The director presents the strategic report for the year ended 31 October 2024.
The Group’s principal activity is the installation and maintenance of mechanical and electrical systems to the Building Services Industry.
In 2024, the Group posted another impressive set of results as we consolidated our portfolio of high profile, secure clients and increased our offerings to those we have developed long term relationships with. This year our expertise in ventilation services in the post-COVID era and Decarbonisation of buildings has seen opportunities continue to arise. Overall we were delighted to see Turnover stay roughly in line with the previous year, falling by only 3.2% compared to 2023, despite our move away from the domestic market and a challenging economic outlook for our Public Sector Clients
Our Maintenance section saw a decrease of 10.1% in Turnover in the Year, reflecting a reduction in previously over-budget spending by some of our maintenance customers. Contract churn also played a role, as some customers made different procurement decisions, leading to non-renewals. However, this was partially offset by new contracts secured during the year, which contributed lower revenue initially due to the mobilisation period and we fully expect revenue to revert to 2023 levels during 2025.
Our Install section saw an increase of 13.9% as we secured increased works with the NHS and London Councils. We also secured several new contracts, including laboratory works, with our University partners. The increase in the year came from a number of new clients who we hope to develop more works with in future.
As ever it was pleasing to note that Turnover has again been achieved with no discernible diminution in gross margins and is supported by cash flow.
Overheads reduced very slightly in the year across a number of categories as we had previously invested in the people required to help the Group to not only take the step to delivering Turnover exceeding £20m, but to do so sustainably each year going forward, and we are now at a stable base to move the Group towards £25m
The Group goes into 2025 with an order book already in hand that will see turnover maintained at 2024 levels at the very least, with opportunities possible to grow further again. With energy costs rocketing, our expertise in decarbonisation planning is of great interest to our clients. In addition, we are seeing great benefits from our collaborative approach as clients keep coming back to us for works safe in the knowledge we can deliver even the most challenging projects. 2024 also saw us achieve unprecedented success in joining 6 new Frameworks which should provide us with further streams on Install work over the coming years. With Tender opportunities still at record levels, the Group aims to further grow the current levels of activity and profitability into the next few years.
Environmental and social responsibility
The Group takes its environmental and social responsibilities very seriously and is always looking at how the Group can improve sustainability and energy efficiency in all contracts as well its own dealings.
Employees
The Group aims to ensure its workforce are safe, healthy and fulfilled. To such end the Group has in place comprehensive Health & Safety and Training policies alongside regular employee appraisals and consultation.
Details of the number of employees and related costs can be found in note 5 to the financial statements.
Key financial highlights are as follows:
2024 2023
£ £
Turnover 21,844,912 22,569,833
Profit/(Loss) before tax 594,473 438,894
Gross profit margin for the year ended 31 October 2024 was 26.8% (2023: 25.9%).
The Group’s principal financial instruments comprise bank balances, trade creditors and trade debtors. The main purpose of these instruments is to raise funds for the Group's operations and to finance the Group's operations.
Due to the nature of the financial instruments used by the Group there is no exposure to price risk. The Group's approach to managing other risks applicable to the financial instruments concerned is shown below.
In respect of bank balances the liquidity risk is managed centrally to maximise interest income whilst ensuring that the Group has sufficient liquid resources to meet the operating needs of its businesses. The Group is exposed to fair value interest rate risk on its deposits and loans. Investment of cash surpluses are made through banks and companies which must fulfil credit rating criteria approved by the Board.
All customers wishing to trade on credit terms are subject to credit verification procedures. Receivable balances are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Future developments
Having made the move to Cloud and hybrid working, the Board have since the Year End made the decision to Upgrade the Accounting and Service Management software package to drive the Group for the next Decade. The upgrade will see one package replace up to 5 legacy systems at once, driving further efficiencies into the business processes.
A Vendor has been appointed and work is to commence shortly with a view to transition to the new system from the start of our 2025/26 Accounts period.
Following the success of renewing our 3rd and 4th largest contracts in the last year, the key focus is to now achieve renewals for our 2 largest contracts which come due in late 2025 and early 2026 respectively.
Aside from this target, we continue to work hard to engage new clients and have recently been given awards that will help us sustain our position in 2026 and beyond even if we were unable to renew.
The Directors ensure the Group never rests on its laurels and are conscious of the changing demands of its customers, especially in times where the economy has moved toward recession and costs remain high. It is testament to the strength of our portfolio that the Group has ridden the worst extent of the inflation crisis, with many contracts including index-linked increases, allowing the Group to continue to pay higher than average pay rises to all staff.
The Environment is also becoming a more urgent consideration as the realisation that reliance on fossil fuels needs to be reduced becomes more apparent. The Group are already working with a number of its largest clients on full de-carbonisation strategies and will continue to help other customers develop their future plans throughout the coming year.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 October 2024.
The results for the year are set out on page 8.
Ordinary dividends were paid by BTU Holdings Limited amounting to £151,275 (2023 - £151,275 of which £96,816 was by BTU Holdings Limited). 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 auditor, Ward Williams, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of BTU Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 October 2024 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, 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.
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.
The objectives of our audit are to identify and assess the risks of material misstatement of the financial statements due to fraud or error; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud or error; and to respond appropriately to those risks. Owing to the inherent limitations of the audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with ISAs (UK).
In identifying and assessing risks of material misstatement in respect or irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
We obtained an understanding of the legal and regulatory frameworks applicable to the group and the sector in which they operate. We determined that the following were the most significant: The Companies Act 2006 and UK corporate taxations laws.
We obtained an understanding of how the group are complying with those legal and regulatory frameworks by making inquiries to the management of the group. We corroborated our inquires through our review of correspondence during our audit work.
We assessed susceptibility of the group's financial statements to material misstatement, including how fraud might occurred. Audit procedures performed included:
identifying and assessing the design and implementation of controls management has in place to prevent and detect fraud;
understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
challenging assumptions and judgement made by management in its significant accounting estimates;
identifying and testing journal entries, in particular journal entries posted with unusual account combinations; and
assessing the extent of compliance with the relevant 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 income statement and related notes. The company's profit for the period was £150,602 (2023 - £21,963).
BTU Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 38 Weyside Road, Guildford, Surrey, GU1 1JB.
The group consists of BTU Holdings Limited and all of its subsidiaries since 19 July 2023. Up to 19 July 2023, the group consisted of AFM Holdings Limited and its subsidiaries.
BTU Holdings Limited, which became the parent of the group following an internal group restructure on 19 July 2023, was incorporated on 16 November 2022. The comparative reporting period of the individual parent company only therefore covers the period from incorporation to 31 October 2023.
The comparative reporting period of the group includes results for the full year-ended 31 October 2023, with AFM Holdings Limited being a parent prior to 19 July 2023 and BTU Holdings Limited being a parent post 19 July 2023.
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, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. 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;
The consolidated group financial statements consist of the financial statements of the parent company BTU Holdings 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 31 October 2024.
All intra-group transactions and balances between the group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
During the last financial statements period, the BTU Group structure was further simplified, with BTU Holdings Limited assuming the role of Group Holding Company. The previous Holding Company, AFM Holdings Limited has since been dissolved. This change of structure has had no impact on the going concern of the Group and therefore the going concern basis of accounting is still deemed appropriate.
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.
Revenue is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (upon delivery), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from contracts for the provision of services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
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 income statement.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). 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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 statement of financial position 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 trade and other receivables and cash and bank balances, are initially measured at transaction price, less any impairment.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
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.
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 trade and other payables, and loans from fellow group companies, are recognised at transaction price. Financial liabilities classified as payable within one year are not amortised.
Trade payables 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.
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 income statement 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 income statement, 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 non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group operates defined contribution pension schemes. The assets of the schemes are held separately from those of the group in an independent administered fund. Contributions payable are charged to the profit and loss account in the year they are payable.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the EBITDA model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
In determining appropriate depreciation rates to apply against property, plant and equipment, the director has used his knowledge and experience of both the group and the industry to asses the useful lives of each individual assets' category.
The useful economic life of an asset is the period over which the asset is expected to be available for use by the group. This estimate is based on the following factors:
Expected usage of the asset: Assessed by reference to the asset’s expected usage capacity when compared to other companies in the industry.
Expected physical wear and tear: Dependent on operational factors such as the number of repairs and maintenance program.
Technical or commercial obsolescence: Arising from changes or improvements in technological advancement of similar assets available on the market.
Historical usage of the asset not being aligned with expectations: Arising with over- or under- consuming the asset when compared with its assumed useful economic life.
The total turnover for the group for the period has been derived from its principal activities wholly undertaken in 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:
Details of the company's subsidiaries at 31 October 2024 are as follows:
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.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse in future periods and relates to accelerated capital allowances that are expected to mature within the same period.
The options outstanding at 31 October 2024 had an exercise price of £30.31 per share, and a remaining contractual life of 8 years and 11 months.
For share options granted, the group has measured fair value in reference to Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), together with considerations of appropriate price earnings ratios at the date of grant. This was the valuation methodology considered the most appropriate.
During the year, the group recognised total share-based payment expenses of £169,300 (2023: £6,772) which related to equity settled share-based payment transactions.
During the year, the share premium capital of £993 was transferred from AFM Holdings Limited to BTU Holdings Limited.
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:
Amounts contracted for but not provided in the financial statements:
The remuneration of key management personnel, which consists of the director of the holding company and fellow directors of its subsidiaries is as follows.
Rent of £106,500 (2023: £43,806) was paid to AFM Holdings (Limited) Pension Scheme regarding the investment property which is used by the group. This rent was charged on an arm's length basis and at a normal commercial rate.
In addition, during the year rent totalling £82,500 (2023: £82,500) was paid to AFM Limited Pension Fund Trust relating to a different property used by the group. This rent was charged on an arm's length basis and at a normal commercial rate.
Dividends totalling £151,275 (2023: £98,816) were paid in the year by the group in respect of shares held by the company's director.
In the financial year-ended 31 October 2023 of the Group, £414,583 of gross wages were reclassified from direct costs to administrative costs. However, upon further review, it was determined that this reclassification did not accurately reflect the nature of the expenses. As a result, in the financial year-ended 31 October 2024, the wages have been reclassified back to direct costs.
This correction ensures that the financial statements provide a true and fair view of the Group’s cost structure. The impact of this reclassification is as follows:
Financial Statements 31 October 2023: Wages previously reported under direct costs (£414,583) have been reclassified to administrative costs.
Financial Statements 31 October 2024: Wages are correctly reported back under direct costs, reflecting the reversal of the 31 October 2023 reclassification (£414,583).
This adjustment has been made in accordance with the accounting policies and relevant financial reporting standards in the United Kingdom, and was done to reflect the true employees' function in the business.