The directors present the strategic report for the year ended 30 April 2021.
Business Energy Solutions Ltd has seen total gas consumption within the portfolio decline which is attributable to a combination of factors; decline in UK gas consumption in particular during COVID-19 lockdowns; seasonal variation versus the previous year; slight decline in average customer size and COVID-19 lockdowns. The overall business performance was in line with the Directors’ expectations. Turnover for the year was £14.5m (2020: £17.7m) a decrease of 18%. Reported profit has reduced due to the impact of increasing wholesale prices The business model and target market remain consistent with the prior year, and the business offers Fixed Rate or Variable products to a predominantly SME and small corporate customer base.
The financial year covered by these accounts saw the continued effect of COVID-19 lockdowns, during the lockdown period we observed a reduction in income. This alongside a delay in the reduction in industry costs resulted in difficult trading conditions for the industry and highlighted the necessity to reduce administration costs where possible. Following cost saving measures implemented we have seen the business return to a strong position and a profitable outlook for future years.
The overall balance sheet value continues to remain strong at £6. 4 m (2020: £6.9m) and the directors are satisfied with this, believing it places the company in a strong and stable position financially for the future.
Objectives and Strategy
The objectives of the company are to deliver long term value to the owners. The Board’s strategy to achieve this is based upon the following principles:
Continued growth by continuing to offer relevant, competitively priced products into core markets, underpinned by high quality service for customers.
Commitment to the rollout of smart metering and other industry initiatives to improve the accuracy of billing and customer experience.
To attract, retain and develop exceptional senior managers to continuously improve the organisation’s capabilities and present challenge to the dominant suppliers in the market.
Diversification into new market segments or adjacent markets to support and spread growth.
The company seeks to manage risk through a combination of Board oversight, operational routines, and policies and the principal risks are aggregated as follows:
Commodity r isk
Commodity risk being the risk of volatility in the price of wholesale energy impacting customer margins. The company seeks to manage this risk by utilising forward energy contracts that align to the term and pricing of customer contracts.
Liquidity r isk
The risk that the company is unable to meet its financial obligations due to insufficient credit or cash reserves. This is managed on a short and long term basis with reference to internal working capital strategies and access to external funding.
Credit r isk
The risks of bad debt from the customer portfolio and the risk of failure of a counterparty or supplier to meet its contractual obligations. A credit onboarding process is followed for new customers, which predominantly included direct debit as the principal means of payment and trade debtors are monitored on an ongoing basis. To reduce this risk further 25 additional field agents have been subcontracted to ensure that debts can collected on a timely basis.
Brexit r isk
Following the UK leaving the European Union on 31 January 2020, uncertainty has increased surrounding the outlook of the UK economy. Although at present there appears to be minimal impact on consumer confidence, this uncertainty may ultimately impact on market confidence and as a result could potentially impact on the demand and price for products/services, which in turn may affect revenue, profit and cash flow.
Coronavirus r isk
At the time of filing we are still faced with the effect of Coronavirus (COVID19). We now appear to be past the worst affects of the lockdowns and the suppression of the economy. We have observed in recent months the opening of the economy and increase in trade.
Whilst no one can predict the future impact on the economy, the company has made steps to ensure to the company will emerge from the pandemic in a strong place. This includes eliminating unnecessary meetings and travel, preparations in case employees are recommended to self-isolate, implementing improved hygiene processes and protecting the company’s liquidity. The company is monitoring the situation and is in continuing close liaison with both its trading partners and its employees.
From a financial perspective, the company has utilised the available payment deferral schemes offered by HM R evenue and C ustoms to ease cash flow and has now made significant repayments of the amounts deferred.
The UK non-domestic supply market is highly competitive, and while risk is present in all markets, this continues to be an attractive place to do business.
Operating in a regulated market opens up regulatory and political risks as well as costs, and it is a feature of normal operations that such risks, costs and changes must be accommodated, albeit that they may cause disruption and/or prices changes for customers.
The business has continued to mitigate the risks noted above through the following strategies:
Ensuring the business has the right skills and capabilities to monitor and maintain compliance with regulatory requirements.
Offering products that pass or share risk with end users combined with comprehensive hedging strategies to reduce exposure.
In determining whether the c ompany’s accounts can be prepared on a going concern basis, the directors considered the c ompany’s business activities together with the factors likely to affect its future development, performance, its financial position including cash flow, liquidity position, borrowing facilities and the risks and uncertainties relating to its business activities. These include the impact of COVID-19 during the year and post balance sheet and also the recoverability of related party debts. The directors regularly review these factors to ensure that any risks are recognised and managed effectively.
Financial and non-financial key performance indicators
The board reviews the company’s KPIs at the monthly board meetings. These include operational and financial measurements.
The key operational KPIs for the business are customer retentions, % of customers on direct debit and bad debts written off.
Customer retentions is key to the business as losing customers results in a loss of revenue. From April 2020 to April 2021 79.7% of customers have been retained.
Having customers on direct debit improves the amount of debt that is collected from customers. This rose during the year to 84% at 30 th April 2021 from 81% at 30 th April 2020, this was fall occurred in March and April 2020 and was a direct result of the COVID-19 lockdowns. This metric has since recovered back to 86% and continues to strengthen each month.
The amount of customer debt that is written off is a significant KPI for the business as this illustrates the performance of the customer relationships team within the company. The bad debt write off has improved this year largely as a result of an increased focus of collecting customer debt, a fall from 7.5% of revenue in 2020 to 7.2% in 2021.
The company uses key financial performance indicators to monitor its business. These include:
2021 2020
Turnover: £14,561,960 £17,669,149
Gross profit margin: 3 6 . 88 % 52.44%
Gross profit margin (adjusted for CJRS) : 41.37% 52. 71 %
Profit/(Loss) before tax: (£ 729,338 ) £940,423
This financial years performance has been significantly impacted by a rise in wholesale prices of Gas. During this financial year the impact of increasing the costs has been absorbed. There will an increase in next years revenue as the companies tracker product delays revenue increases to customers.
As at 30 April 2021 , the c ompany’s cash position was £ 385k (20 20: £ 340k ). There is currently no external bank debt in the c ompany, a debenture was due to Axpo Solutions AG presented within o ther creditors.
The company is continuing to provide commercial gas and related services. The company expects to continue with its current activities in future periods. It is not expected that the company will be directly impacted by ‘Brexit’ due to the nature and market of its customer base.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 April 2021.
The results for the year are set out on page 11.
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 auditor, Cowgill Holloway LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' 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.
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.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below .
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussions with the directors (as required by auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the company's license to operate. We identified the following areas as those most likely to have such an effect: laws related to energy supply activities and the regulated nature of the energy industry.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Through these procedures we did not become aware of any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
We design procedures in line with our responsibilities, outlined below to detect material misstatement due to fraud:
Matters are discussed amongst the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud
Identifying and assessing the design and effectiveness of controls that management have in place to prevent and detect fraud
Detecting and responding to the risks of fraud following discussions with management and enquiring as to whether management have knowledge of any actual, suspected or alleged 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Business Energy Solutions Ltd is a private company limited by shares incorporated in the United Kingdom . The registered office is Parkside Stand, Fleetwood Town Football Club, Park Avenue, Fleetwood, Lancashire, FY7 6TX.
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 £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements , including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group . T he company has therefore taken advantage of e xemptions from the following disclosure requirements:
- Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares ;
- Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
- Section 33 ‘Related Party Disclosures’ : Compensation for key management personnel .
The financial statements of the company are consolidated in the financial statements of BES Utilities Holding Ltd. These consolidated financial statements are available from its registered office, Parkside Stand , Fleetwood Town Football Club, Park Avenue, Fleetwood, Lancashire, FY7 6TX .
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss .
Basic financial assets, which include debtors 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, 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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors , bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Turnover derived from the supply of gas includes an estimate of the value of gas supplied to customers between the date of the last meter reading and the end of the reporting period. Estimation of the number of units consumed but not yet processed through the settlement process are based on industry data until final reconciliation data is received.
Similarly purchase volumes are also subject to the same degree of estimation, with associated settlement costs dependent on the receipt of final reconciliation data.
Trade and other debtors/ creditors which have no stated interest rate, do not constitute a financing transaction, and are due to be settled within one year and as such are initially and subsequently measured at the undiscounted amount of consideration expected to be received, net of impairment.
The company has long term commercial contracts in place for the purchase of gas. On the grounds that these contracts are held for the purpose of the delivery of a non-financial item in accordance with the company's expected purchase and sale requirements, the own use exemption has been applied. As a result, the agreements do not fall within the scope of Section 12 of FRS102 and are not accounted for as derivatives.
Trade debtors are stated net of the allowance for the impairment of bad and doubtful debts. Debtor balances are provided against based on the date the invoice is raised. Receivables are categorised based on customer and account type, attributing varying risk profiles to each possibility. The percentages applied to each category of aged receivables is based on the average loss for that category, based on historic experience.
Non-trade legal fees have been incurred in relation to a one-off ongoing legal matter and the costs are defined as exceptional on the basis they have not been incurred as a result of regular trade.
Redundancy costs are considered exceptional as they arose as a direct result of Covid-19 and subsequent restructuring of teams.
Government grants received in the year related to claims made for the Coronavirus Job Retention Scheme.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
During the year wage costs have been recharged to BES Commercial Electricity Ltd, a fellow subsidiary company of the group, totalling £ 5,198,561 (2020: £6,259,016). This recharge is calculated on a customer basis and is not included within the above costs.
During the year directors remuneration has been recharged to BES Commercial Electricity Ltd, a fellow subsidiary company of the group, totalling £330,273 (20 20 : £3 30 , 273 ). This included £165,137 (20 20 : £1 65 , 137 ) in relation to the highest paid director. This recharge is not included within the above cost.
The charge for the year can be reconciled to the (loss)/profit per the profit and loss account as follows:
A debenture is in place in favour of Axpo Solutions AG which consists of a fixed and floating charge over the assets of the company.
This debenture cover s the amounts due to Axpo Solutions AG of the company (included within trade creditors), and the amounts owed by group companies BES Utilities Holdings Ltd and BES Commercial Electricity Ltd. At the balance sheet date the potential gross amount due to Axpo Solutions AG under this debenture was £ 7,252,224 (2020: £10,124,434).
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:
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.
The company had committed at the year end to purchase wholesale gas totalling £11,228,611 (2020: £12,114,454) by 31 March 2026 (2020: 30 September 2023).
The company had committed at the year end to sell wholesale gas totalling £15,730 (2020: £Nil) by 31 May 2021.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The company has taken advantage of the exemption provided in Financial Reporting Standard 102 Section 33 from disclosing related party transactions with group companies.
During the year the company has recognised energy commissions and other staff costs due to Commercial Power Limited, a company under common control, of £ 2,084,244 (20 20 : £ 2,502,925 ) within expenses and recharged £ 254,508 (20 20 : £ 102,703 ) for various services. During the year £ 280,000 was repaid from Commercial Power (20 20 : £ 2,550, 000 was advanced ), there are no official repayment terms, however it is expected to be repaid over a number of years and is non-interest bearing. At the year end an amount of £ 7,504,289 (20 20 : £8 ,601,119 ) was owed from Commercial Power Limited, this amount is included within other debtors.
During the year the company has recognised various managed services due to Fleetwood Wanderers Limited, a company under common control, of £ 1,201,830 (20 20 : £ 951,589 ) within expenses , and recharged £ 108,093 (20 20 : £ nil ) for various services . During the year £ nil was repaid by (2020: £7 5 ,000) Fleetwood Wanderers Limited, there are no official repayment terms, however it is expected to be repaid over a number of years and is non-interest bearing. At the year end an amount of £ 522,427 (20 20 : £ 816 , 175 ) was owed by Fleetwood Wanderers Limited, this amount is included within other debtors.
At the year end an amount of £4,734,000 (20 20 : £4,734,000) was owed from Jaymel Limited , a company under common control, this amount is included within other debtors. There are no official repayment terms, however it is expected to be repaid over a number of years and is non-interest bearing.
During the year the company has recognised accommodation services due to Breck Apartments LLP, a partnership under common control, of £ Nil (20 20 : £ 1 , 200 ). At the year end an amount of £ 300 (20 20 : £ Nil ) was owed to Breck Apartments LLP, this amount is included within other debtors .
During the year the company recognised various services due to Card Saver Limited, a company under common control, of £Nil (20 20 : £ 383,459 ) and recharged vehicle and various other costs amounting to £ 384,346 (20 20 : £4 1 , 6 1 5 ). During the year there was an intergroup transfer of £1,233,328 (2020:£Nil) At the year-end an amount of £ 2,094,034 (20 20 : £ 3,978,247 ) was owed from Card Saver Limited, this amount is included within other debtors. There is no official repayment terms, however it is expected to be repaid over a number of years and is non-interest bearing.
During the year the company has recharged £ 11,825 (20 20: £ 10,365 ) for various services to The Leisure Channel Ltd, a company under common control. At the year end an amount of £ 32,108 (2020: £2 0 , 505 ) was owed from The Leisure Channel Ltd, this amount is included within other debtors.
During the year the company has recognised various managed services due to DBC International PTY, a company under common control, of £ Nil (20 20 : £ 538,813 ) within expenses and recharged £ Nil (2020: £5,108) for various services. At the year end an amount of £ Nil (20 20 : £ 6,129 ) was owed from DBC International PTY, this amount is included within other debtors.
During the year the company has recognised various managed services due to CX International Ltd , a company under common control, of £ 1,067,656 (20 20 : £ Nil ) within expenses and recharged £ 6,257 (2020: £ Nil ) for various services. At the year end an amount of £ 12,387 (20 20 : £ Nil ) was owed from CX International Ltd , this amount is included within other debtors.
New Primrose Development s LLP is a partnership under common control . At the year end an amount of £ 300 (20 20 : £ Nil ) was owed to Business Energy Solutions Ltd, this amount is included within other debtors .
Included within accruals is interest payable to the directors at a rate of 10% p.a. (2020: 10%) on any balances owed to them throughout the year. During the year interest of £14,523 (2020: £38,920) was incurred and interest of £Nil (2020: £72,947) was transferred from a related party company. As at the year end accrued interest amounted to £126,390 (2020: £111,867).
Advances or credits have been granted by the company to its directors as follows:
The ultimate parent company is BES Utilities Holding Ltd, a company registered in England and Wales.
Business Energy Solutions Ltd is consolidated within BES Utilities Holding Ltd's group financial statements and copies can be obtained from the group's its registered office, Parkside Stand , Fleetwood Town Football Club, Park Avenue, Fleetwood, Lancashire, FY7 6TX .
The ultimate controlling party is deemed to be A J Pilley by virtue of his majority shareholding in the Group's holding company, BES Utilities Holding Ltd.