The director presents the strategic report for the year ended 17 July 2024.
The company trades as a contract catering company 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 company’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 company.
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 company’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 company as services are provided on third party premises.
The company started the year with 332 trading contracts and ended it with 318 contracts. Less contacts but of larger size, reflected in the company’s sales level of £43.5m. This shift in contract numbers demonstrates the company’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. Company 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 company 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 company 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 company, 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 company’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 company’s annual review of catering subsidies and customer prices.
Throughout the business, staff have and continue to be regularly updated both on company 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 company’s contracts.
Although contract retention is good considering the company’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 company 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 company.
Ms. Julie Leigh has been introduced to the company 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 company’s current IT provider (Access) has been chosen to partner with, developing improved bespoke IT software.
The company 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 company’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 company continues to be impacted by increased costs in its key production costs, that the company 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 company generate profits before tax of £1,116k comparable to the profits generated in the previous year £642k. This performance represents the ability of the company to trade profitably during ongoing challenging trading conditions.
The Director has paid a dividend to the holding company of £120k for the year.
As this is the second year as a Large Company the Director and Senior Management Team have had regard to their S172 responsibilities and how the company has to act differently and focussed on issues with the inclusion of all employees in the communication process.
As reported last year, the company implemented a new internet-based staff communication system, two way communication channels. This is provided highly successful with benefits to staff motivation and company culture. Short / long term sickness and staff absenteeism have all reduced, though cause and effect is hard to establish. Mellors newly improved website also bring additional communication channels for all.
At time of writing, Mellors has been shortlisted for 3 awards in the national contact catering sector annual event, the best performance in the company’s 30 year history. We look forward to sharing future successes with all our employees and 120,000 customers.
On behalf of the board
The director presents his annual report and financial statements for the year ended 17 July 2024.
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £120,000. The director does not recommend payment of a final dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The auditor, PM+M Solutions for Business LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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 company 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 company’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 company strategy, all company cars are either hybrid or electric. This choice of vehicle aligns with the company’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 company’s environmental impact and reduced our CO2 emissions.
The company 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 company’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.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The director is 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. He is 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.
We have audited the financial statements of Mellors Catering Services Limited (the 'company') for the year ended 17 July 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).
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 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 Company'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 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 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 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 Company'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 Company 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, pensions legislation and tax legislation.
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 member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Mellors Catering Services Limited is a private company limited by shares incorporated in England and Wales. The registered office is West Lancs Technology Management Centre, White Moss Business Park, Moss Lane View, Skelmersdale, England, WN8 9TN.
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 £.
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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Mellors Consolidated Limited. These consolidated financial statements are available from its registered office, West Lancs Technology Management Centre, White Moss Business Park, Moss Lane View, Skelmersdale, United Kingdom, WN8 9TN.
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.
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.
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.
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, 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 are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
In the application of the company’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 in the United Kingdom.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
From the 1 April 2023 the effective tax rate is 25%.
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:
Amounts owed by fellow group undertakings are interest free and repayable on demand.
The following are the major deferred tax liabilities and assets recognised by the 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.
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.
Contributions totalling £420,815 (2023: £645,212) were payable to the fund at the balance sheet date.
The company 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.
The company is a member of a VAT group and is jointly and severally liable for any VAT debts of the group. At year end, the VAT liability of other members of the VAT group was £2,359 (2023 - £71,706).
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: