The directors present the strategic report for the year ended 30 September 2024.
Business Review
As a subsidiary of the nZero Group, the UK’s leading Gaseous Energy measurement and control partner, the Company will play a key role in the UK’s journey to net zero by enhancing energy security, delivering innovative low-carbon solutions, and strengthening the UK’s global competitiveness while ensuring reliable power and warm homes for all.
Turnover increased by 18% to £13.5m (2023: £11.4m) through the combination of delivering a larger opening order book of £12.2m (Sept 2023: £6.5m) and the continued investment into green gas and decarbonisation projects coupled with the RIIO2 investment cycle across the gas transmission and distribution networks.
Gross margin increased to 26% (2023: 22%) due to improvements in productivity and economies of scale. Administration expenses in the year increased to £2.2m representing a 22% increase compared to the prior year. The increase in administration expenses related to investment into training, recruitment fees and general inflation across overheads.
Operating profit before amortisation, depreciation and interest increased to £1.3m from £0.7m in the previous year. This growth was driven by a combination of higher turnover and improved gross margins. On 30 September 2024 net assets were £6.4m (2023: £5.2m). Cash at bank increased to £4.3m (2023: £3.2m) due to the profit generated in the year.
Impact of Russian Invasion of Ukraine
The Company revenues are primarily earned via UK, Ireland, and Middle Eastern based customers and therefore we have limited exposure directly to Ukraine, Russia, or Belarus. The sanctions imposed on Russia or Belarus have not had and are not expected to have any direct impact on our business or prospects for the future.
One of the significant impacts of the invasion of Ukraine has been the impact on international natural gas prices and publicised Government policies across Europe with an aim to reduce reliance on imported gas from Russia. This has led to an increase in demand across Europe for engineering capabilities not only for building new LNG terminals across Europe but also Government policies across Europe to reduce the use of fossil fuels in electricity generation and in accelerating a move to new greener technologies to use energy carriers such as low carbon hydrogen and green ammonia.
The other major impact has been on the cost and lead times of materials. Management monitor key material price swings to mitigate margin erosion and thorough contract management to mitigate risk of contractual damages associated with delays.
Solutions
The Company is passionate about innovating the energy system to sustain our way life whilst protecting the planet. This involves solving complex strategic challenges for Energy Producers, Energy Transporters, and Industrial Users across the energy sector bringing together best of breed technology.
The Company continues to be trusted by its customers delivering end to end solutions backed by over 40 years of expertise and thousands of successful projects. Services include consultancy, training, end to end project delivery from concept, design, build, install, commission and 24/7 support & maintenance. Typical gaseous energy measurement solutions include fiscal and non-fiscal metering, gas analysis, pressure control, odorisation and cyber security & digital services. The Company's core markets are Gas Transmission & Distribution, Green Gas (Biomethane) to gas grid, Low Carbon Hydrogen & CCUS and Oil, Gas & Chemical.
Helping our clients to achieve emission reduction goals - Methane Mitigation Technology
Methane emissions, of which c60% comes from human activity, are the second largest contributor to climate change. Whilst methane emissions are 84x more potent than carbon dioxide in terms of contributing to global warming, they don’t last as long in the atmosphere (around 12 yrs) compared to carbon dioxide which can last for centuries. The reduction of methane emissions in the short term is an important part of the plan to combat climate change providing time for solutions to be developed and implemented to reduce carbon dioxide emissions.
Over the last 12 months we have focused on developing our relationships with the following exclusive partners whose technology is complementary to our existing expertise and will help our customers achieve their methane mitigation plans.
Non-venting control valve – exclusive relationship with VRG Controls, a North American based patented technology provider, focused on the reduction of methane emissions across gas distribution networks and gas fired power stations.
Zero Emission Vacuum and Compressor - exclusive relationship with Zevac a North American based patented portable gas and liquid cross-compression equipment easily integrated into operations and maintenance plans as a safe, reliable, and scalable alternative to natural gas venting and NGL flaring.
Teeblender Propane Optimisation - exclusive relationship with Greener Blue a UK patented technology that can dynamically blend biomethane with natural gas, reducing and potentially eliminating the use of Propane enrichment on biomethane gas to grid plants, leading to substantial operational cost savings, whilst improving the overall carbon footprint.
Reduction in fugitive emissions from instrumentation - exclusive relationship with TRACErase a North American based patented technology that uses a catalytic combustion process to oxidize the vented sample whilst maintaining the atmospheric pressure reference. Chemical analysis instruments frequently require a pressure reference to atmospheric pressure for proper operation typically achieved by venting the sample to the atmosphere. These vented samples, generally called fugitive emissions, are air pollutants and contribute to worldwide pollution problem.
Helping our clients to protect against increased cyber security risks
During the year the Company invested in the formation of a Digital Technology Division to focus on supporting its customer base with mitigating and managing cyber risk associated with operational technology deployed on national energy infrastructure assets. The Company is uniquely placed due to its existing relationships, expertise and knowledge of the systems deployed in the field. Turnover from these services is forecast to increase rapidly in the year ending 30 September 2025.
Low Carbon Hydrogen, Carbon Capture, Utilisation and Storage (CCUS)
The Company is part of the nZero Group, which remains at the forefront of the UK’s drive to decarbonise, having first designed, built, and commissioned over six years ago a low carbon hydrogen and natural gas blending system (https://hydeploy.co.uk/). Followed swiftly, by delivering one of the UK’s first hydrogen switching trial using different blends of hydrogen and natural glass to power furnaces at Pilkington Glass, St Helen’s.
Recent projects include: (1) H100 a first-of-a-kind demonstration project delivering 100% green hydrogen gas to customers, providing evidence for future low-carbon policy decisions and a clear path towards net zero heating for the UK. The Group is responsible for the design, build and commissioning of the metering, gas analysis, pressure control and odorisation equipment; (2) Hybay - Working with INEOS Inovyn to design, build and commission an analyser system to measure the low carbon hydrogen being produced by its electrolyser technology is of fuel grade quality for PEM fuel cell road vehicle applications.
The UK Government remains committed to developing the UK’s low carbon hydrogen and CCUS economy as it is considered critical to achieving both energy security and net zero targets.
There has been a significant increase in opportunities in this sector, resulting in the tripling of turnover in the year. Turnover is forecast to increase over the foreseeable future across a range of services including consultancy & feed studies, industrial fuel switching trails, blending, and low carbon hydrogen and carbon capture projects.
Green Gas - Biomethane
The Company is one of the UK’s leading providers of specialist grid entry units enabling customers to connect biomethane gas to the UK’s gas network (the “grid”) and we believe renewable gasses are a crucial element to the energy transition. This is especially true for those sectors difficult to decarbonise such as heating and transport – which biomethane is particularly well suited to decarbonise.
Over the last ten years the Company has built and commissioned over 40 Biomethane to grid entry units, with most units being in full operation flowing gas into the grid daily and being supported and maintained by the Company's experienced support and maintenance team.
Turnover from new projects increased significantly in the year whilst service revenues continue to grow on the back of adding new customer sites to our expanding 24/7 field service support team.
Biomethane to grid remains a core part of the Government plans to meet carbon reduction targets and following the extension of the UK Government’s subsidy system designed to increase the proportion of green gas in the grid (“Green Gas Support Scheme”). The market is expected to continue its growth trajectory with turnover in the year ending 30 September 2025 expected to increase.
Oil, Gas & Chemical
The Company has a strong presence in the UK Oil, Gas and Chemical industry and maintains a well-established repeat customer base. Turnover from this sector remained relatively flat compared to the prior year which is consistent crude oil prices which despite some volatility, have maintained a relatively stable trajectory over the past year. Turnover for analyser and sample systems is forecast to remain stable in the year ending 30 September 2025. The relationships maintained by the Company across this sector has positively contributed to the Company's turnover growth being experienced in the low carbon Hydrogen and CCUS market.
Gas Transmission & Distribution
The Company maintains good working relationships with the UK gas distribution networks and is a key delivery partner on the National Gas Transmission metering and gas quality framework.
Turnover in the year, from this market, increased significantly compared to the prior year. Based on the orderbook, and sales pipeline opportunities turnover is forecast to increase further in the year ending 30 September 2025.
The Company monitors several KPI’s on a regular basis including Turnover per employee; project margin, sector margin, contribution from third party costs (“Throughput”), productivity, trade debtor and trade creditor days, operating cash flow and sales pipeline conversion. The results of the KPIs are commercially sensitive information and have not been disclosed.
Cyber security
Cyber security remains a significant risk for both the Company and its customer base. The Company continues to invest in its internal infrastructure, employee awareness training and processes with a view to protecting critical systems and sensitive information from digital attacks. The Company continues to work with specialist cyber security organisations for access to best of breed testing software and support and is proactively working with its customers to ensure their infrastructure and assets are adequately protected.
To guard against the most common cyber threats and to demonstrate the Company's commitment to cyber security it has plans to implement the internationally recognised ISO27001 information security management standard which will provide a level of assurance through an independent technical verification.
Investment in research and development remains a key pillar of the Company's long term strategy to build partnerships with technology companies focused on decarbonisation solutions providing expert practical knowledge and support to help such companies commercialise new technology. During the year the Company continued its investment strategy of research and development expenditure across a variety of novel projects.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 September 2024.
The results for the year are set out on page 12.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Company’s cost base and margin may be impacted by fluctuations in freight, energy, labour and other input costs. The Company has a strong commercial focus on procurement. Pricing and cost improvement initiatives are maintained along with ongoing monitoring of the commercial implications of commodity price and other input cost movements.
Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with financial liabilities. The company aims to mitigate liquidity risk by managing the cash generation of its operations with strong focus on cash collection and regular and detailed cashflow forecasting. The business has no material exposure to non-basic financial instruments.
The ability to retain and attract talent is critical to the success of the Company operations. A fundamental pillar of the Company’s strategy is focused on its people with a goal to become a great place to work, where people feel safe and appreciated, and know they are doing something important and contributing to a net zero future. Under pinning the goal are clear and measurable objectives such as staff turnover to be less than 9.5%. Every day the team continues to work on the individual actions required to deliver the objectives such as regular clear and communication from the top, wellness and team building events, staff surveys, competitive benchmarked remuneration, training and development through the nZero academy and clear succession planning.
The results of operations and financial position are measured using the functional currency of the primary economic environment in which the entity operates. Transactions are conducted in British Pounds, Euros and US Dollars. The company is exposed to exchange rate fluctuations and hence, currency rates changes are monitored to minimize the effect on results of operations.
Credit risk is the risk that customers or counterparties will not be able to meet their obligations to the company. The company has policies aimed at minimising such losses and require that deferred payment terms are only granted to customers who demonstrate an appropriate payment history and satisfy credit worthiness procedures.
The risk faced by the business is the regulatory risk relating to changes to employment and tax legislation. The company actively engages in the consultation phase of any proposed legislative changes, and positively embraces the final legislation. The company is committed to investing in both the resources and system changes necessary to ensure full compliance with such legislative changes.
Saffery LLP have expressed their willingness to continue in office.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through 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 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 income statement has been prepared on the basis that all operations are continuing operations.
Thyson Technology Limited is a private company limited by shares incorporated in England and Wales. The registered office is Helix Business Park, New Bridge Road, Ellesmere Port, England, CH65 4LX.
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 £000.
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 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; 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 financial statements of the company are consolidated in the financial statements of nZero Group Limited. These consolidated financial statements are available from its registered office, Helix Business Park, New Bridge Road, Ellesmere Port, England, CH65 4LX.
With a £26.3m order book at 31 December 2024, in addition to: A strong pipeline of new opportunities; the revenue growth expected through National Gas RIIO-2 works, RIIO-3 FEEDs and RIIO-3 works; further opportunities with other gas networks; growth of the Service side of the Business’ operations as a result of increasing project completions, and; the medium term opportunities linked to the production, storage and transportation of low carbon Hydrogen, the directors are confident that the business will continue to remain profitable in the foreseeable future and generate positive future cash flows to fully support the asset carrying values.
The directors have prepared a detailed integrated profit and loss account, balance sheet and cashflow forecast and are comfortable with the Group’s position as a going concern. In making their going concern assessment, the directors have considered a period of at least 12 months from the date of signing these financial statements.
Software development costs
Expenditure on development activities is capitalised if the process is technically and commercially feasible and the company has sufficient resources to complete development. The expenditure capitalised includes the cost of materials and direct labour. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses, and is written off over 5 years on a straight line basis.
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, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the 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, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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 classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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.
Research and development tax credits
The company, in the normal course of business, incurs expenses that are related to research and development and as such attract tax credits from HMRC. These credits are recognised as a credit within the income tax line of the profit and loss in the period in which the claim has been agreed with HMRC, with the remaining unpaid but agreed balance recognised within other debtors.
Where claims are under discussion with HMRC, the credit will be recognised at the point that it is considered that the claim will sufficiently progress so that the asset recognition criteria as set out in FRS102 of virtually certain recovery is met.
Research and development
In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all the expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if certain specific criteria are met in order to demonstrate the asset will produce probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are then amortised on a straight line basis over their useful economic lives which range from 3 to 6 years.
If it is not possible to distinguish between the research and development phases of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
Finance costs
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
In the application of the company’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.
There are a number of assumptions in the calculation of work in progress in respect to construction contract debtors as described in note 1.7.
The company establishes a provision for inventory that is not deemed to be held at the lower of cost and net realisable value. When assessing this the directors consider the recent movement of stock, past experience and future expectations for sale as described in 1.7.
The company depreciates tangible fixed assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes as described in 1.5.
The judgement is applied by management when determining the residual values of tangible fixed assets. When determining the residual value, management aim to assess the amount that the company would currently obtain for disposal of the asset, if it were already of the condition expected at the end of its useful life. Where possible this is done with reference to external market prices.
The average monthly number of persons (excluding directors) employed by the company during the year was:
Directors are remunerated by the company's parent, nZero Group Limited. The aggregate remuneration of other employees comprised:
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:
With effect from 1 April 2023 the rate of corporation tax increased from 19% to 25%. From the same date a small companies rate of 19% was introduced for companies with profits of £50,000 or less. The main rate of 25% applies to companies with profits over £250,000 and marginal relief applies for profit between the thresholds. The corporation tax liabilities within the financial statements are calculated using these rates.
Other creditors includes a lease incentive of £151k (2023: £196k).
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
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 £25k (2023: £18k) were payable at the balance sheet date.
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:
The immediate parent company is Thyson Technology Holdings Limited, the company is a subsidiary of nZero Group Limited, a company incorporated in the United Kingdom. The smallest and largest group in which the results of the company are consolidated are those headed by nZero Group Limited.
No other group financial statements include the results of this company. The consolidated financial statements of nZero Group Limited are available to the public and may be obtained from Helix Business Park, New Bridge Road, Ellesmere Port, England, CH65 4LX