The director presents the strategic report for the year ended 27 July 2024.
The group trades as a contract catering group serving meals on a daily basis under long term fixed price or cost-plus management fee contracts. These are mainly serving the education sector (Primary and Secondary Schools in north of England).
The group’s management team has continued to work on improving quality and financial contribution from the core site portfolio, re-structing and re-negotiating longer term arrangements, and not renewing contracts that do not meet the financial and or operational criteria of the group.
Food inflation has stabilised over this financial year at around 2%, with food cost margin better controlled from last year, partly due to the impact of the group’s investment in procurement talent and IT and quality local supply chain, combined with a stable and experienced area manager and operations team.
Food and sundries inflation combined with annual wage review and NJC cost are mitigated through annual review of catering subsidies and or customer tariffs and free school meal allowances. The entitlement of households’ access to free school meal entitlement has increased post pandemic which has brought further importance to the services and nutrition provided by Mellors. Free school meals represent 49.3% of revenue increasing from 47.1% last year. Demographic swings of primary and secondary children is mixed dependant on geographical area, but overall in shallow decline.
In year national business cost pressures of volatile energy markets do not substantially impact the group as services are provided on third party premises.
The group started the year with 332 trading contracts and ended it with 318 contracts. Less contacts but of larger size, reflected in the group’s sales level of £43.5m. This shift in contract numbers demonstrates the group’s continued strategy to step away from poorly performing and small contracts and continue to trade and improve catering contracts that surpass or have the potential to meet minimum contribution levels.
Contract catering is a labour intense sector of the hospitality industry, with complex and high levels of pension arrangements. Group labour margin this year is 54.4%, a betterment from last year’s 54.7%. The number of employees at the start of the year was 1,751, increasing to 1,764 at this year-end. 94% of group employees are female.
Improved work practices of Mellors circa 60 mobile support staff and investment in IT, has enabled the closure of one satellite support office. This has enabled the focus of all group support resources under one roof, Mellors Support Office (Skelmersdale), delivering overhead saving and environmental improvements.
Effective management and healthy market conditions has delivered this year has seen the best performance of EBITA in the history of the group, catalysed by offering the highest level of food and service in the UK education sector, reflected in our client satisfaction rating and portfolio retention.
92% of the group’s business focussed in the education sector, the remained in commercial and business and industry catering contacts. This strategic balance of business ensures healthy payment terms and minimises bad debts. The management team have carried out effective work during the year making significant inroads into long term debts of historic / closed contacts.
Last year’s enhanced holiday pay legislation has now been revoked, and new employment terms are in place for newly employed catering staff.
Annual enhancements of national living wage / NJC pay reviews and forthcoming employer’s NI responsibilities – these are funded through the group’s annual review of catering subsidies and customer prices.
Throughout the business, staff have and continue to be regularly updated both on group progress and relevant measures to keep them safe whilst providing service in order to avoid accidents at work which is the risk that is always present in a working environment such as that found in the group’s contracts.
Although contract retention is good considering the group’s maturing site portfolio, new contact gains has proved stubborn in the year; a market in post pandemic consolidation combined with a new and under development sales team for Mellors. Both aspects are set to improve and proactively the group is expanding geographical operating area southwards.
Long serving director and chairman Mr. Klaas Timmerman passed away during the year. Founder and Managing Director Mr. Mark Timmerman has taken on his limited remit. CEO Tony Trainor has also flexed his responsibilities in support whilst initiating the engagement of Mr. Andrew Walker as Operation Director, a new post for the group.
Ms. Julie Leigh has been introduced to the group as Finance Director. Mr. James Tredwell (non-executive director) is thanked for providing quality support and financial advice over this transitional period.
The management team has continued to invest in and implement new HR, procurement and employee information software solutions. During this year Mellors has also sourced a new food, menu and allergen management IT system to be launched next financial year.
Accounting systems were reviewed in year. The group’s current IT provider (Access) has been chosen to partner with, developing improved bespoke IT software.
The group launched new on-site branding for both Primary schools and Secondary schools, a new strap line, management mantras and a new interactive website supporting clients, customers, suppliers and staff. Mellors “valued added team” is tasked with launching new branded food and menu innovations.
Between the close of the accounting period and the date of these accounts, the director and senior management team have continually reviewed the trading performance and the value of the assets shown in the Balance Sheet. In their post Balance Sheet review the director concluded that the attached accounts represent a true and fair view of the group’s financial position as represented by the Balance Sheet as at the accounts date and that the asset values have not been impaired.
It is important, especially as the group continues to be impacted by increased costs in its key production costs, that the group continues to improve the control of these day to day production costs and new working conditions, menus and customer offerings were introduced during the period under review and measured at each monthly management meeting.
The ongoing and current performance of the business by unit is measured at the end of every trading week and compared to budgets, prior year incorporating factors such as trading days, sales per unit per day and sales per employee hour.
The director are pleased to report that all these indicators are showing steady trading as at the date of signing these accounts.
During a period of continued difficult trading the group generate profits before tax of £996k comparable to the profits generated in the previous year £503k. This performance represents the ability of the group to trade profitably during ongoing challenging trading conditions.
On behalf of the board
The director presents his annual report and financial statements for the year ended 27 July 2024.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £166,230. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
In accordance with the company's articles, a resolution proposing that PM+M Solutions for Business LLP be reappointed as auditor of the group will be put at a General Meeting.
Mellors Catering Services provides quality bespoke long term catering services on third party premises; predominantly primary schools, secondary schools and colleges. Energy usage and waste management on these premises sits with-in the domain of our clients. Mellors has responsibility to use these resources effectively.
As a user of our clients’ energy and developer of on-site waste, we minimise our impact though staff training, menu planning and flexible year group meal portion, this reduces food waste which we target at 3.0%. Mellors also has effective management through procurement and use of food packaging and disposables, targeted at 2.0% and achieved this year 1.8%.
To reduce use of disposables further, in this financial year the group moved to near zero use of single use sandwich boxes as we switched all our food production to bagels and baguettes served in reduced bio-degradable sleeves. This single innovation has removed 483,000 sandwiches wedges (pa) from landfill.
Where all Mellors employees can influence the group’s environmental impact, there has been significant successes. For example, Mellors is working with Olio to redistribute surplus food to people in the community who need it, rather than it ending up in landfill. The initial trial with two Mellors education sites has proven positive. In the Autumn term 2024, the sites donated a level of food waste which has the positive effect of 417kg CO2 emissions.
In line with group strategy, all group cars are either hybrid or electric. This choice of vehicle aligns with the group’s environmental initiatives through ISO14001 accreditation. It also demonstrates a dedication to adopting eco-friendly solutions. Investing in hybrid and electric vehicles is a vital step towards achieving a greener future and minimising the group’s environmental impact and reduced our CO2 emissions.
The group encourages meetings via online meeting platforms as a priority (4 people maximum), car sharing & has reviewed site and area manager locations to minimise transportation. The average six month milage per driver has reduced by 15% to 8,605 miles per driver. Logistics mileage is minimized through 61% of our £22m of food purchased locally.
Improved work practices enabled the closer of our regional Sheffield office this fiscal year, relocating all resources centrally to Mellors Support Office (Skelmersdale). This promotes better communications and reduced energy use. Annual figure of 58,824 KWh which is on par with previous year, 13,825kg of CO2.
The group’s greatest opportunity for environmental protection is the education, habit forming and attitude nudging of the 125,000 young people we serve daily. We target on-site messages and promotions to influence Mellors customers approach to purchasing, food waste, waste segregation, life-style choices, method of transport to school etc
We have audited the financial statements of Mellors Consolidated Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 27 July 2024 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the director's report have been prepared in accordance with applicable legal requirements.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we have considered the following:
the nature of the industry and sector, control environment and business performance including the design of the Group's remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management about their own identification and assessment of the risks of irregularities;
the matters discussed among the audit engagement team including significant component audit teams and involving relevant specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud;
any matters we identified having obtained and reviewed the Group'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 internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: timing of recognition of commercial income, posting of unusual journals and complex transactions; and manipulating the Group's performance profit measures and other key performance indicators to meet remuneration targets and externally communicated targets. 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 Group 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 UK Companies Act, employment law, health and safety regulations, pensions legislation and tax legislation.
Audit response to risks identified
Our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
enquiring of management concerning actual and potential litigation and claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and
in addressing the identified risks of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; 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.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £17,150 (2023 - £37,304 loss).
Mellors Consolidated Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is West Lancs Technology Management Centre White Moss Business Park, Moss Lane View, Skelmersdale, United Kingdom, WN8 9TN
The group consists of Mellors Consolidated Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
A reclassification of £468,000 has been made between management charge income and wages & salaries for the prior period. This adjustment does not impact the reported profit.
The consolidated group financial statements consist of the financial statements of the parent company Mellors Consolidated Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 20 July 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue is recognised when services are delivered and the company has fulfilled its contractual obligation to the customer.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price. Financial liabilities classified as payable within one year are not amortised.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the application of the group’s accounting policies, the director is 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.
A source of estimation uncertainty is the bad debt provision but the directors have used their historical knowledge and customer payment terms to determine the provision. The directors do not believe there to be any other critical judgements or key sources of estimation uncertainty.
All turnover arose from the provision of catering services and within the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2023 - 1).
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:
From the 1 April 2023 the effective tax rate is 25%.
Details of the company's subsidiaries at 27 July 2024 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
An unknown amount of the deferred tax asset is expected to reverse in the 12 months following the end of the accounting period. This relates to unpaid pension contributions due to delays of pension scheme set up from councils out of the control of Mellors Catering Services Limited.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Contributions totalling £745,836 (2023: £709,137) were payable to the fund at the balance sheet date.
This relates to the application of merger accounting, with regards to previous acquisition of Mellors Catering Services.
The group has an unlimited guarantee with Double Dutch Hotels Limited, a related party, This guarantee is secured by a fixed and floating charge held by National Westminster Bank over all fixed and current assets of the company. The outstanding borrowings at year end was £3.5m.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
At the year end, amounts due to the group from entities related by common control, totalled £2,537,893 (2023: £1,050,171).
At the year end, amounts due from the group to entities related by common control, totalled £26,574 (2023: £17,143).
These loans are interest free and repayable on demand.