The directors present their annual report and financial statements for the year ended 31 March 2023.
The directors find the results for the year satisfactory and as expected. The results for the year are set out on page 8.
No dividends were paid during the year and the directors do not recommend a 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 directors have the benefit of an indemnity which is a qualifying third party indemnity provision as defined by section 234 of the Companies Act 2006. This was in force throughout the financial period and still in force at the time of approving the financial statements.
Details on the Company's risk management objectives and policies can be seen in the notes 11, 13 and 16 to the financial statements.
On 29 June 2023, a written resolution was passed thereby reducing the Company's share premium account by £1,000,000, from £4,037,248 to £3,037,248. The purpose of the reduction was in order to create additional distributable reserves to facilitate a subsequent distribution to the parent undertaking.
In accordance with the company's articles, a resolution proposing that Deloitte LLP, Statutory Auditor be reappointed as auditor of the company will be put at a General Meeting.
The directors have at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
This expectation arises due to the forecasted future profitability and cash flows of the business, which the directors believe provide strong indication of the entity's ability to continue as a going concern.
The directors have also considered the conflict in Ukraine in their assessment of the Company's ability to continue in operational existence. Although this conflict has driven the market price of the wholesale gas up, post reporting date prices have stabilised at a comparatively low rate. Sales volumes also continue to grow and in the short term the directors do not believe the conflict is directly or indirectly causing material worry to the Company's ability continue as a going concern.
The directors have assessed the increased inflation environment that the business is operating in post year-end. This has led to inflation across the business in energy prices and some critical equipment manufactured for the maintenance of the Company's assets. The business does not have significant direct exposure to interest rate increases by the Bank of England.
This report has been prepared in accordance with the special provisions for small companies under Part 15 of the Companies Act 2006.
The Company has taken advantage of exemptions available to UK small companies under the Companies Act 2006, to not deliver a strategic report with these financial statements.
Qualified Opinion
Basis for qualified opinion
For the years ended 31 March 2023 and 31 March 2022 revenue and cost of sales in the statement of comprehensive income has been disclosed on a gross basis as £7,762,603 (2022: £5,738,136) and £7,344,847 (2022: £5,177,407) respectively as if the Company has control over natural gas from the point of purchase to the point of sale. In our opinion the company should apply the repurchase requirements of IFRS15 ‘Revenue from Contracts with Customers’ (‘IFRS 15’) as the company is both buying natural gas from, and selling natural gas back to, the same related party. The company should therefore disclose revenue and cost of sales on a net basis, representing the compression service performed, therefore reducing revenue and cost of sales by £6,383,658 (2022: £4,723,709) to £1,378,945 (2022: £1,014,427) and £961,189 (2022: £453,698) respectively.
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 Financial Reporting Council’s (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 qualified opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
As explained more fully in the directors’ responsibilities statement, 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.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
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 considered the nature of the company’s industry and its control environment, and reviewed the company’s documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management and the directors about their own identification and assessment of the risks of irregularities, including those that are specific to the company’s business sector.
We obtained an understanding of the legal and regulatory frameworks that the company operates in, and identified the key laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements. These included UK Companies Act, tax legislation;and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty.
We discussed among the audit engagement team regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
enquiring of management and in-house legal counsel concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations; and
reading minutes of meetings of those charged with governance and reviewing with HMRC.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, except for the effects of the matter described in the basis for qualified opinion section of our report, based on the work undertaken in the course of the audit:
the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors’ report has been prepared in accordance with applicable legal requirements.
Except for the effects of the matter described in the basis for qualified opinion section of our report, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the directors’ report.
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to take advantage of the small companies’ exemption in preparing the directors’ report and from the requirement to prepare a strategic report.
We have nothing to report in respect of these matters.
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.
Hams Warrington Limited is a private company limited by shares incorporated in the United Kingdom under the Companies Act 2006 and is registered in England and Wales. The registered office is 1010 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS. The company's principal activities and nature of its operations are disclosed in the directors' report.
The financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £.
The nature, timing of satisfaction of performance obligations and significant payment terms of the Company's major sources of revenue are as follows:
Natural gas sales relate to charges for the cost of natural gas drawn by customers. Natural gas prices are market driven which fluctuate monthly due to a range of micro and macro economic factors. Prices rose throughout the year due to geopolitical issues, exaggerated further by the war in Ukraine. Natural Gas revenue is recognised at the point of sale and customers are invoiced monthly. The point of sale is the point at which gas is dispensed to the customer.
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.
The commencement of capitalisation begins when both finance costs and expenditure for the asset are being incurred and activities that are necessary to get the asset ready for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete, or where construction is suspended for a significant period of time.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
The company recognises financial debt when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
Other financial liabilities, including trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Financial liabilities are derecognised when, and only when, the Company’s obligations are discharged, cancelled, or they expire.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The tax expense represents the sum of the tax currently payable and deferred tax.
In the current year, the following new and revised standards, amendments and interpretations have been adopted by the Company. The impact of the adoption of these standards and amendments is not deemed to have a material effect on the current or prior period, and is not anticipated to have a material effect on future periods:
Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction
Amendments to IAS 8 - Definition of Accounting Estimates
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting policies
IFRS 17 Insurance Contracts, including Amendments to IFRS 17 and Initial Application of IFRS 17 and IFRS 9 - Comparative Information
Annual Improvements to IFRS 2018-2020: Amendment to IFRS 1 First Time Adoption of IFRS (Subsidiary as a First-time Adopter), Amendments to IFRS 9 Financial Instruments (Fees in the '10 per cent' test for Derecognition of Financial Liabilities) and Amendment to IAS 41 Agriculture (Taxation in Fair Value Measurements).
Amendment to IAS 37 - Onerous Contracts: Costs of Fulfilling a Contract
Amendment to IAS 16 - Property Plant and Equipment: Proceeds before Intended Use
Amendments to IFRS 3 - Reference to the Conceptual Framework
At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the UK):
Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants, Deferral of Effective Date Amendment (published 15 July 2020) and Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) (published 23 January 2020)
Lease Liability in a Sale and Leaseback (Amendment to IFRS 16)
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
The directors anticipate that the adoption of these standards, amendments and interpretations in future periods will not have a material impact on the financial statements 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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The key sources of estimation uncertainty which have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities are outlined below.
Property, plant and equipment assets are depreciated over their estimated useful economic lives (UEL), which is estimated by management in terms of how long the assets will remain operational and continue to generate economic benefits. Any anticipated residual values are taken into account where appropriate. The actual useful lives of assets and their estimated residual values are reviewed annually and can vary based on a number of factors. The assessment of residual values consider the condition, remaining useful live and projected disposal value of the asset.
The significance of this estimate is that it will determine the value of depreciation charged to the income statement each year and the carrying value of property, plant and equipment in the statement of financial position.
In respect of Compressed Natural Gas refuelling station development costs, included within plant and equipment, the depreciation charge for each year, at 20 years UEL, is £257,000. The sensitivity on annual depreciation charges arising on this class of asset, due to estimates of UEL, can be illustrated as follows:
The additional depreciation charge that would be incurred should UEL estimate be revised down to:
15 years UEL (-5 years), would result in an increase of £86,000 per year
10 years UEL (-10 years), would result in an increase of £257,000 per year
The reduction in depreciation charge that would be realised should UEL estimate be revised up to:
25 years UEL (+5 years), would result in a decrease of £51,000 per year
30 years UEL (+10 years), would result in a decrease of £86,000 per year
Figures above are rounded to the nearest £000's.
The average monthly number of persons (including directors) employed by the Company during the year was:
The directors are the only employees of the company and received emoluments of £Nil (2022: £Nil) for their services to the Company.
Amounts written off financial assets relate to losses arising upon the release of an intercompany loan amount receivable from other related parties.
The charge for the year can be reconciled to the (loss)/profit per the income statement as follows:
In the March 2021 Budget it was announced that legislation will be introduced in Finance Bill 2021 to increase the main rate of UK corporation tax from 19% to 25%, effective 1 April 2023. The expected future impact of this will be an increase in current tax charges for any profits taxed at the main rate.
The Company has tax adjusted losses carried forward of £2,879,608 (2022: £2,879,608) and temporary differences relating to accelerated capital allowances of £2,465,495 (2022: £2,566,709), for which a deferred tax asset of £103,528 (2022: £78,225) has not been recognised, as the timing of future taxable profits arising within the Company against which to utilise these losses, is uncertain. The value of the unrecognised deferred tax asset disclosed is calculated at 25%, being the rate of tax expected to apply to the Company's taxable profits, at the point at which the losses are utilised and temporary differences reverse.
The tax adjusted losses carried forward do not have an expiry date.
All trade receivable balances are due from related parties.
Amounts owed by group undertakings and related parties consist of intercompany loans, which are unsecured, bear no interest and are repayable on demand.
In 2022, £873,423 was recognised as a contract asset. It has been concluded that a more accurate representation of this balance is as accrued income. Consequently, the balance in 2022 has been reclassified to accrued income to align with the presentation in 2023.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
The Company considers its exposure to credit risk which the directors determine as being the risk that trade receivables, amounts owed to the Company by the parent undertaking, or amounts recognised as accrued income to be invoiced, are not recoverable from the counterparty.
The directors have considered the nature of the relationship with the Company's primary receivable, CNG Fuels Ltd, in their assessment of the credit risk attached to balances due from this party, and judge it to be remote, due to the nature of the relationship and ongoing commercial arrangements in place.
The Company is party to and monitors financial information available relating its primary receivable, to make an ongoing assessment of the credit worthiness of the party, and use this information to ensure they respond effectively to any signs of credit risk, should they arise.
No receivable balances are impaired at the reporting end date.
At 31 March 2023, trade receivables are shown net of an allowance for doubtful debts of £Nil (2022: £Nil). Write-offs, reversals and new provisions were all £Nil during the year (2022: £Nil).
The expected credit loss rate applied to receivable balances is based on the Company's historical credit losses experienced over the three year period to 31 March 2023, which are nil. As such, management has not elected to provide for any expected credit losses arising against receivables outstanding at the period end.
Trade payables includes balance of £3,270,258 (2022: £119,416) outstanding at year end which are owed to related parties conducted under the suppliers' standard payment terms. Trade payable balances are unsecured and do not bear interest.
Amounts owed to parent undertaking consist of intercompany loans, which are unsecured, bear no interest and are repayable on demand.
The following table details the remaining contractual maturity for the Company's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the Company may be required to pay.
Responsibility for liquidity risk management rests with the board of directors, who have established an appropriate liquidity risk management framework suitable to the needs and considerations of the Company's funding and liquidity management requirements.
The Company's short term liquidity objectives are to ensure its trade and other payable balances are settled as they fall due and its working capital requirements are funded through a combination of the profits generated by the Company's principal operating activities and short term support available from the wider group should the need arise. Therefore the Company's key short term liquidity risk response is to ensure the working relationship with customers and suppliers is well managed and maintained to ensure payment terms are adhered to by its customers to enable the Company to settle its payables as they fall due.
The Company has one class of Ordinary shares which have full rights in the Company with respect to voting, dividends and capital distributions.
There were no movements in share capital during the year.
During the year the Company entered into the following transactions with related parties:
Sales and purchases to and from entities with significant influence over the company relate to the sale and purchase of natural gas and associated costs with CNG Fuels Ltd. The transactions were conducted at market rate.
Purchases of services from entities which have significant influence over the Company, were that of recharged
administrative expenditure from CNG Fuels Ltd, under an operator and management agreement.
During the year, intercompany loan balances receivable from other related parties were written off, resulting in other losses of £94,461 (see note 7).
The following amounts were outstanding at the reporting end date:
Amounts due to parent company, consist of intercompany loans of £205,453 (2022: £277,037), which are unsecured, carry no interest and are repayable on demand. Also included are trade payable balances of £24,000 (2022: £106), which are unsecured, bear no interest and are due within the supplier's standard credit terms.
Amounts due to entities with significant influence over the Company, consist of trade payable balances, which are unsecured, bear no interest and are due within the the supplier's standard credit terms.
The following amounts were outstanding at the reporting end date:
Amounts due from entities with significant influence over the Company consist of trade receivable balances due from CNG Fuels Ltd, which are unsecured, bear no interest and are due within the Company's standard credit terms.
Amounts due from fellow group undertakings and other related parties consist of intercompany loans, which are unsecured, bear no interest and are repayable on demand.
Contact assets has been reclassified to accrued income in prior year (Please see note 10), resulting to change in the movement in working capital.