SMS Towage Limited |
Strategic Report |
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Review of the business |
The company owns and operates a fleet of tugs which provide port towage services to shipping companies in various ports around the UK. |
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Despite reporting a loss, the directors are pleased with the performance of the company in the year which has seen strong growth in its port operations. The reasons for the loss include increases in interest rates and payroll costs. The company continues to invest in its fleet and has continued its programme of fleet upgrades in the year with the addition of three modern vessels in place of retired older vessels. The growth of our fleet also results in higher depreciation costs and the opportunity to have more managed drydocking identifying timely, but expensive remedial works. |
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The company is aware of its responsibility to reduce its output of CO2 and has invested significantly in on board vessel technology to monitor fuel consumption and engine performance in real-time. Other oil reduction investments have been made in ultra-filtration of engine oil to significantly extend time between oil changes and, in co-operation with port authorities, to replace onboard deck generators with onshore electrical power. |
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At the balance sheet date the company had net assets of amounting to £28,546,596, an increase of £3,248,316 from the previous year. The company remains in a strong financial position and this will enable the company to continue to follow the stategic path set out by the directors. |
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The key performance indicators of the company are turnover and the number of vessels being operated by the company. Turnover for the year has increased from £17,901,042 to £20,178,452. During the year the company operated 17 vessels compared to 18 for the previous year. |
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Whilst the company has made a loss for the year of £823,953, the increase in the value of the vessels has resulted in total comprehensive income for the year of £3,308,316. |
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Principal risks and uncertainties |
The principal risk faced by the company would be a significant reduction in its business should the UK enter a deep recession that impacts port activity and hence the company’s revenues. The directors are alert to and would look to align the cost base to a significant reduction in business. |
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General inflation and interest rate rises have been a feature of the last financial year. Cost pressures within the company in most areas have been a challenge. The company has been able to partly mitigate the impact on its margins by raising tariffs. The fall in crude oil prices over the last year has been welcome. Fuel oil prices have fallen although they remain significantly above their pre-Covid levels. |
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Staff recruitment has remained a challenge throughout the year. Growth has required recruitment of additional support staff and the company faces the cost pressures associated with staff recruitment and retention. To mitigate this issue the company has invested significantly in new IT systems to support staff productivity and decision making. |
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This report was approved by the board on 5 October 2023 and signed on its behalf. |
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P. Escreet |
Director |
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Investments |
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Investments in subsidiaries, associates and joint ventures are measured at cost less any accumulated impairment losses. Listed investments are measured at fair value. Unlisted investments are measured at fair value unless the value cannot be measured reliably, in which case they are measured at cost less any accumulated impairment losses. Changes in fair value are included in the profit and loss account. |
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Stocks |
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Stocks are measured at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the first in first out method. The carrying amount of stock sold is recognised as an expense in the period in which the related revenue is recognised. |
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Debtors |
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Short term debtors are measured at transaction price (which is usually the invoice price), less any impairment losses for bad and doubtful debts. Loans and other financial assets are initially recognised at transaction price including any transaction costs and subsequently measured at amortised cost determined using the effective interest method, less any impairment losses for bad and doubtful debts. |
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Creditors |
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Short term creditors are measured at transaction price (which is usually the invoice price). Loans and other financial liabilities are initially recognised at transaction price net of any transaction costs and subsequently measured at amortised cost determined using the effective interest method. |
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Taxation |
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A current tax liability is recognised for the tax payable on the taxable profit of the current and past periods. A current tax asset is recognised in respect of a tax loss that can be carried back to recover tax paid in a previous period. Deferred tax is recognised in respect of all timing differences between the recognition of income and expenses in the financial statements and their inclusion in tax assessments. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply to the reversal of the timing difference, except for revalued land and investment property where the tax rate that applies to the sale of the asset is used. Current and deferred tax assets and liabilities are not discounted. |
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Provisions |
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Provisions (ie liabilities of uncertain timing or amount) are recognised when there is an obligation at the reporting date as a result of a past event, it is probable that economic benefit will be transferred to settle the obligation and the amount of the obligation can be estimated reliably. |
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Foreign currency translation |
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Transactions in foreign currencies are initially recognised at the rate of exchange ruling at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated at the closing rate of exchange. Non-monetary items that are measured at historical cost are translated at the rate ruling at the date of the transaction. All differences are charged to profit or loss. |
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Leased assets |
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A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases. The rights of use and obligations under finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charge and the reduction in the outstanding liability using the effective interest rate method. The finance charge is allocated to each period during the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leased assets are depreciated in accordance with the company's policy for tangible fixed assets. If there is no reasonable certainty that ownership will be obtained at the end of the lease term, the asset is depreciated over the lower of the lease term and its useful life. Operating lease payments are recognised as an expense on a straight line basis over the lease term. |
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Pensions |
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Contributions to defined contribution plans are expensed in the period to which they relate. |
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2 |
Critical accounting estimates and judgements |
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The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: |
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Useful lives of plant and machinery and motor vehicles |
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The company estimates the useful lives of plant and machinery and motor vehicles based on the period over which the assets are expected to be available for use. The estimated useful lives of plant and machinery and motor vehicles are reviewed periodically and are updated in expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of plant and machinery and motor vehicles are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets. |
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Allowance for doubtful debts |
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The Company makes allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analysed historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance of doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables. |
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Allowance for inventories written down |
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Reviews are made periodically by management on damaged, obsolete and slowmoving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. |
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3 |
Analysis of turnover |
2023 |
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2022 |
£ |
£ |
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Services rendered |
20,178,452 |
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17,901,042 |
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By geographical market: |
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UK |
20,178,452 |
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17,901,042 |
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4 |
Operating profit |
2023 |
|
2022 |
£ |
£ |
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This is stated after charging: |
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Depreciation of owned fixed assets |
4,782,923 |
|
4,024,008 |
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Operating lease rentals - land and buildings |
53,600 |
|
56,750 |
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Auditors' remuneration for audit services |
9,000 |
|
9,000 |
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Auditors' remuneration for other services |
400 |
|
1,190 |
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Key management personnel compensation (including directors' emoluments) |
|
218,638 |
|
222,111 |
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5 |
Directors' emoluments |
2023 |
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2022 |
£ |
£ |
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Emoluments |
210,368 |
|
215,279 |
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Company contributions to defined contribution pension plans |
8,270 |
|
6,832 |
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|
218,638 |
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222,111 |
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Highest paid director: |
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Emoluments |
82,086 |
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72,554 |
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Number of directors to whom retirement benefits accrued: |
2023 |
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2022 |
Number |
Number |
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Defined contribution plans |
2 |
|
2 |
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6 |
Staff costs |
2023 |
|
2022 |
£ |
£ |
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Wages and salaries |
1,235,921 |
|
1,109,013 |
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Social security costs |
135,768 |
|
118,402 |
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Other pension costs |
38,052 |
|
28,651 |
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Direct labour - vessel crews |
5,591,970 |
|
4,645,487 |
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|
7,001,711 |
|
5,901,553 |
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Average number of employees during the year |
Number |
Number |
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Administration |
35 |
|
33 |
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Crew |
137 |
|
136 |
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|
172 |
|
169 |
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7 |
Interest payable |
2023 |
|
2022 |
£ |
£ |
|
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Bank loans and overdrafts |
1,118,535 |
|
530,415 |
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Finance charges payable under finance leases and hire purchase contracts |
|
- |
|
4,305 |
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1,118,535 |
|
534,720 |
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8 |
Taxation |
2023 |
|
2022 |
£ |
£ |
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Analysis of charge in period |
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Current tax: |
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UK corporation tax on profits of the period |
159,577 |
|
441,635 |
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Tax on profit on ordinary activities |
159,577 |
|
441,635 |
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Factors affecting tax charge for period |
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The differences between the tax assessed for the period and the standard rate of corporation tax are explained as follows: |
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2023 |
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2022 |
£ |
£ |
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(Loss)/profit on ordinary activities before tax |
(664,376) |
|
1,056,248 |
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Standard rate of corporation tax in the UK |
19% |
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19% |
|
£ |
£ |
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Profit on ordinary activities multiplied by the standard rate of corporation tax |
|
(126,231) |
|
200,687 |
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Effects of: |
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Expenses not deductible for tax purposes |
(57,591) |
|
(58,716) |
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Depreciation for period in excess of capital allowances |
343,399 |
|
266,604 |
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Crystalisation of deferred gains |
- |
|
33,060 |
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Current tax charge for period |
159,577 |
|
441,635 |
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Factors that may affect future tax charges |
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It was proposed in the 2021 Budget that the corporation tax main rate will increase to 25% from 1 April 2023. |
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9 |
Tangible fixed assets |
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Vessels |
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Plant and machinery |
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Motor vehicles |
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Total |
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At valuation |
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At cost |
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At cost |
£ |
£ |
£ |
£ |
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Cost or valuation |
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At 1 April 2022 |
42,864,078 |
|
255,002 |
|
327,290 |
|
43,446,370 |
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Additions |
11,112,678 |
|
171,624 |
|
120,474 |
|
11,404,776 |
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Revaluation |
421,114 |
|
- |
|
- |
|
421,114 |
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Disposals |
(3,539,206) |
|
- |
|
(58,879) |
|
(3,598,085) |
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At 31 March 2023 |
50,858,664 |
|
426,626 |
|
388,885 |
|
51,674,175 |
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|
|
|
|
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Depreciation |
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At 1 April 2022 |
- |
|
182,690 |
|
123,510 |
|
306,200 |
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Charge for the year |
4,683,461 |
|
35,212 |
|
64,250 |
|
4,782,923 |
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Revaluation |
(4,490,762) |
|
- |
|
- |
|
(4,490,762) |
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On disposals |
(192,699) |
|
- |
|
(26,110) |
|
(218,809) |
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At 31 March 2023 |
- |
|
217,902 |
|
161,650 |
|
379,552 |
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|
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Carrying amount |
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At 31 March 2023 |
50,858,664 |
|
208,724 |
|
227,235 |
|
51,294,623 |
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At 31 March 2022 |
42,864,078 |
|
72,312 |
|
203,780 |
|
43,140,170 |
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|
2023 |
|
2022 |
£ |
£ |
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Carrying amount of vessels on cost basis |
27,360,949 |
|
20,970,878 |
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The vessels were revalued at open market value as at 31 March 2023 by Offshore Shipbrokers Limited of of Artillery House, Lower Level, 35 Artillery Lane, London, E1 7LP. |
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10 |
Investments |
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Other |
investments |
£ |
|
Cost |
|
At 1 April 2022 |
673,727 |
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At 31 March 2023 |
673,727 |
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The company holds 20% or more of the share capital of the following companies: |
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Capital and |
Profit (loss) |
|
Company |
Shares held |
reserves |
for the year |
|
|
Class |
% |
£ |
£ |
|
Belfast Towage Limited |
Ordinary |
33 |
|
2,718,785 |
|
664,803 |
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The registered office of Belfast Towage Limited is situated at Clarendon House, 23 Clarendon Road, Belfast, BT1 3BG. |
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11 |
Stocks |
2023 |
|
2022 |
£ |
£ |
|
|
Raw materials and consumables |
530,994 |
|
502,969 |
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|
|
|
|
|
|
|
|
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12 |
Debtors |
2023 |
|
2022 |
£ |
£ |
|
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Trade debtors |
2,551,239 |
|
2,300,518 |
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Other debtors |
1,665,678 |
|
825,760 |
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Prepayments and accrued income |
951,023 |
|
135,174 |
|
|
|
|
|
|
5,167,940 |
|
3,261,452 |
|
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|
|
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|
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13 |
Creditors: amounts falling due within one year |
2023 |
|
2022 |
£ |
£ |
|
|
Bank loans |
2,592,000 |
|
1,914,000 |
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Trade creditors |
1,205,939 |
|
652,469 |
|
Corporation tax |
159,577 |
|
441,635 |
|
Other taxes and social security costs |
7,034 |
|
7,953 |
|
Other creditors |
77,587 |
|
52,963 |
|
Accruals and deferred income |
176,751 |
|
147,078 |
|
|
|
|
|
|
4,218,888 |
|
3,216,098 |
|
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|
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14 |
Creditors: amounts falling due after one year |
2023 |
|
2022 |
£ |
£ |
|
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Bank loans |
21,151,500 |
|
17,226,000 |
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|
|
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|
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15 |
Loans |
2023 |
|
2022 |
£ |
£ |
|
Analysis of maturity of debt: |
|
Within one year or on demand |
2,592,000 |
|
1,914,000 |
|
Between one and two years |
2,592,000 |
|
1,914,000 |
|
Between two and five years |
18,559,500 |
|
15,312,000 |
|
|
|
|
|
|
23,743,500 |
|
19,140,000 |
|
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|
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The bank loans are secured by mortgages secured on the vessels owned by the company and by a debenture provided by the company. |
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16 |
Deferred taxation |
2023 |
|
2022 |
£ |
£ |
|
|
Revaluation of vessels |
5,624,041 |
|
4,847,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
2023 |
|
2022 |
£ |
£ |
|
|
At 1 April |
4,847,960 |
|
4,078,220 |
|
Charged to other comprehensive income |
779,607 |
|
769,740 |
|
|
At 31 March |
5,627,567 |
|
4,847,960 |
|
|
|
|
|
|
|
|
|
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17 |
Share capital |
Nominal |
|
2023 |
|
2023 |
|
2022 |
value |
Number |
£ |
£ |
|
Allotted, called up and fully paid: |
|
Ordinary shares |
£1 each |
|
500,000 |
|
500,000 |
|
500,000 |
|
|
|
|
|
|
|
|
|
|
18 |
Other reserves |
2023 |
|
2022 |
|
Revaluation reserve |
£ |
£ |
|
|
At 1 April |
16,306,162 |
|
12,790,186 |
|
Gain on revaluation of land and vessels |
4,911,876 |
|
4,492,503 |
|
Deferred taxation arising on the revaluation of vessels |
|
(779,607) |
|
(769,740) |
|
Transfer to profit and loss account |
(3,291,943) |
|
(206,787) |
|
|
At 31 March |
17,146,488 |
|
16,306,162 |
|
|
|
|
|
|
|
|
|
|
19 |
Profit and loss account |
2023 |
|
2022 |
£ |
£ |
|
|
At 1 April |
8,492,118 |
|
7,730,718 |
|
(Loss)/profit for the financial year |
(823,953) |
|
614,613 |
|
Dividends |
(60,000) |
|
(60,000) |
|
Transfer to profit and loss account |
3,291,943 |
|
206,787 |
|
|
At 31 March |
10,900,108 |
|
8,492,118 |
|
|
|
|
|
|
|
|
|
|
20 |
Dividends |
2023 |
|
2022 |
£ |
£ |
|
|
Dividends on ordinary shares (note 19) |
60,000 |
|
60,000 |
|
|
|
|
|
|
|
|
|
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21 |
Events after the reporting date |
|
|
On 11 January 2023 the company contracted for the purchase of a tug at a cost of £4,357,778. The vessel was delivered on 8 August 2023. |
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|
22 |
Capital commitments |
2023 |
|
2022 |
£ |
£ |
|
|
Amounts contracted for but not provided in the accounts |
4,357,778 |
|
3,748,000 |
|
|
|
|
|
|
|
|
|
|
23 |
Defined benefit pension plans |
|
|
The company made contributions to defined contribtion pension schemes for directors, staff and crew amounting to £168,173 during the year (2022 - £112,394). The company expects to make contributions amounting to £170,000 during the year to 31 March 2024 however no provision has been made in relation to this commitment. |
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24 |
Contingent liabilities |
|
|
The company has provided a guarantee to Danske Bank to secure the borrowings of Belfast Towage Limited, a company in which SMS Towage Limited holds an interest. The guarantee provided is in the amount of £675,000. |
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|
25 |
Related party transactions |
2023 |
|
2022 |
£ |
£ |
|
SMS Towage (Bristol Channel) Limited |
|
P. Escreet (Director) holds an interest in the company |
|
Purchases from the related party |
|
|
|
|
- |
|
118,894 |
|
Loan provided to related party |
|
|
|
|
441,450 |
|
480,000 |
|
Amount due from (to) the related party |
830,000 |
|
511,911 |
|
SMS Self Administered Pension Scheme |
|
P. Escreet (Director) is a trustee of the scheme |
|
Rent paid to related party |
|
53,000 |
|
56,750 |
|
Amount due from (to) the related party |
748 |
|
(476) |
|
Belfast Towage Limited |
|
SMS Towage Limited holds an interest in the company |
|
Sales to the related party |
|
759,378 |
|
847,999 |
|
Purchases from related party |
|
|
|
|
- |
|
38,190 |
|
Amount due from (to) the related party |
142,124 |
|
103,557 |
|
Redeemable preference shares held in related party |
266,667 |
|
266,667 |
|
P. Escreet |
|
P. Escreet (Director) holds an interest in the company |
|
Dividends paid to related party |
|
31,200 |
|
31,200 |
|
Amount due from (to) the related party |
(33,193) |
|
(27,427) |
|
|
Mrs. C. A. Escreet |
|
Mrs. C. A. Escreet (Secretary) held an interest in the company |
|
Dividends paid to related party |
|
28,800 |
|
28,800 |
|
|
|
|
|
|
|
|
|
|
26 |
Controlling party |
|
|
The company was controlled throughout the financial year by Mr. P. Escreet. |
|
|
27 |
Presentation currency |
|
|
The financial statements are presented in Sterling rounded to the nearest Pound. |
|
|
28 |
Legal form of entity and country of incorporation |
|
|
SMS Towage Limited is a private company limited by shares and incorporated in England and Wales. |
|
|
29 |
Principal place of business |
|
|
The address of the company's principal place of business is: |
|
|
Ocean House |
|
Livingstone Road |
|
Hessle |
|
HU13 0EG |