going concern |
These financial statements have been prepared on a going concern basis. |
The company receives funding from Orkney Islands Council under a service level agreement to provide the lifeline ferry services for the North and South Isles of Orkney. The directors consider that the company will be able to continue to operate with the available funding over the next twelve months. On this basis, the directors consider it appropriate to prepare the financial statements on the going concern basis. The financial statements do not include any adjustments that would result from the withdrawal of funding from Orkney Islands Council. |
3. | EMPLOYEES AND DIRECTORS |
2024 | 2023 |
£ | £ |
Wages and salaries |
Other pension costs |
The average number of employees during the year was as follows: |
2024 | 2023 |
Ships Crew | 173 | 162 |
Office Staff | 23 | 19 |
Pier Staff | 6 | 6 |
4. | OPERATING LOSS |
Subsidy income received from Orkney Islands Council under a service level agreement for the operation of lifeline ferry services for the North and South Isles of Orkney. |
2024 | 2023 |
£ | £ |
Other Operating Income | 15,683,667 | 13,402,00 0 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
5. | AUDITORS' REMUNERATION |
2024 | 2023 |
£ | £ |
Fees payable to the company's auditors for the audit of the company's financial statements |
7,500 |
7,880 |
6. | INTEREST PAYABLE AND SIMILAR EXPENSES |
2024 | 2023 |
£ | £ |
Amortisation of Deferred |
Government Grants | ( |
) |
( |
) |
7. | TAXATION |
Analysis of the tax charge |
No liability to UK corporation tax arose for the year ended 31 March 2024 nor for the year ended 31 March 2023. |
Tax effects relating to effects of other comprehensive income |
2024 |
Gross | Tax | Net |
£ | £ | £ |
Pension Reserve | - | 951,000 |
2023 |
Gross | Tax | Net |
£ | £ | £ |
Pension Reserve | - | 7,765,000 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
8. | TANGIBLE FIXED ASSETS |
Fixtures |
Plant and | and | Motor | Computer |
Totals | machinery | fittings | vehicles | equipment |
£ | £ | £ | £ | £ |
COST |
At 1 April 2023 |
Additions |
Disposals | ( |
) | ( |
) |
At 31 March 2024 |
DEPRECIATION |
At 1 April 2023 |
Charge for year |
Charge written back | (350 | ) | - | (350 | ) | - | - |
At 31 March 2024 |
NET BOOK VALUE |
At 31 March 2024 |
At 31 March 2023 |
9. | STOCKS |
2024 | 2023 |
£ | £ |
Stocks |
10. | DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
2024 | 2023 |
£ | £ |
Trade debtors |
Other debtors |
VAT |
Prepayments |
11. | CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
2024 | 2023 |
£ | £ |
Trade creditors |
Other creditors |
Balance of Grant due to OIC | 836,081 | 836,081 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
12. | PROVISIONS FOR LIABILITIES |
2024 | 2023 |
£ | £ |
Other provisions |
Provision - Engine Replacement | 500,000 | 500,000 |
13. | ACCRUALS AND DEFERRED INCOME |
2024 | 2023 |
£ | £ |
Deferred government grants | 7,507,110 | - |
14. | CALLED UP SHARE CAPITAL |
Allotted, issued and fully paid: |
Number: | Class: | Nominal | 2024 | 2023 |
value: | £ | £ |
Ordinary | £1 | 7,500,000 | 7,500,000 |
15. | RESERVES |
Retained | Other | Pension |
Totals | earnings | reserves | Reserve |
£ | £ | £ | £ |
At 1 April 2023 | (1,017,734 | ) | ( |
) |
Deficit for the year | ( |
) | ( |
) | - | - |
Pension Reserve | 951,000 | - | - | 951,000 |
At 31 March 2024 | (110,216 | ) | ( |
) |
In a departure from the provisions of FRS 102, a separate Pension Reserve has been disclosed to show the cumulative amount of the Pension Asset/(Liability) for presentation purposes. This element of the profit and loss account is not realised and not available for distribution. |
16. | EMPLOYEE BENEFIT OBLIGATIONS |
The company's employees are eligible to join a Local Government pension scheme, which is a defined benefit statutory scheme. The most recent full actuarial valuation was on 31 March 2023 and was carried out by a qualified independent actuary. Contributions to the scheme are determined by the actuary on the basis of triennial valuations. The estimated Employer's contributions for the year to 31 March 2025 will be approximately £698,000. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
16. | EMPLOYEE BENEFIT OBLIGATIONS - continued |
The amounts recognised in profit or loss are as follows: |
Defined benefit |
pension plans |
2024 | 2023 |
£ | £ |
Current service cost |
Net interest from net defined benefit asset/liability |
(359,000 |
) |
19,000 |
Past service cost |
697,000 | 1,971,000 |
Actual return on plan assets |
Changes in the present value of the defined benefit obligation are as follows: |
Defined benefit |
pension plans |
2024 | 2023 |
£ | £ |
Opening defined benefit obligation |
Current service cost |
Contributions by scheme participants |
Interest cost |
Benefits paid | ( |
) | ( |
) |
Remeasurements: |
Actuarial (gains)/losses from changes in demographic assumptions |
61,000 |
(267,000 |
) |
Actuarial (gains)/losses from changes in financial assumptions |
(1,412,000 |
) |
(13,009,000 |
) |
Other Experience Remeasurement | 1,970,000 | 1,475,000 |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
16. | EMPLOYEE BENEFIT OBLIGATIONS - continued |
Changes in the fair value of scheme assets are as follows: |
Defined benefit |
pension plans |
2024 | 2023 |
£ | £ |
Opening fair value of scheme assets |
Contributions by employer |
Contributions by scheme participants |
Interest Income | 1,312,000 | 796,000 |
Benefits paid | (566,000 | ) | (335,000 | ) |
Return on plan assets (excluding interest income) |
1,470,000 |
(2,779,000 |
) |
The amounts recognised in other comprehensive income are as follows: |
Defined benefit |
pension plans |
2024 | 2023 |
£ | £ |
Actuarial (gains)/losses from changes in demographic assumptions |
(61,000 |
) |
267,000 |
Actuarial (gains)/losses from changes in financial assumptions |
1,412,000 |
13,009,000 |
Other Experience Remeasurement | (1,970,000 | ) | (1,475,000 | ) |
Return on plan assets (excluding interest income) |
1,470,000 |
(2,779,000 |
) |
851,000 | 9,022,000 |
The major categories of scheme assets as a percentage of total scheme assets are as follows: |
Defined benefit |
pension plans |
2024 | 2023 |
Equities | 84% | 87% |
Bonds | 6% | 7% |
Property | 8% | 5% |
Cash | 2% | 1% |
100% | 100% |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
16. | EMPLOYEE BENEFIT OBLIGATIONS - continued |
Principal actuarial assumptions at the balance sheet date (expressed as weighted averages): |
2024 | 2023 |
Discount rate |
Future salary increases |
Future pension increases |
Mortality Assumptions | 2024 | 2023 |
Assumed life expectations on retirement at age 65: | Years | Years |
Retiring today |
- Males | 20.2 | 20.9 |
- Females | 22.8 | 23.4 |
Retiring in 20 years |
- Males | 22.4 | 22.5 |
- Females | 25.9 | 25.6 |
Merchant Navy Ratings Pension Fund (MNRPF) |
Some employees may qualify to contribute to the MNRPF, a defined benefit scheme, with a contribution rate of 2.0%. It is a multiple employer scheme and the company is unable to identify its share of the underlying assets and liabilities. As at the last valuation in March 2023, the MNRPF had a deficit of £106.9M, and this has been updated on 10 June 2024 to a deficit of £24m. The Trustees of the fund have requested additional deficit contributions to be made. |
Merchant Navy Officers Pension Fund (MNOPF) |
The MNOPF is closed to new members and closed to future accrual from 31 March 2016 when contributing members were transferred to the Ensign Retirement Plan (for the MNOPF). The MNOPF is a multiple employer scheme and the Council is unable to identify its share of the underlying assets and liabilities. As at the last full valuation in 2021 the Fund had a surplus of £61M, and the actuarial report at 31 March 2023 has updated this to a deficit of £10M. As there were sufficient assets at 31 March 2021 to cover the Fund's technical provisions at 31 March 2021, no further deficit contributions were agreed. |
17. | CONTINGENT LIABILITIES |
On 11 September 2023 Orkney Ferries Ltd were successful in The Zero Emission Vessel and Infrastructure (ZEVI) competition. This project funded by the Department of Transport and Innovate UK is to fund 100% battery electric vessels. The Grant Offer Letter was signed in November 2023 and the project is now underway with the 12m vessel due to arrive in Orkney in August 2024 and the 24m vessel to follow in Spring 2025. |
Grant assistance of £7,373,140 has been received during the year ended 31 March 2024 from Innovate UK, with monitoring of the project set to continue until 31 March 2028. |
If the conditions of the grant funding are not met, Innovate UK may suspend, terminate or reclaim the grant in whole or in part. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
18. | CAPITAL COMMITMENTS |
2024 | 2023 |
£ | £ |
Contracted but not provided for in the |
financial statements |
On 11 September 2023 Orkney Ferries Ltd were successful in The Zero Emission Vessel and Infrastructure (ZEVI) competition. This project funded by the Department of Transport and Innovate UK is to fund 100% battery electric vessels. The Grant Offer Letter was signed in November 2023 and the project is now underway with the 12m vessel due to arrive in Orkney in August 2024 and the 24m vessel to follow in Spring 2025. |
19. | RELATED PARTY DISCLOSURES |
2024 | 2023 |
£ | £ |
Revenue Grants Receivable from Orkney Islands Council |
Purchases |
Capital Grants Receivable from Orkney Islands Council | 145,333 | - |
Amount due from related party |
Amount due to related party |
Orkney Islands Council is regarded by the directors as being the company's ultimate parent company. |
The ultimate parent organisation is Orkney Islands Council, a local authority incorporated under the Local Government Scotland Act 1973. |
20. | POST BALANCE SHEET EVENTS |
On 30 May 2024, the Company received a loan of £2,664,000 to assist with the investment in the Zero Emission Vessel and Infrastructure project, from Orkney Islands Council. Security for the loan to be granted once ownership of the vessel has been transferred to Orkney Ferries Limited. |
21. | ULTIMATE CONTROLLING PARTY |
The controlling party is Orkney Islands Council. |
The ultimate Controlling Party is Orkney Islands Council, a local authority incorporated under the Local Government Scotland Act 1973. |
Orkney Ferries Limited (Registered number: SC036770) |
Notes to the Financial Statements - continued |
for the Year Ended 31 March 2024 |
22. | SIGNIFICANT JUDGEMENTS AND ESTIMATION UNCERTAINTIES |
The financial statements contain estimated figures that are based on assumptions made by the company about the future that are otherwise uncertain. Estimates are made taking into account professional advice (e.g. actuarial advice), historical experience, current trends and other relevant information. Items included within the Company's Balance Sheet at 31 March 2024 for which there is a risk of material adjustment in the forthcoming year are as follows: |
Pension Asset |
The value of the pension assets at 31 March 2024 is £8.629M. This asset depends on a number of factors, including discount rates, changes in retirement age, mortality rates and expected return on pension's assets. These are determined on an actuarial basis by Hymans Robertson, the actuaries for the Orkney Islands Council Pension Fund. |
Provision - Engine Replacement |
The value of the provision for engine replacement at 31 March 2024 is £500k. This liability depends on a number of factors, including the age of the vessel, sourcing suitable replacements, extent of work involved, what needs to be changed and moved. The provision has been made following guidance from the Head of Marine Services at Orkney Islands Council. |