The directors have pleasure in presenting the Strategic Report, the Director’s Report and the financial statements for the year ended 31 July 2020. The comparative period shown is for the year ended 31 July 2019.
The year ended 31 July 2020 has seen a 6% increase on profit before tax for continuing operations following the disposal in the year of our hire and events division, SLX. Profit before tax on continuing operations is £1.390m in 2020 vs £1.317m in 2019. Due to Covid-19 restrictions and the negative impact this pandemic is having on our markets, our continuing operations. Revenue on continuing operations was down 11% on the prior year at £19.79m vs £22.36m in 2019. This is a strong result in difficult trading conditions where we have managed to strengthen our cash and profitability to support us through these unprecedented times.
We have continued to focus on those parts of the business most important to our many customers and this is reflected in these financial statements, with customers' needs in mind we have continued investing in R&D whilst building on our current core business which has grown gross profit margins in the year. We are showing a positive statement of comprehensive income with a profit after tax on continuing operations improvement on the prior year at £1.396m vs £1.095m in 2019.
The management of the business and the execution of the group’s strategy are subject to a number of risks. The key business risks and uncertainties are considered to relate to Covid-19, Brexit, the ever-increasing competition from UK and overseas competitors where we have seen some amalgamation, and the effect of changes in government policy on the funding of arts and educational facilities.
These risks are mitigated and monitored through continued development of potential markets, continued review of assets and expected life, regular review of the impact of Brexit both in respect of foreign currency valuation and legislation and review of various trade bodies, government Covid-19 assistance and arts related funding. We anticipate that our markets will be those that recover slower as and when the globe recovers from Covid-19, we have measures in place to navigate through these challenges.
Trading following year end has been as expected for install and service, Box sales has been most affected by Covid -19. This has resulted in redundancies in this area. We have a strong order book for Install and Service for 2020/21. In addition, we continue to have the support of our lenders as the board look to use these unprecedented times to focus on future strategies.
The commercial environment in the group’s marketplace is expected to remain very competitive, with a slow recovery from Covid-19. The group expects 20/21 to be a challenging year with reduced levels of trade.
However, with the sale of our loss-making SLX division which required regular large cash investments we are more liquid, able to respond to the challenges of Covid-19 whilst focusing on developing further growth in the remaining businesses with new strategic initiatives.
The gross margin for continuing operations in the period was 30% (2019: 28.6%), with profit before tax on continuing operations being 7.0% this year against 4.9% 2019. The board are focused on margin management for all new business operations and this is reflected in the new year trading.
Trading following year end has been above expectations, going into the new year with the largest order book we have seen in many years. In addition, we continue to have the support of our lenders as the board look to generate further growth through new products and markets in 2020/21.
The commercial environment in the group’s marketplace is expected to remain very competitive. However, with the sale of our loss making SLX division which also required regular large cash investments we expect to be more liquid and able to focus greater on developing further growth in the remaining profitable businesses, we will continue to obtain further operating efficiencies, whilst developing our Opus range. The group is confident of maintaining market share and improving current levels of performance.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 July 2020.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 8.
No ordinary dividends were proposed. The directors do not recommend payment of a further dividend.
In accordance with the company's articles, a resolution proposing that Saffery Champness LLP be reappointed as auditor of the group will be put at a General Meeting.
Basis for opinion
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 group's or the parent 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 .
Other information
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.
In the light of the knowledge and understanding of the group and the parent 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company 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.
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 group's and the parent 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 group or the parent 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 .
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.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £136,585 (2019 - £747,280 profit).
Stage Electrics Group Limited (“the company”) is a private limited company by shares incorporated in England and Wales . The registered office is Encore House, Unit 3 Britannia Road, Patchway, Bristol, BS34 5TA. With effect from 2 October 2019 the name of the company was changed from SLX Group Limited to Stage Electrics Group Limited.
The group consists of Stage Electrics Group Limited and all of its subsidiaries as listed in note 16.
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 £ 1 .
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The group financial statements incorporate those of Stage Electrics Group Limited and all of its subsidiaries (ie entities that the g roup controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 July 2020 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The group has entered into a joint operation. This is not a separate entity and as such the group has not accounted for the operation under the equity method. The joint operation is accounted for as an ordinary contract in the groups operation reflecting the level of interest that the group holds as per the contractual agreement in place.
A t the time of approving the financial statements , t he directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future.
The directors have considered the position of the group as a result of coronavirus. Trading activity has reduced, however as the government has allowed construction to continue during lockdown, the group has been able to continue with a number of its ongoing projects.
The group has made use of a number of government measures including the furlough scheme, the Coronavirus Business Interruption Loan Scheme and deferral of VAT liabilities, amongst others. With the help of these measures and strict cost management, the group has ended the financial year with a strong balance sheet.
The directors have prepared prudent cash flow forecasts for the next twelve months which show that the group's cash position remains positive during that period.
Thus t he directors continue to adopt the going concern basis of accounting in preparing the financial statements.
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.
Turnover is taken on fixed price contracts while the contract is in progress, having regard to the proportion of the total contract which has been completed at the statement of financial position date, estimated by reference to the costs incurred to date versus the total estimated costs to completion. Provision is made for all foreseeable losses.
Turnover on equipment sales is recognised at the point of despatch and turnover on hire of equipment is recognised on a straight line basis from the hire date.
Negative goodwill arising on the acquisition if subsidiary undertakings represents the excess of the fair value of the identifiable assets and liabilities acquired over the fair value of the consideration. The excess is initially recognised in the statement of financial position. Subsequently, the excess exceeding the fair value of consideration is recognised in the statement of comprehensive income in the periods expected to be benefited.
Concessions, patents, licences and trademarks purchased by the Group are amortised to nil by equal annual instalments over their useful economic lives, generally their respective unexpired periods, of between three and five years.
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 recognised in the income statement .
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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.
The group 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 group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, which include debtors, 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.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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 group after deducting all of its liabilities.
Basic financial liabilities, including trade and other creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group 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 group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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.
The group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the company. The annual contributions payable are charged to the profit and loss account.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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 d asset are consumed.
Government grants are recognised at the fair value of the asset receive d or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met . Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable . A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the income statement for the period.
Exceptional costs
Material items which fall outside the ongoing activities of the company are separately disclosed in the statement of comprehensive income where they are relevant to understanding the true and fair view of financial performance of the company for the period reported.
In the application of the group’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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The Group considers whether intangible assets and/or goodwill are impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash generating units. This requires estimations of the future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cash flows.
Revenue is recognised in respect of long term contracts. Revenue is recognised based on the cost of completion method and requires managements best estimate of the expected total costs to complete and the overall outcome of the contract. Related amounts due to or from long term contracts is included in the financial statements based on the agreed contract and management knowledge of variations and modifications as the contract progresses reflecting all available knowledge at any point in time.
In the opinion of the directors disclosure of information relating to turnover attributable to the markets supplied in the course of the year would be seriously prejudicial to the interests of the company, it is therefore not disclosed.
Other income recognised in the financial statements relates to government grants received under the Coronavirus Job Retention Scheme.
During the year the group incurred costs totalling £141,847 in relation to internal restructuring. These costs are not expected to re-occur.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
On 11 October 2019 the group disposed of the trade and assets of its Hire and Events division SLX. The corresponding amounts have been classified and restated in the statement of comprehensive income as discontinued operations as they represented a separate major line of business.
The actual (credit)/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:
Goodwill
Goodwill arose on the acquisition of the share capital of Performing Arts Technology Limited on 3 June 2014. It is being amortised over its estimated useful economic life of 10 years.
Company
The Company holds no intangible fixed assets.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 July 2020 are as follows:
All entities listed above which include an indirect holding are directly owned by subsidiary undertakings within the group.
The registered address of Northern Light Stage and Technical Services Limited and Performing Arts Technology Limited is 4th Floor 115 George Street, Edinburgh, EH2 4JN.
The registered address of all other subsidiaries is Encore House, Unit 3 Britannia Road Patchway Trading Estate, Patchway, Bristol, United Kingdom, BS34 5TA.
Group
The group has provided a cross company guarantee in respect of the bank overdraft by way of fixed and floating charge over the assets of the group.
The long term loan relates to an application made by the group under the Coronavirus Business Interruption Loan Scheme. As a result, under the terms of the scheme, the Secretary of State for Business, Energy and Industrial Strategy has provided a limited guarantee to Barclays Bank for 80% of the loan balance.
No repayments are required for the first 12 months. Following that, equal monthly instalments will be paid of £20,833 with the final repayment falling due in May 2025. Interest will be charged after the first 12 months at a floating rate of 2.65% + LIBOR.
Company
The company has guaranteed the bank overdraft facility of the group by way of cross company guarantee by fixed and floating charge over the assets of the group.
Deferred tax assets and liabilities are offset where the group or 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:
Deferred tax is not recognised in respect of capital tax losses of £623,458 and accumulated capital allowances of £157,599 as it is not sufficiently probable that they will be recovered against the reversal of deferred tax liabilities or future taxable profits.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Ordinary shares are entitled to one vote per share and to receive dividends equally out of the profits of the company. The "A" Ordinary shares are not entitled to vote or receive dividends out of the profits of the company. "A" Ordinary shares rank second in priority on a return of capital or capital reduction.
The share premium account represents the premium arising on the issue of equity shares, net of issue expenses.
The capital redemption reserve represents the value of ordinary shares repurchased by the company.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
During the current and previous period no director received remuneration through the company; the above is in respect of the group. No guarantees have been given or received.
Group
During the period the company made sales of £3,945 (2019: £8,210) to and purchases of £8,506 (2019: £216,954) from Clifton Marquee Company Limited, a company related by virtue of a common director.
Group and company
In the prior year the directors advanced the company £200,000, which was fully repaid in the period. During the period interest of £20,055 (2019: £20,671) was paid to the directors in respect of these loans.