The directors present the strategic report for the year ended 31 December 2021.
Clariant Oil Services UK Ltd ('the Company') is a subsidiary of the global speciality chemicals business, Clariant AG ("the Group"). In 2019 the Group was organised into four business areas; Care Chemicals, Catalysis & Energy, Natural Resources and Plastics & Coatings, of which only Natural Resources was active in the Company.
The Group has five strategic pillars which define its future path:- increase profitability; reposition portfolio; add value with sustainability; foster innovation and R&D; and intensify growth. Clariant's mission is to build leading positions in the business we are in, adopting functional excellence as part of our culture and to create value through appreciating the needs of our customers, our employees, our shareholders and our environment.
Turnover of the Company increased by 17% in 2021 to £34,49 1 ,000 (2020 - £29,549,000). The increase is mainly attributable to increased sales in both domestic and overseas markets.
The results for the Company show a loss before taxation of -£ 180 ,000 (2020 - £905,000). No interim dividend (2020 - £NIL) has been paid. No final dividend was paid or proposed in the year (2020 - £NIL). The main reason for the loss is due to a provision of £1, 128 ,000 relating to a Vat risk in Angola. Changes to importation by the customer were made when the risk was recognised and reviewed with consultants. There is no risk going forward
The Company's assets exceeded its liabilities at the end of the year by £12,0 72 ,000 (2020 - £12,415,000).
The market place within which the Company operates remains highly competitive and challenging. The Company will therefore continue to focus attention on remaining competitive by seeking new business, improving the efficiency of systems and processes and controlling costs where applicable. It is envisaged that the Company will continue to trade profitably in 2022.
The Company's management is continuing to monitor the impact of Covid-19 and the Ukraine invasion on the business. However in 2021 the Company increased sales compared to 2020 and it is expecting to continue this trend in 2022. Profitability and cashflow will move in line with sales and purchases, and the Directors are satisfied that the Company will have sufficient liquidity to continue its business for the foreseeable future.
As a result of Brexit and the challenges of importing goods into the UK during January and February 2021 the Company had low sales in those months. However, the sales have since returned to normal levels of trading.
As a supplier of chemicals and services to the oil industry, the Company is exposed to various general and sector-specific risks. These include, but are not limited to, environmental, product and country risks. These are reviewed and managed with the assistance of specialists within the Group and external advisers. Specific risk evaluations may be carried out by functions such as Internal Audit, Environmental, Health and Safety and Legal. The Company maintains appropriate levels of insurance cover.
Environmental risks
Environmental and safety issues are addressed as part of the focus on sustainable development in all aspects of production, transport, distribution and use of products and services. The risks identified are routinely reviewed and regular audits monitor compliance with legislative requirements and Group guidelines.
Mandatory principles on Environment, Safety and Health ("ESH") are laid down in the Group's ESH regulations which form an integral part of business processes and strategic planning.
Corporate Sustainability & Regulatory Affairs have built on the Group's principles by drawing up an ESH strategy, a set of guidelines and targets that are mandatory worldwide and by assigning responsibilities. As well as complying with national laws and regulations, the ESH policy commits Clariant to ethical and sustainable operations in all business activities by participation in the Global Responsible Care initiative of the chemical industry.
Product risks
The Group's integrated product policy ensures the inclusion of environmental and safety issues in all processes along the entire value chain. From supplier selection to providing customers with comprehensive information and services, the Company ensures that its products are used in ways that are safe, which minimise environmental impact and that they can be properly disposed of. The Company is continuing to monitor any developments with regards to Brexit and has implemented appropriate measures to ensure that its products will remain compliant with all applicable regulations.
Country risks
The Company is trading with partners in some countries which have higher than average socio-political risks. These risks are regularly reviewed and appropriate measures are taken to mitigate where considered necessary.
The management team uses a series of KPls to monitor and manage performance against strategic objectives. The principal KPls include:
Growth of sales(%)
Control of selling, general and administrative overheads ("SG&A" costs) as a percentage of turnover Improvement in net working capital (debtor and stock days)
Turnover for the financial year was £34,49 1 ,000 which was 17% above the previous year due to increased sales in domestic and overseas markets. SG&A costs as a percentage of turnover were 38.7% in 2021 compared to 40.3% in 2020.
Debtor days are the number of days third party sales represented by the third party debtors. Stock days are the number of days cost of goods sold represented by the value of stock. Net working capital is monitored on an on¬ going basis in order to maximise cash flow. Debtor days increased from 59 in 2020 to 64 days in 2021, due to increased sales to Africa with longer payment terms. Stock days decreased from 42 days in 2020 to 30 days in 2021. The decrease in stock days is due to the increased sales to the Africa region at the end of the year.
As part of its commitment to its environmental health and safety obligations the Company monitors the lost time accident rate, which for 2021 was NIL (2020 - NIL). An LTA is recorded where an employee is off work the day after an accident, and the rate is calculated per 200,000 hours worked. There were no prosecutions, major accidents or environmental incidents in the current or prior year.
In addition to Company law, Clariant provides a clear framework within which the directors must operate, and these are set out within the Clariant Bylaws of the Executive Committee and the associated Terms of Reference. The directors ensure that they act in good faith, using their own skill and judgment to assess the long term consequences of their decisions, in order to promote the overall success of the Company. The directors recognise the need to fully engage with a diverse range of stakeholders and consider the interests of these groups when making decisions to ensure that they act fairly between members. The directors promote the Company's values and reinforce the Clariant Code of Ethics throughout the organisation to support employees and the wider workforce to act in line with these values and safeguard compliance with local regulations.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2021.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The principal risks and uncertainties are discussed in the Strategic Report.
Engagement with employees is vital for Clariant's journey to a high performing organisation. Employee engagement starts with providing a shared understanding on Corporate, Business and Service Unit's initiatives to all its employees. Therefore, Clariant is continuously communicating all corporate initiatives throughout the organisation. Communication is cascaded through to the local Company whereby information is then shared through local email correspondence, town hall meetings and team meetings.
In order to secure our long-term success, every employee must commit to a shared goal, shaping who we are and what we stand for: our Vision, Mission and Values. They describe what is important to us, where we want to go, and how we aim to get there. They give us direction and send a clear signal to all stakeholders supporting our business. The Corporate values also form an integral part of the annual performance management cycle, which all UK employees participate in. Performance Management at Clariant is a key driver for employee's day-to-day actions, supporting continuous development and growth. The process enables regular feedback on performance, based on constructive dialogue, respect and trust.
All permanent employees in the UK also participate in the group bonus plans, which reward employees with an annual cash bonus based on the group company achievements. The key principle of the plans is to ensure a unified "One Clariant" culture whereby employees have a common understanding of the Company performance, and the financial factors affecting this.
Since 2014, Clariant has committed to regular employee engagement surveys to assess levels of engagement and to continuously seek a better understanding of how employees experience their working environment. Clariant uses these assessments as a basis for appropriate and necessary activities and initiatives to enhance and drive future engagement.
The directors' view on the future outlook for the company is outlined in the Strategic Report.
BHP LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Clariant Oil Services UK Ltd (the 'company') for the year ended 31 December 2021 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies . The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
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
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.
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' r eport 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below .
We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates and considered the risk of acts by the company that were contrary to applicable laws and regulations, including fraud. We designed audit procedures to respond to the risk, recognising that 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 involved deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
We focused on laws and regulations, relevant to the company, which could give rise to a material misstatement in the financial statements. Our tests included agreeing the financial statement disclosures to underlying supporting documentation, enquiries with management, review of company minutes and legal expenses. There are inherent limitations in the audit procedures described 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.
As part of our audit procedures, we addressed the risk of management override of internal controls, including testing of journals and review of nominal ledger. We evaluated whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
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.
Clariant Oil Services UK Ltd ("the Company") manufactures and supplies chemicals and services to the oil industry, predominantly in the United Kingdom and Africa.
The Company is a private company, incorporated and domiciled in England, United Kingdom. The address of its registered office is Airedale House, 423 Kirkstall Road, Leeds, LS4 2EW.
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.
As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS;
the requirements of paragraphs 45(b) and 46-52 if IFRS 2 Share Based Payments;
the requirements of IFRS 7 Financial Instruments: Disclosures;
the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements;
the requirements of IAS 7 Statement of Cash Flows;
the requirements of paragraphs 30 and 31 of IAS 8 accounting Policies, Changes in Accounting Estimates and Errors;
the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures;
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
Where required, equivalent disclosures are given in the group accounts of Clariant AG. The group accounts of Clariant AG are available to the public and can be obtained from Investor Relations at Hardstrasse 61, CH-4133, Pratteln, Switzerland.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Assets under construction are not depreciated and are transferred to their appropriate category when they are available for use, at which point depreciation starts.
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.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The tax expense represents the sum of the tax currently payable and deferred tax.
At inception, the company assesses whether a contract is , or contains , a lease within the scope of IFRS 16. A contract is , or contains , a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within tangible fixed assets, apart from those that meet the definition of investment property .
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other tangible fixed assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in : future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
(a) Useful economic lives of property, plant and equipment
The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note xx for the carrying amount of the property, plant and equipment, and note 1.4 for the useful economic lives for each class of assets.
(b) Inventory provisioning
The Company manufactures and distributes chemical products which often have a finite shelf life. As a result it is necessary to consider the recoverability of the cost of inventory and the associated provisioning required. When calculating the inventory provision, management considers the nature and condition of the inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials. See note 12 for the net carrying amount of the inventory and associated provision.
(c) Impairment of trade receivables
The company makes an estimate of the recoverable value of trade and other receivables. When assessing impairment of trade and other receivables, management considers factors including the credit rating of the receivable, the ageing profile of receivables and historical experience. See note 13 for the net carrying value of the receivables and associated impairment provision.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
Included in wages and salaries are additional employment costs of £NIL (2020 - £266,000) in respect of severance payments.
Due to the impact of Covid-19 pandemic in 2020, the Company took advantage of available government support schemes including contribution towards wages and salaries of £NIL in the year ended 31 December 2021 (2020 - £9,000). Grants received have been netted off with staff costs in the statement of comprehensive income.
Only one director received remuneration through the Company for services. The other directors received no remuneration for their services to the Company during the year ended 31 December 2021 (2020 - £NIL). However, they are remunerated for their services to the UK Group and their costs are borne by a fellow subsidiary company, Clariant Services UK Limited, and consequently no figures are included above.
The directors' emoluments paid by Clariant Services UK Limited are solely in respect of duties under the directors' contracts of employment with Clariant Services UK Limited and no separate directors' fees are payable.
The charge for the year can be reconciled to the (loss)/profit per the profit and loss account as follows:
At 31 December 2021 the enacted rate of corporation tax due to come into force on 1 April 2023 was 25%, an increase from the current rate of 19%. However, it was announced in the fiscal statement on 24 September 2022 that the increase to 25% is to be reversed and that the corporation tax rate will remain at 19%.
In light of this, FRS101 requires these accounts to uplift the deferred tax asset to reflect the enacted rate of 25%. However, this will be reversed in the year ended 31 December 2022 financial statements if the change to maintain the corporation tax rate at 19% is enacted before that date. The impact of this would be to decrease the deferred tax asset by £8,000.
Tangible fixed assets includes right-of-use assets, as follows:
Stocks are stated after provisions for impairment of £24,000 (2020 - £1,000).
The difference between purchase price or production cost of stocks and their replacement cost is not material.
Trade receivables, which are all due within one year, are stated after provisions for impairment of £40,000 (2020 - £NIL).
Included in amounts owed by group undertakings are loans receivable of £6,236,000 (2020 - £9,872,000) which are unsecured and repayable on demand with no interest charged.
Included in amounts owed by group undertakings is a loan receivable of £NIL (2020 - £749,000) denominated in Euros, repayable on demand with no interest charged.
Other amounts owed by group undertakings represents trading balances, which are unsecured, do not bear interest and are payable in accordance with the Group's inter-company payment terms.
Amounts owed to group undertakings represent trading balances, which are unsecured, do not bear interest and are payable in accordance with the Group's inter-company payment terms.
Included in amounts owed to group undertakings is a loan payable of £231,000 (2020 - £NIL) denominated in Euros, repayable on demand with no interest charged.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
Deferred tax assets are expected to be recovered within one year.
The VAT provision arises from the introduction of VAT in Angola in 2019. Ernst and Young in Angola recognised that Clariant Oil Services UK Limited has a VAT registration risk. Once the risk was recognised, sales to Angola were stopped. Sales commenced once customers agreed to import the goods themselves and therefore there is no risk going forward.
The value of the provision is based on sale imported by the joint venture on behalf of Clariant Oil Services UK Limited, between October 2019 and August 2020. The value of the provision is 14% import tax and 14% sales tax. There is also within the provision an amount for possible fines and interest.
The dilapidation provision arises from the legal obligation to reinstate leasehold properties to their original state at the end of the lease terms. It is envisaged that these amounts will be settled at the end of the leases.
The Company is a participating employer of the Clariant Pension Plan (the "Plan"), a scheme which is managed by an independent Trustee body and comprises both Defined Benefit and Defined Contribution sections. The Plan is funded by contributions from the Company and its employees. Total contributions in respect of the Defined Benefit Section are based on the advice of a qualified independent actuary. On 31 December 2001 the existing Defined Benefit Section of the Plan was closed to new members and a new Defined Contribution Section of the Plan was established for new employees from 1 January 2002.
On 1 April 2016 the Defined Benefit Section of the Plan was closed for future accrual and all employees transferred to the Defined Contribution Section of the Plan.
The details of the main scheme are as follows:
The Clariant Pension Plan - Defined Benefit Section
The most recent actuarial valuation was carried out at 1 April 2021 by an independent actuary using the projected unit method. The review indicated that the value of the assets of the Plan exceeded the benefits earned up to the valuation date by £11,300,000 allowing for a pre-retirement discount rate of Gilt Curve plus a term margin of 1.5% and a post retirement discount rate of Gilt Curve +0.25%. Future pension increases range between 0% and 5%, dependent on the terms of the pension offered. The market value of the Plan's assets was £404,500,000 as at 1 April 2021.
The Clariant Pension Plan - Defined Contribution Section
The Defined Contribution Section is funded by the payment of contributions into personal accounts held under trust. These personal accounts are independent of the Company and are invested with a professional investment manager appointed by the Trustee. The charge against profit is the amount of employer contributions payable to the pension scheme in respect of the accounting year.
IAS 19 disclosures
As permitted by IAS 19 'Employee benefits' the contributions paid by the Company to the Plan are accounted for as though to a defined contribution scheme. This arises since the share of assets and liabilities relating to the Company cannot be separately identified.
At 31 December 2021 the surplus of the Plan was £36,334,000 (2020 - £27,509,000). Full details of the Plan are given in the financial statements of the principal employer of the Plan, Clariant Production UK Ltd, whose financial statements are publicly available.
The immediate parent undertaking is Clariant Production UK Ltd.
The ultimate parent undertaking and controlling party is Clariant AG, a company incorporated in Switzerland.
Clariant AG is the parent undertaking of the smallest and largest group of undertakings to consolidate these financial statements at 31 December 2021. The consolidated financial statements of Clariant AG can be obtained from Investor Relations at Hardstrasse 61, CH-4133, Pratteln, Switzerland.