Company registration number 00584986 (England and Wales)
P & D NORTHERN STEELS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
P & D NORTHERN STEELS LIMITED
COMPANY INFORMATION
Directors
J Martin
P Martin
W Russell
Company number
00584986
Registered office
Woodstock Distribution Centre
Meek Street
Royton
Oldham
Greater Manchester
OL2 6HL
Auditor
Champion Accountants LLP
1 Worsley Court
High Street
Worsley
Manchester
M28 3NJ
P & D NORTHERN STEELS LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2
Independent auditor's report
3 - 5
Statement of income and retained earnings
6
Balance sheet
7
Statement of cash flows
8
Notes to the financial statements
9 - 22
P & D NORTHERN STEELS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 OCTOBER 2022
- 1 -
The directors present the strategic report for the year ended 31 October 2022.
Fair review of the business
The principal activity of the Company remained Steel Stockholding - Sale and Distribution of reversing mill plate and sheet steels.
Turnover in 2022 increased by £4.1m, from £11,399,318 in 2021 to £15,557.250 driven both by tonnage sold and rising cost of steel generally. The steel market experienced significant price rises following on from the impact of Brexit, Covid 19 and the ongoing conflict in Ukraine.
The financial position at the end of the year was considered healthy by the directors of the Company.
The external commercial environment is expected to remain competitive for the forthcoming year but with our loyal customer base and strong focus on quality and customer service, the directors feel that the Company will continue to perform well into the future.
Principal risks and uncertainties
The management of the business and continued strategy going forward is subject to a number of certain risks.
The directors of the Company will monitor these risks and consider the key business risks affecting the Company are changes in the prices in the global market, competition from other stockholders and the market forces which affect the value of steel.
The price of steel varies due to changes in the cost of raw materials but also in demand. Demand currently remains healthy but prices are reviewed regularly and taken into consideration when purchasing and selling respectively.
The Company aims to reduce debt liability and ensure continued strong cash flow – utilising Credit Insurance across our Debtor book and remaining proactive in relation to Credit Control procedures. The directors monitor the Company’s cash flow regularly.
The directors and senior management team foresee no significant changes to the current policies and strategies in the next 12 months.
Going concern
The directors have considered the Company position at the time of signing the financial statements, and in particular the rising cost of living and inflation, war in Ukraine and the impact on the Company and wider economy.
The directors have given due consideration to the current financial strength of the company, including ongoing trade and forecasts after the year end and have concluded that they have adequate resources to continue to operate for the foreseeable future.
Key performance indicators
31.10.22 31.10.21
Gross profit 28.37% 25.09%
Return On Capital 49.31% 41.65%
Sales Credit Days 89 129
J Martin
Director
14 July 2023
P & D NORTHERN STEELS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 2022
- 2 -
The directors present their annual report and financial statements for the year ended 31 October 2022.
Principal activities
The principal activity of the company continued to be that of steel stockists and suppliers.
Results and dividends
The results for the year are set out on page 6.
Ordinary dividends were paid amounting to £800,000. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
J Martin
P Martin
W Russell
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
J Martin
Director
14 July 2023
P & D NORTHERN STEELS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF P & D NORTHERN STEELS LIMITED
- 3 -
We have audited the financial statements of P & D Northern Steels Limited (the 'company') for the year ended 31 October 2022 which comprise the statement of income and retained earnings, the balance sheet, the 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).
In our opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the financial statements:
give a true and fair view of the state of the company's affairs as at 31 October 2022 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for qualified opinion
As auditors we were unable to attend and observe the counting of physical inventories at the previous year end date. It was not possible to use alternative audit procedures to satisfy ourselves regarding the inventory quantities held at the previous year end, which is included in the balance sheet at £2,711,053. Consequently we were unable to determine whether any adjustment to the amount was necessary.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
P & D NORTHERN STEELS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF P & D NORTHERN STEELS LIMITED
- 4 -
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.
Matters on which we are required to report by exception
In respect solely of the limitation on our work relating to stock, described above:
we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and
we were unable to determine whether adequate accounting records had been maintained.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
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.
Auditor's responsibilities for the audit of the financial statements
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
As part of our planning process:
- We enquired of management the systems and controls the company has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. The company did not inform us of any known, suspected or alleged fraud.
- We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102 and Companies Act 2006.
- We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment
accordingly.
- Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
P & D NORTHERN STEELS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF P & D NORTHERN STEELS LIMITED
- 5 -
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
- Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
- Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
- Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to stock valuation & cut-off.
- Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
- Testing key revenue lines, in particular cut-off, for evidence of management bias.
- Performing a physical verification of key assets.
- Obtaining third-party confirmation of material bank balances.
- Documenting and verifying all significant related party balances and transactions.
There are inherent limitations in the audit procedures described above. The more removed that laws and regulations are from financial transactions, 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. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member, for our audit work, for this report, or for the opinions we have formed.
Mark Turner FCA
Senior Statutory Auditor
For and on behalf of Champion Accountants LLP
14 July 2023
Chartered Accountants
Statutory Auditor
1 Worsley Court
High Street
Worsley
Manchester
M28 3NJ
P & D NORTHERN STEELS LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 OCTOBER 2022
- 6 -
2022
2021
Notes
£
£
Turnover
5
15,557,250
11,399,318
Cost of sales
(11,144,130)
(8,539,309)
Gross profit
4,413,120
2,860,009
Administrative expenses
(1,192,193)
(1,105,280)
Other operating income
15,000
19,598
Operating profit
6
3,235,927
1,774,327
Interest receivable and similar income
9
16
2
Interest payable and similar expenses
10
(101,806)
(30,695)
Amounts written off investments
11
(67)
5,710
Profit before taxation
3,134,070
1,749,344
Tax on profit
12
(605,183)
(333,603)
Profit for the financial year
2,528,887
1,415,741
Retained earnings brought forward
3,397,144
1,981,403
Dividends
13
(800,000)
Retained earnings carried forward
5,126,031
3,397,144
The profit and loss account has been prepared on the basis that all operations are continuing operations.
P & D NORTHERN STEELS LIMITED
BALANCE SHEET
AS AT 31 OCTOBER 2022
31 October 2022
- 7 -
2022
2021
Notes
£
£
£
£
Fixed assets
Tangible assets
15
117,296
178,800
Investments
16
305
372
117,601
179,172
Current assets
Stocks
17
4,061,272
2,711,053
Debtors
18
5,859,044
6,113,143
Cash at bank and in hand
280,257
115,651
10,200,573
8,939,847
Creditors: amounts falling due within one year
19
(5,135,550)
(5,601,486)
Net current assets
5,065,023
3,338,361
Total assets less current liabilities
5,182,624
3,517,533
Creditors: amounts falling due after more than one year
20
(54,593)
(118,389)
Net assets
5,128,031
3,399,144
Capital and reserves
Called up share capital
25
1,050
1,050
Capital redemption reserve
950
950
Profit and loss reserves
5,126,031
3,397,144
Total equity
5,128,031
3,399,144
The financial statements were approved by the board of directors and authorised for issue on 14 July 2023 and are signed on its behalf by:
J Martin
Director
Company Registration No. 00584986
P & D NORTHERN STEELS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 OCTOBER 2022
- 8 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
1
1,382,358
35,786
Interest paid
(101,806)
(30,695)
Income taxes paid
(254,154)
Net cash inflow from operating activities
1,026,398
5,091
Investing activities
Purchase of tangible fixed assets
(4,680)
(152,379)
Proceeds from disposal of tangible fixed assets
18,001
22,400
Proceeds from disposal of subsidiaries
491
Proceeds from disposal of investments
(491)
Repayment of loans
13,110
Interest received
16
2
Net cash generated from/(used in) investing activities
13,337
(116,867)
Financing activities
Repayment of bank loans
(47,222)
(2,778)
Payment of finance leases obligations
(27,907)
111,200
Dividends paid
(800,000)
Net cash (used in)/generated from financing activities
(875,129)
108,422
Net increase/(decrease) in cash and cash equivalents
164,606
(3,354)
Cash and cash equivalents at beginning of year
115,651
119,005
Cash and cash equivalents at end of year
280,257
115,651
P & D NORTHERN STEELS LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 9 -
1
Cash generated from operations
2022
2021
£
£
Profit for the year after tax
2,528,887
1,415,741
Adjustments for:
Taxation charged
605,183
333,603
Finance costs
101,806
30,695
Investment income
(16)
(2)
Loss/(gain) on disposal of tangible fixed assets
1,568
(19,253)
Depreciation and impairment of tangible fixed assets
46,615
21,890
Other gains and losses
67
(5,710)
Movements in working capital:
Increase in stocks
(1,350,219)
(1,654,038)
Decrease/(increase) in debtors
263,674
(3,369,933)
(Decrease)/increase in creditors
(815,207)
3,282,793
Cash generated from operations
1,382,358
35,786
2
Analysis of changes in net funds/(debt)
1 November 2021
Cash flows
31 October 2022
£
£
£
Cash at bank and in hand
115,651
164,606
280,257
Borrowings excluding overdrafts
(47,222)
47,222
-
Obligations under finance leases
(111,200)
27,907
(83,293)
(42,771)
239,735
196,964
3
Accounting policies
Company information
P & D Northern Steels Limited is a private company limited by shares incorporated in England and Wales. The registered office is Woodstock Distribution Centre, Meek Street, Royton, Oldham, Greater Manchester, OL2 6HL.
3.1
Accounting convention
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.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2022
3
Accounting policies
(Continued)
- 10 -
3.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
3.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue 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.
3.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Plant and machinery
15% Reducing balance
Fixtures, fittings & equipment
33% Straight line
Motor vehicles
25% Straight line
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.
3.5
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
3.6
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
3
Accounting policies
(Continued)
- 11 -
3.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
3.8
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
3.9
Financial instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
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.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
3
Accounting policies
(Continued)
- 12 -
Impairment of financial assets
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. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. 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.
Derecognition of financial assets
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.
Classification of financial liabilities
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
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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
3
Accounting policies
(Continued)
- 13 -
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
3.10
Equity instruments
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.
3.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
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 when the company has 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.
3.12
Employee benefits
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.
3.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
3
Accounting policies
(Continued)
- 14 -
3.14
Leases
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.
3.15
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
3.16
Foreign exchange
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.
4
Judgements and key sources of estimation uncertainty
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.
5
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Sales of goods
15,557,250
11,399,318
2022
2021
£
£
Turnover analysed by geographical market
United Kingdom
14,242,055
9,639,296
Overseas
1,315,195
1,760,022
15,557,250
11,399,318
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
5
Turnover and other revenue
(Continued)
- 15 -
2022
2021
£
£
Other revenue
Interest income
16
2
Commissions received
15,000
15,000
Grants received
4,598
6
Operating profit
2022
2021
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(26,875)
3,902
Government grants
(4,598)
Fees payable to the company's auditor for the audit of the company's financial statements
2,975
Depreciation of owned tangible fixed assets
11,849
13,038
Depreciation of tangible fixed assets held under finance leases
34,766
8,852
Loss/(profit) on disposal of tangible fixed assets
1,568
(19,253)
7
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Directors
3
3
Staff
8
8
Total
11
11
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
619,048
512,658
Social security costs
83,952
60,185
Pension costs
9,897
9,352
712,897
582,195
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 16 -
8
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
229,373
183,135
Company pension contributions to defined contribution schemes
2,642
2,384
232,015
185,519
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2021 - 2).
Remuneration disclosed above include the following amounts paid to the highest paid director:
2022
2021
£
£
Remuneration for qualifying services
137,689
118,643
Company pension contributions to defined contribution schemes
1,321
1,318
9
Interest receivable and similar income
2022
2021
£
£
Interest income
Interest on bank deposits
16
2
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
16
2
10
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
1,887
1,063
Interest on invoice finance arrangements
96,701
29,554
98,588
30,617
Other finance costs:
Interest on finance leases and hire purchase contracts
3,218
78
101,806
30,695
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 17 -
11
Amounts written off investments
2022
2021
£
£
Amounts written back to current loans
-
6,201
Other gains and losses
(67)
(491)
(67)
5,710
12
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
614,758
254,154
Deferred tax
Origination and reversal of timing differences
(9,575)
79,449
Total tax charge
605,183
333,603
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:
2022
2021
£
£
Profit before taxation
3,134,070
1,749,344
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
595,473
332,375
Tax effect of expenses that are not deductible in determining taxable profit
9,710
1,228
Taxation charge for the year
605,183
333,603
13
Dividends
2022
2021
£
£
Final paid
800,000
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 18 -
14
Impairments
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
2022
2021
Notes
£
£
In respect of:
Fixed asset investments
16
67
-
Recognised in:
Amounts written off investments
67
-
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
15
Tangible fixed assets
Plant and machinery
Fixtures, fittings & equipment
Motor vehicles
Total
£
£
£
£
Cost
At 1 November 2021
489,129
75,748
219,546
784,423
Additions
4,680
4,680
Disposals
(28,251)
(28,251)
At 31 October 2022
460,878
80,428
219,546
760,852
Depreciation and impairment
At 1 November 2021
460,135
71,325
74,163
605,623
Depreciation charged in the year
6,173
2,515
37,927
46,615
Eliminated in respect of disposals
(8,682)
(8,682)
At 31 October 2022
457,626
73,840
112,090
643,556
Carrying amount
At 31 October 2022
3,252
6,588
107,456
117,296
At 31 October 2021
28,994
4,423
145,383
178,800
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
2022
2021
£
£
Motor vehicles
107,456
145,383
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 19 -
16
Fixed asset investments
2022
2021
£
£
Listed investments
305
372
Movements in fixed asset investments
Investments
£
Cost or valuation
At 1 November 2021
372
Valuation changes
(67)
At 31 October 2022
305
Carrying amount
At 31 October 2022
305
At 31 October 2021
372
17
Stocks
2022
2021
£
£
Raw materials and consumables
4,061,272
2,711,053
18
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
3,790,029
4,036,881
Amounts owed by group undertakings
1,295,000
1,295,000
Other debtors
661,208
292,054
Prepayments and accrued income
101,993
487,969
5,848,230
6,111,904
Deferred tax asset (note 23)
10,814
1,239
5,859,044
6,113,143
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 20 -
19
Creditors: amounts falling due within one year
2022
2021
Notes
£
£
Bank loans
21
11,333
Obligations under finance leases
22
28,700
28,700
Trade creditors
1,395,963
2,189,014
Corporation tax
614,758
254,154
Other taxation and social security
549,819
527,707
Other creditors
2,322,478
2,446,599
Accruals and deferred income
223,832
143,979
5,135,550
5,601,486
Obligations under finance leases and hire purchase contracts are secured against the assets concerned.
Included within other creditors is a balance of £2,320,111 (2021: £2,444,241) due to RBS Invoice Finance Limited which is secured by a fixed and floating charge over the company's assets.
20
Creditors: amounts falling due after more than one year
2022
2021
Notes
£
£
Bank loans and overdrafts
21
35,889
Obligations under finance leases
22
54,593
82,500
54,593
118,389
Obligations under finance leases and hire purchase contracts are secured against the assets concerned.
21
Loans and overdrafts
2022
2021
£
£
Bank loans
47,222
Payable within one year
11,333
Payable after one year
35,889
Bank loans consist of a CBILS loan payable to Close Brothers Limited. The loan was satisfied in full on 3 May 2022.
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 21 -
22
Finance lease obligations
2022
2021
Future minimum lease payments due under finance leases:
£
£
Within one year
28,700
28,700
In two to five years
54,593
82,500
83,293
111,200
23
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2022
2021
Balances:
£
£
Accelerated capital allowances
10,814
1,239
2022
Movements in the year:
£
Asset at 1 November 2021
(1,239)
Credit to profit or loss
(9,575)
Asset at 31 October 2022
(10,814)
24
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
9,897
9,352
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.
25
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1,050
1,050
1,050
1,050
P & D NORTHERN STEELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2022
- 22 -
26
Operating lease commitments
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:
2022
2021
£
£
Within one year
154,340
154,340
Between two and five years
229,423
383,763
383,763
538,103
27
Related party transactions
P & D Northern Group Limited is the parent company of P & D Northern Steels Limited. At the year end, there is an interest free loan included within other debtors of £1,295,000 (2021: £1,295,000).
Advanced Metallurgical Services Limited is a related party by virtue of common directorships. Goods purchased during the year amounted to £8,468 (2021: £10,248) and management charges receivable during the year amounted to £15,000 (2021: £15,000). At the year end, there is a balance of £1,500 (2021: £NIL) included within trade debtors and an interest free loan included within other debtors of £131,208 (2021: £131,208).
Totally Charged EV Limited is a related party by virtue of common directorships. At the year end, there is an interest free loan included within other debtors of £266,768 (2021: £963).
P & D Northern Asset Management Limited is a related party by virtue of common directorships. At the year end, there is an interest free loan included within other debtors of £192,081 (2021: £86,792).
28
Ultimate controlling party
The directors consider the parent company to be P & D Northern Group Limited, a company registered in England and Wales.
The registered office of P & D Northern Group Limited is Woodstock Distribution Centre, Meek Street, Royton, Oldham, OL2 6HL.
The company is ultimately controlled by J Martin and P Martin by virtue of their combined shareholding in the parent company.
The smallest and largest group into which the financial statements are consolidated into is that headed by P & D Northern Group Limited. A copy of the consolidated accounts can be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.
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