Company Registration No. 01985443 (England and Wales)
SPECIAL QUALITY ALLOYS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
SPECIAL QUALITY ALLOYS LIMITED
COMPANY INFORMATION
Directors
A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
R Wood
D M Pryce
D J Matthews
J Miller
Secretary
A C Beardshaw
Company number
01985443
Registered office
Bacon Lane
Sheffield
S9 3NH
Auditor
BHP LLP
2 Rutland Park
Sheffield
S10 2PD
Bankers
National Westminster Bank plc
42 High Street
Sheffield
S1 2GE
SPECIAL QUALITY ALLOYS LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2 - 3
Independent auditor's report
4 - 5
Statement of comprehensive income
6
Balance sheet
7
Statement of changes in equity
8
Statement of cash flows
9
Notes to the financial statements
10 - 21
SPECIAL QUALITY ALLOYS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2020
- 1 -
The directors present the strategic report for the year ended 31 May 2020.
Fair review of the business
The principal activities of the company continue to be the stockholding and distribution of bar stock, open die forging and ring rolling, primarily in nickel based superalloys and special steels.
The prime markets for these alloys include oil & gas, chemical processing, marine, power generation & general engineering.
Special Quality Alloys
had a very strong year and the Board are pleased to report that the company broke all previous records for both turnover and profitability. Both domestic and international order intake was excellent. The Board’s historical decisions of merging the company with our forge business, then commencing an ambitious capital investment programme in both new facility construction and expansion of hot work capabilities, have all paid off. Its U.S. facility experienced a similarly strong performance, exceeding Plan and coming in at the higher end of expectations. Again, the Board agreed to invest in new processing equipment to ensure the business can maintain and improve productivity by utilising the latest technology.
The Board considers the year to have been very successful and indeed it would have been more so had we not experienced the arrival of the pandemic in the final quarter. Ordinarily we would report that the business outlook now remains very positive. However, it would be naive to believe that the Group does not face a challenging time ahead as the world economy, and specifically the demand for oil & gas, is shrinking fast in the short term.
However, the Board can report that at the onset of the pandemic, all companies took swift and proactive decisions to limit the impact of this development. Many introduced revised shift patterns along with the adoption and development of innovative remote working protocols for staff and customers alike, with the key goal of maintaining customer service and overall performance.
It is in these more uncertain times that the careful and prudent financial approach traditionally practiced by the Board will prove critical to the ongoing sustainability of the Group.
Results and dividends - The results for the year are set out on page
6
.
A K Beardshaw
Director
23 April 2021
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2020
- 2 -
The directors present their annual report and financial statements for the year ended 31 May 2020.
Principal activities
The principal activities of the company continue to be the manufacture and supply of nickel based super-alloys and special steels.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
A K Beardshaw
S G S Marshall
B J Beardshaw
A C Beardshaw
R Wood
D M Pryce
D J Matthews
J Miller
Results and dividends
The results for the year are set out on page 6.
Ordinary dividends were paid amounting to £2,650,000. The directors do not recommend payment of a final dividend.
Auditor
The auditor, BHP LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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;
-
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-
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.
SPECIAL QUALITY ALLOYS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
- 3 -
Statement of disclosure to auditor
So far as the directors are aware, there is no relevant audit information of which the company's auditor are unaware. Additionally, the directors 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 auditors are aware of that information.
On behalf of the board
A K Beardshaw
Director
23 April 2021
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 4 -
Opinion
We have audited the financial statements of Special Quality Alloys Limited (the 'company') for the year ended 31 May 2020 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 31 May 2020 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.
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
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
-
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue
.
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.
SPECIAL QUALITY ALLOYS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SPECIAL QUALITY ALLOYS LIMITED
- 5 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identifie
d
material misstatements in the strategic report and the directors'
r
eport
.
We have nothing to report in respect of the following matters where 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 directors' 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'
r
esponsibilities
s
tatement, 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.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities
.
This description forms part of our auditor’s 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.
John Warner (Senior Statutory Auditor)
for and on behalf of BHP LLP
23 April 2021
Chartered Accountants
Statutory Auditor
2 Rutland Park
Sheffield
S10 2PD
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2020
- 6 -
2020
2019
Notes
£
£
Turnover
2
41,550,506
34,893,334
Cost of sales
(31,680,651)
(27,005,975)
Gross profit
9,869,855
7,887,359
Distribution costs
(66,769)
(57,181)
Administrative expenses
(2,826,392)
(2,424,526)
Other operating income
5,822
24,170
Operating profit
3
6,982,516
5,429,822
Interest receivable and similar income
6
8,406
5,900
Interest payable and similar expenses
7
(755)
Profit before taxation
6,990,167
5,435,722
Tax on profit
8
(1,381,465)
(1,039,122)
Profit for the financial year
5,608,702
4,396,600
The profit and loss account has been prepared on the basis that all operations are continuing operations.
SPECIAL QUALITY ALLOYS LIMITED
BALANCE SHEET
- 7 -
2020
2019
Notes
£
£
£
£
Fixed assets
Tangible assets
10
5,355,650
4,952,451
Investments
11
1,097,866
492,919
6,453,516
5,445,370
Current assets
Stocks
13
19,924,179
16,770,580
Debtors
14
9,783,198
8,977,703
Cash at bank and in hand
5,041,686
3,833,641
34,749,063
29,581,924
Creditors: amounts falling due within one year
15
(13,055,661)
(10,011,241)
Net current assets
21,693,402
19,570,683
Total assets less current liabilities
28,146,918
25,016,053
Provisions for liabilities
16
(1,228,994)
(1,056,831)
Net assets
26,917,924
23,959,222
Capital and reserves
Called up share capital
19
100,000
100,000
Profit and loss reserves
26,817,924
23,859,222
Total equity
26,917,924
23,959,222
The financial statements were approved by the board of directors and authorised for issue on 23 April 2021 and are signed on its behalf by:
A K Beardshaw
Director
Company Registration No. 01985443
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2020
- 8 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 June 2018
100,000
22,112,622
22,212,622
Year ended 31 May 2019:
Profit and total comprehensive income for the year
-
4,396,600
4,396,600
Dividends
9
-
(2,650,000)
(2,650,000)
Balance at 31 May 2019
100,000
23,859,222
23,959,222
Year ended 31 May 2020:
Profit and total comprehensive income for the year
-
5,608,702
5,608,702
Dividends
9
-
(2,650,000)
(2,650,000)
Balance at 31 May 2020
100,000
26,817,924
26,917,924
SPECIAL QUALITY ALLOYS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2020
- 9 -
2020
2019
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
21
6,998,427
7,428,514
Interest paid
(755)
Income taxes paid
(1,343,809)
(941,586)
Net cash inflow from operating activities
5,653,863
6,486,928
Investing activities
Purchase of tangible fixed assets
(1,178,873)
(2,259,905)
Proceeds on disposal of tangible fixed assets
176,692
29,500
Proceeds on disposal of subsidiaries
(604,947)
Interest received/(paid)
8,406
5,900
Net cash used in investing activities
(1,598,722)
(2,224,505)
Financing activities
Repayment of borrowings
(197,096)
Dividends paid
(2,650,000)
(2,650,000)
Net cash used in financing activities
(2,847,096)
(2,650,000)
Net increase in cash and cash equivalents
1,208,045
1,612,423
Cash and cash equivalents at beginning of year
3,833,641
2,221,218
Cash and cash equivalents at end of year
5,041,686
3,833,641
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
- 10 -
1
Accounting policies
Company information
Special Quality Alloys Limited is a
private
company
limited by shares
incorporated in England and Wales.
The registered office is
Bacon Lane, Sheffield, S9 3NH.
1.1
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 a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption under section 400 of the
Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group
.
Special Quality Alloys Limited is a wholly owned subsidiary of Special Steel Co. Limited and the results of Special Quality Alloys Limited are included in the consolidated financial statements of Special Steel Co. Limited which are available from Bacon Lane, Sheffield, S9 3NH.
1.2
Going concern
A
true
t the time of approving the financial statements
,
t
he directors have a reasonable expectation that the
company
has adequate resources to continue in operational existence for the foreseeable future. Thus
t
he directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
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.
1.4
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:
Land and buildings Leasehold
Over term of lease
Plant and machinery
10% or 20% straight line
Fixtures, fittings & equipment
20% straight line
Computer equipment
20% straight line
Motor vehicles
25% straight line
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
1
Accounting policies
(Continued)
- 11 -
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
.
1.5
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.
1.6
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.
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.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (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.
1.7
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.
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.
1.8
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.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
1
Accounting policies
(Continued)
- 12 -
1.9
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.
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.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
1
Accounting policies
(Continued)
- 13 -
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
paymen
ts 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. A
m
ounts 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
s
ubsequently 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 though 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.10
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.
1.11
Derivatives
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
1.12
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
1
Accounting policies
(Continued)
- 14 -
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 taxation is provided at appropriate rates on all timing differences using the liability method.
1.13
Provisions
Provisions are recognised when the
company
has a legal or constructive present obligation as a result of a past event, it is probable that the
company
will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision i
s
measured at present value
,
the unwinding of the discount is recognised as a finance cost in profit or loss in the period
in which
it arises.
1.14
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.
1.15
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.16
Leases
Rentals payable under operating leases,
including
any lease incentives received, are charged to
profit or loss
on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease
s
asset are consumed.
1.17
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
- 15 -
2
Turnover and other revenue
An analysis of the company's turnover is as follows:
2020
2019
£
£
Turnover
Sales
41,550,506
34,893,334
Turnover analysed by geographical market
2020
2019
£
£
United Kingdom
22,979,086
21,334,273
Other markets
18,571,420
13,559,061
41,550,506
34,893,334
3
Operating profit
2020
2019
Operating profit for the year is stated after charging/(crediting):
£
£
Exchnage (gains)/losses
51,616
(70,351)
Fees payable to the company's auditor for the audit of the company's financial statements
10,900
6,100
Depreciation of owned tangible fixed assets
631,884
436,270
Profit on disposal of tangible fixed assets
(32,900)
(29,500)
Operating lease charges
106,000
103,781
4
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2020
2019
Number
Number
Production
93
83
Admin
23
20
Directors
5
5
Total
121
108
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
4
Employees
(Continued)
- 16 -
Their aggregate remuneration comprised:
2020
2019
£
£
Wages and salaries
3,927,630
3,479,522
Social security costs
383,460
341,270
Pension costs
178,166
138,718
4,489,256
3,959,510
5
Directors' remuneration
2020
2019
£
£
Remuneration for qualifying services
408,058
398,468
Company pension contributions to defined contribution schemes
44,267
40,373
452,325
438,841
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2019 - 4).
Remuneration disclosed above include the following amounts paid to the highest paid director:
2020
2019
£
£
Remuneration for qualifying services
124,593
119,784
6
Interest receivable and similar income
2020
2019
£
£
Interest income
Interest on bank deposits
8,397
5,900
Other interest income
9
Total income
8,406
5,900
7
Interest payable and similar expenses
2020
2019
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
755
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
- 17 -
8
Taxation
2020
2019
£
£
Current tax
UK corporation tax on profits for the current period
1,157,465
920,122
Deferred tax
Origination and reversal of timing differences
224,000
119,000
Total tax charge
1,381,465
1,039,122
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:
2020
2019
£
£
Profit before taxation
6,990,167
5,435,722
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2019: 19.00%)
1,328,132
1,032,787
Tax effect of expenses that are not deductible in determining taxable profit
2,426
1,313
Effect of change in corporation tax rate
32,194
(13,980)
Fixed asset differences
18,865
18,833
Deferred tax not recognised
(152)
169
Taxation charge for the year
1,381,465
1,039,122
9
Dividends
2020
2019
£
£
Interim paid
2,650,000
2,650,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
- 18 -
10
Tangible fixed assets
Land and buildings Leasehold
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 June 2019
989,915
6,108,980
288,708
321,199
357,630
8,066,432
Additions
847,990
150,365
17,254
163,264
1,178,873
Disposals
(123,000)
(107,602)
(230,602)
At 31 May 2020
989,915
6,833,970
439,073
338,453
413,292
9,014,703
Depreciation and impairment
At 1 June 2019
499,118
1,863,879
270,763
275,779
204,440
3,113,979
Depreciation charged in the year
98,992
428,757
8,834
23,255
72,046
631,884
Eliminated in respect of disposals
(6,150)
(80,660)
(86,810)
At 31 May 2020
598,110
2,286,486
279,597
299,034
195,826
3,659,053
Carrying amount
At 31 May 2020
391,805
4,547,484
159,476
39,419
217,466
5,355,650
At 31 May 2019
490,797
4,245,099
17,945
45,420
153,190
4,952,451
11
Fixed asset investments
2020
2019
Notes
£
£
Investments in subsidiaries
12
1,097,866
492,919
Movements in fixed asset investments
Shares in group undertakings
£
Cost or valuation
At 1 June 2019
492,919
Additions
604,947
At 31 May 2020
1,097,866
Carrying amount
At 31 May 2020
1,097,866
At 31 May 2019
492,919
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
- 19 -
12
Subsidiaries
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Special Quality Alloys Inc
United States of America
Ordinary
95.00
13
Stocks
2020
2019
£
£
Finished goods and goods for resale
19,924,179
16,770,580
14
Debtors
2020
2019
Amounts falling due within one year:
£
£
Trade debtors
9,503,338
8,288,523
Amounts due from group undertakings
148,516
571,081
Prepayments and accrued income
131,344
118,099
9,783,198
8,977,703
15
Creditors: amounts falling due within one year
2020
2019
£
£
Trade creditors
7,346,872
5,990,121
Consignment stock creditors
1,245,543
1,442,639
Amounts due to group undertakings
2,914,390
1,050,770
Corporation tax
193,425
379,769
Other taxation and social security
709,005
622,472
Other creditors
23,361
Accruals and deferred income
623,065
525,470
13,055,661
10,011,241
16
Provisions for liabilities
2020
2019
£
£
Other liabilities
730,994
782,831
Deferred tax liabilities
17
498,000
274,000
1,228,994
1,056,831
Movements on provisions apart from retirement benefits and deferred tax liabilities:
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
16
Provisions for liabilities
(Continued)
- 20 -
Other liabilities
£
At 1 June 2019
782,831
Utilisation of provision
(51,837)
At 31 May 2020
730,994
17
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Liabilities
Liabilities
2020
2019
Balances:
£
£
ACAs
498,000
274,000
2020
Movements in the year:
£
Liability at 1 June 2019
274,000
Charge to profit or loss
224,000
Liability at 31 May 2020
498,000
18
Retirement benefit schemes
2020
2019
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
178,166
138,718
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.
19
Share capital
2020
2019
£
£
Ordinary share capital
Issued and fully paid
100,000 Ordinary shares of £1 each
100,000
100,000
SPECIAL QUALITY ALLOYS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
19
Share capital
2020
2019
£
£
(Continued)
- 21 -
20
Capital commitments
Amounts contracted for but not provided in the financial statements:
2020
2019
£
£
Acquisition of tangible fixed assets
-
579,650
21
Cash generated from operations
2020
2019
£
£
Profit for the year after tax
5,608,702
4,396,600
Adjustments for:
Taxation charged
1,381,465
1,039,122
Finance costs
755
Investment income
(8,406)
(5,900)
Gain on disposal of tangible fixed assets
(32,900)
(29,500)
Depreciation and impairment of tangible fixed assets
631,884
436,270
Decrease in provisions
(51,837)
(7,816)
Movements in working capital:
Increase in stocks
(3,153,599)
(2,259,886)
(Increase)/decrease in debtors
(805,497)
1,980,624
Increase in creditors
3,427,860
1,879,000
Cash generated from operations
6,998,427
7,428,514
22
Analysis of changes in net funds
1 June 2019
Cash flows
31 May 2020
£
£
£
Cash at bank and in hand
3,833,641
1,208,045
5,041,686
Borrowings excluding overdrafts
(1,442,639)
197,096
(1,245,543)
2,391,002
1,405,141
3,796,143
2020-05-31
2019-06-01
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CCH Software
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