The directors present the strategic report for the year ended 31 December 2023.
This report sets out how the directors comply with the requirements of section 172 Companies Act 2006 and how these requirements have impacted on the decision making of the Gwent Holdings Limited directors.
Our directors have always acted in good faith in ways which promote the success of the company and the group with regard to its members and stakeholders whilst maintaining the highest level of business conduct.
The group's coal operations are governed by external planning consents, coal licences and coal resources and the group plans to operate safely and responsibly within these constraints.
Coaling is now completed and the site will be restored in accordance with the agreed terms of the reclamation project.
The group's healthcare activities are regulated by the Healthcare Inspectorate of Wales who carry out regular inspections and audits of the hospital and its services.
The likely consequences of any decision in the long term
The directors constantly review the capital expenditure requirements across the group and are committed to ensuring that all operations have the investment required. Progress is constantly reviewed in order to achieve both the extraction and the restoration targets.
Funding is provided via the holding company where appropriate.
The interest of the employees
The directors recognise the importance of all Employees and their roles in the group.
Health and safety remains an absolute priority in both the mining and healthcare activities and additional measures were introduced immediately during Covid 19 to minimise any risk to the workforce.
The group engages regularly with the workforce through toolbox talks and other forms of communication.
The need to foster the group’s business relationships with suppliers, customers and others
The directors understand the importance of our suppliers to achieve the long-term plans of the business. Supplier relationships are key to the business and regular meetings and performance reviews are carried out to ensure the quality of supplies and services are maintained.
All customers are regularly contacted to support our relationship and to ensure quality standards and delivery terms are achieved.
Other stakeholders include governing bodies, local authorities, finance partners, regulatory bodies and residents.
The impact of the group's operations on the community and environment
The directors are particularly aware of the impact of the restoration project on the local community and operates in ways which minimises the impact on the environment, wildlife and residents in the local community. Funding and sponsorship are provided for many local events.
Desirability of the group maintaining a reputation for high standards of business conduct
The directors ensure the reputation of the group is maintained in all business transactions.
There is a commitment to ensure the workforce fully reflects society and is included as a key element to deliver the corporate plan.
The need to act fairly between members of the company
The group is family owned and regularly engages with the directors of the company.
The results of these financial statements includes the consolidated position of the group. The most significant trading activity of the group in the year continued to be represented by the coal mining operations of Merthyr (South Wales) Limited, the healthcare operations of St Joseph's Independent Hospital Limited and income from property rentals and plant hire.
The results are presented on page 11.
Group revenue decreased by £24.0m (23%) from £102.8m to £78.8m; coal sales fell by £20.6m (27%) from £75.2m to £54.6m. The hospital contributed approximately £24.1m (2022: £27.6m) to group revenue in the year to 31 December 2023.
Group profitability decreased significantly due to a combination of factors including £28.5m of exceptional items (2022: £3.0m) and decreases in profitability of the coaling operations as well as the results of St Joseph's Independent Hospital Limited; resulting in a profit before tax for the year of £0.4m (2022: £38.3m).
Group net assets at 31 December 2023 were £62.2m (2022: £72.5m).
All coaling operation ceased on 30 November 2023. All former miners were made redundant with effect from this date. All remaining coal was sold by February 2024.
The directors are satisfied with the group's coal operational performance during the year. The total tonnage of coal sales in the year was 355,481 (2022: 495,764) a 28% decrease. The average coal price achieved increased by 1.3% to £153.62 per tonne. Sales, was historically one of the company's key measures of operating effectiveness.
GP% which is one of the company's key areas of operating effectiveness was 7.6% for the year ended 31 December 2023 compared to 14.5% for the year ended 31 December 2022. GP has again been significantly impacted by exceptional items.
The gross profit includes £11.6m (2022: £18.0m) of exceptional items related to provision adjustments and royalty payments to the landowner for consent to extract mining reserves and increased costs of working including site stability and restoration issues (see note 2, 8, 18, 23); adjusting for these items the GP% was 29.0% compared to 38.4% in 2022.
The companies key performance indicators (KPI's) for the third year of trading were:
2023 2022
Outpatients 35,909 43,179
Admissions 5,718 8,324
Patient Day Equivalents 7,073 9,883
Imaging 13,004 14,754
Physiotherapy 14,107 13,345
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The directors were very satisfied with the KPI's achieved during the year which demonstrate continuing growth in all core areas of the business.
Revenue fell by 12.7% to £24.1m. GP% was 45.3% compared to 53.1% .
The hospital's purpose is to make a positive difference to our patient's lives through outstanding personalised care and forms the bedrock on which we base all our strategic decisions. Consequently, the hospital has continued to invest in infrastructure improvements.
Performance review - Parent company
The company has invested in property and plant and machinery in previous years and is now generating revenue from those assets; the company's revenue for the year ended 31 December 2023 was £9.6m and its profit before taxation was £16.4m.
Mining Operations
The principal activity is the reclamation of direct land to the east of Merthyr Tydfil, South Wales, through the operation of a surface coal mine. The principal risks and uncertainties faced by the group in relation to these operations are:
Market
The group works in close co-operation with the relevant regulatory authorities to satisfy both the planning permissions and licence requirements.
The world commodity markets determines the price of coal but the group minimises risk by securing fixed term contracts with key customers.
Operations
Our mining Engineers are constantly reviewing detailed geographical and engineering models to maximise efficiencies within the mine.
Heavy equipment is used in the restoration project and health and safety is of primary concern to the business. Working practices are designed to ensure safety and also minimise the impact of the project on local residents and the local environment.
Healthcare
The principal activity is the operation of the St Joseph's private hospital; the principal risks relating to these trading activities are:
Health & Safety
The group has in place a rigorous and far-reaching health & safety policy and is committed to adhering to all legislation requirements imposed through enforcing authorities.
Coal operations
The principle risk for the group is to achieve sales for the product at satisfactory pricing levels. Currently these remain positive and are likely to be so for the foreseeable future.
The UK Steel and Cement sectors provide our key customer base. Our mine plan is fully-costed and regularly reviewed and includes appropriate allowances for contingencies such as adverse weather. The most significant variable cost is fuel. Coal prices and fuel costs are currently providing a natural hedge. Full account has been taken for funding the restoration obligation in the future costs and cash flows.
Hospital
Whilst there remains a level of uncertainty in the wider economy due to the ongoing pandemic the board is confident that the group can withstand this. The group continued to invest significantly in 2023 and activities continued to increase significantly.
The group's activities expose it to a number of financial risks including price risk, credit risk, cash flow risk and liquidity risk.
Cash flow risk - Loans bear fixed interest rates, therefore the group does not have significant exposure to adverse movements in interest rates.
Credit risk - The group's principal financial assets are bank balances and cash, and trade and other receivables. The group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. The group does have a concentration of credit risk, with a small number of counterparties and customers; the group actively manages this risk.
Liquidity risk - In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the group uses a mixture of long-term equity and short-term debt finance.
Price risk - The group does have significant exposure to price risk particularly in the mining operations as noted above.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11, a review of business is set out in the strategic report on page 2.
Ordinary dividends were paid amounting to £6,500,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were 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.
The auditor, UHY Hacker Young, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group's subsidiary, Merthyr (South Wales) Limited is the only entity within the group required to report in accordance with the Streamlined Energy and Carbon legislation. We have reported on all sources of GHG emissions and Energy usage in relation to Merthyr (South Wales) Limited:
We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £'m of revenue.
The group's coal licence expired and coaling ceased on 30 November 2023. All miners were made redundant. The group continued to sell the remaining coal extracted until February 2024. The group now has no alternative other than to cease trading with regards to it's mining operations.
The healthcare operations continued to grow in terms of revenue and profitability.
The directors have prepared cashflow projections for the group and at the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to meet its debts as they fall due, thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
We have audited the financial statements of Gwent Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, 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
Emphasis of matter - provisions
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 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 directors 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 directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the group and parent company through discussions with directors and other management, and from our commercial knowledge and experience of the relevant sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the group and parent company, including the Companies Act 2006;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the group and parent company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial statements, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the group and parent 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations. The coaling operations which comprise a significant proportion of the group's activities were discontinued post year end.
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 £12,960,712 (2022 - £8,567,454 profit).
Gwent Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Bradbury House, Mission Court, Newport, Gwent, United Kingdom, NP20 2DW.
The group consists of Gwent Holdings 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, 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 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated financial statements incorporate those of Gwent Holdings Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).
The acquisition of Gwent Investments Limited has been treated as a group reconstruction since there was no change in the ultimate ownership. Accordingly the acquisition was accounted for using the merger accounting method.
Merthyr (Holdings) Limited, Merthyr (South Wales) Limited and St Joseph's Independent Hospital Limited have been included in the group financial statements using the purchase method of accounting.
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.
In the parent company financial statements, group reorganisation relief has been applied to the acquisition of Gwent Investments Limited in accordance with s.612 of the Companies Act 2006 therefore no premium has been accounted for and the investment has been recorded at the nominal value of the shares issued.
The group's coal licence expired and coaling ceased on 30 November 2023. All miners were made redundant. The group continued to sell the remaining coal extracted until February 2024. The group now has no alternative other than to cease trading it's mining operations. The accounts of Merthyr (South Wales) Limited have been prepared on a basis other than going concern.
The healthcare operations continued to grow in terms of revenue and profitability.
The directors have prepared cashflow projections for the group and at the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to meet its debts as they fall due, thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover relates to amounts derived from coal sales and other services. Turnover is recognised at the fair value of the consideration received or receivable, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Freehold land and assets in the course of construction are not depreciated.
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.
Deferred stripping costs
Stripping costs incurred during the production stage of operations are deferred and included within fixed assets. The amount of stripping cost deferred is based on the ratio of overburden removed to coal extraction. Stripping costs incurred in the period are deferred to the extent the current period ratio exceeds the life of mine ratio. Such deferred costs are charged against profits to the extent that, in subsequent periods, the ratio is below the life of mine ratio. The remaining balance has been released as coaling ceased in 2023.
Mining projects
Mining projects include the costs of site establishment and costs incurred prior to commencement of operations and costs transferred from intangible fixed assets. Costs have now been fully written off.
Restoration and closure costs
The total costs of reinstatement of soil excavation and of surface restoration are recognised as a provision at site commissioning when the obligation arises. The amount provided represents the present value of the expected costs. Costs are charged to the provision as incurred and the unwinding of the discount is included in the interest charge for the year. An asset is created for an amount equivalent to the initial provision. This is charged to the profit and loss account on a coal extraction basis over the life of the site. The asset is now fully amortised,
In the parent company financial statements, investments in subsidiaries 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.
Investments in prestige vehicles are measured at fair value through profit or loss, except for vehicles 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.
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 (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) 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.
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.
Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other administrative expenses.
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.
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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The company's subsidiary, Merthyr South Wales’ coal licence expired and coaling ceased on 30 November 2023, the director had no alternative other than for the Merthyr South Wales to cease trading, therefore Merthyr South Wales’ accounts have been prepared on a basis other than going concern. No significant adjustments were required as a result of ceasing to adopt the going concern basis. The director is satisfied that there is no significant risk that Merthyr South Wales will not be able to meet its liabilities as they fall due and hence we are satisfied that its ceasing to be a going concern does not impact on the company’s or the group’s ability to continue as a going concern.
The directors have prepared cashflow projections and at the time of approving the financial statements, the directors have a reasonable expectation that the company and the group has adequate resources to meet its debts as they fall due, however, since the director has no alternative other than for the company to cease trading, these financial statements have been prepared on a basis other than going concern; no significant adjustments were required as a result of ceasing to adopt the going concern basis.
Restoration provision
The restoration provision is based on managements best estimate of the cash flow expected in order to restore the mine in accordance with the planning consent. The restoration is based on the original restoration plan. Changes to any of the factors included in the estimate can have a significant impact on the overall expected cost; in particular the overall cost is significantly impacted by the cost of plant including fuel. As discussed further in notes 8 and 18 the provision was re-assessed during the year and as a consequence the estimate was increased by £15.2m, including the unwinding of discount, this is made up of a increase in the provision of £12.5m (debit to cost of sales) and an unwinding discount of £2.7m (debit to finance costs) (2022: £18.0m was debited to the profit and loss account). The credit to cost of sales is regarded as an exceptional item, refer to note 8. The increase in the current year is the net effect of reduction in fuel costs and increase in plant hire costs. In the prior year some of the plant hire costs were hired from other group companies however following the disposal of heavy plant by the group, restoration will now require hire of plant from third parties, this has resulted in an increase in the provision by £15.0m in the current year.
A restoration asset was created for an amount equipment to the initial provision. The asset is amortised on a unit of production basis. The carrying value of the restoration asset is therefore susceptible to the same uncertainties as the provision. The amortisation charge is affected by estimates of remaining reserves.
Mining rights (Intangible) and Mining Projects (Tangible) are also amortised on a unit of production basis, therefore the amortisation of these assets is also affected by the estimate of future recoverable reserves.
As disclosed in section 1 above costs are deferred to the extent that the current ratio of overburden to coal exceeds the ratio expected in the company's life of mine (LOM) projections and costs are released when the current ratio is below the LOM rate. These ratios are derived from extensive geographical survey and bore-hole testing, however the asset can clearly be significantly affected by managements judgement and estimate of future coal recovery and much shift.
All turnover relates to the UK by origin and destination.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Exceptional items included in cost of sales
Restoration provision/asset
As discussed in notes 2 and 18 during the year the directors again reassessed the restoration provision based on current operating costs in particular diesel prices which have decreased significantly and increased plant hire costs, which as a result increased the restoration provision by £15.2m to £91.2m (including the unwinding of the discount). This is made up of a increase in the provision of £12.5m (debit to cost of sales) and unwinding of discount of £2.7m (debit to finance costs) (2022: £3.0m was debited to the profit and loss account). The debit to cost of sales is regarded as an exceptional item. The significant increase in the current year provision is a result of increased plant hire costs from third parties to complete required restoration.
This followed an increase in the restoration provision of £3.0m in 2022 and these increases were principally a result of increases in plant hire and diesel prices.
Royalties
The company incurred exceptional royalty costs of £14.1m (£54.17 per tone); being payments to the landowner for consent to extract mining reserves and increased costs of working including site stability and restoration issues (see note 23).
Exceptional items included in administrative expenses
Impairment of goodwill
Included within administrative costs is impairment of goodwill of £3.2m as all coaling operations ceased on 30 November 2023 (see note 14).
Profit on sale of investment properties
Included within administrative costs is profit on the sale of investment properties of £1.3m (see note 17).
Other interest relates to interest on overdue taxation.
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:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The goodwill was impaired as all coaling operations ceased on 30 November 2023.
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
More information on impairment movements in the year is given in note 14.
Investment property comprises of freehold property held for capital appreciation. The fair value of the investment property has been arrived at on the basis of a valuation carried out at independent third parties, who are not connected with the company. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties.
The carrying value of land and buildings comprises:
Details of the company's subsidiaries at 31 December 2023 are as follows:
The registered office address for Gwent Investments Limited is Llanover House, Llanover Road, Pontypridd, Rhonda Cynon Taff, CF37 4DY.
The registered office address for Merthyr (South Wales) Limited and PMG Gwern Y Domen Limited is Bradbury House, Mission Court, Newport, Gwent, NP20 2DW.
The registered office address for Ffos-y-Fran Limited partnership is 4 Stable Street, London, N1C 4AB.
The registered office address for St Joseph's Independent Hospital Limited is Harding Avenue, Malpas, Newport, NP20 6ZE.
The registered office address for the rest of the companies above is Cwmbargoed Disposal Point, Fochriw Road, Cwmbargoed, Merthyr Tydfil, CF48 4AE.
St Joseph's Independent Hospital Limited is regarded as a subsidiary because of the control the company has by virtue of the terms of the shareholder agreement.
Other debtors falling due after more than one year includes cash funds held by LPAs of £15,413,773 (2022: £15,086,689).
Cash funds held by Local Planning Authorities (LPAs) are cash balances paid by the company as part of its Section 106 commitments and will be repaid to the company on milestones during the restoration and rehabilitation of the relevant sites.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax set out above relates to accelerated capital allowances and this is expected to reverse over the useful lives of the related assets.
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 provision relates to the costs of returning land disturbed during mining activities including aftercare costs. Restorations will commence while mining operations are ongoing and the provision is expected to be largely utilised over the next 7 years.
As discussed in note 8 the provision was increased by £15.2m (2022: increased by £3.0m).
The Group has entered a lease with The Geraint Morgan Legacy Limited (the land owner); under the terms of the lease, the Group has given an unlimited guarantee and indemnity against all damage; loss; costs claims; and expenses whatsoever resulting from the Mining Operations or restoration and aftercare of the Mining Land.
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:
During the year the company paid royalties of £22,788,445 (2022: £9,318,588) and electricity recharges of £666,661 (2022: £170,380) to Geraint Morgan Legacy Ltd, of which Mr D Lewis is a director and shareholder. At the year end an amount of £20,022,080 (2022: £2,639,611) was due to Geraint Morgan Legacy Ltd and this amount was included within creditors due within one year. The royalties included £14,127,912 exceptional costs being payments to the landowner for consent to extract mining reserves and increased costs of working including site stability and restoration issues.
Dividends totalling £6,500,000 (2022 - £0) were paid in the year in respect of shares held by the company's directors.