The directors present the strategic report for the year ended 31 March 2023.
Principal Activities and Business Review
The company and the group are principally engaged in:
· Road, rail and intermodal freight transport
· Bonded and general warehousing
· Primary and secondary distribution
· Contract packing
· Engineering services
· Container hire repair and refurbishing
· Self-storage
The group continues to focus on improving asset utilisation in road, rail and warehousing.
Strategy
Our principal business strategy remains the achievement of a consistently high quality, robust, sustainable and cost-effective logistics service to UK industry and the development of mutually beneficial, long term business partnerships. A focus on new business development supported by a philosophy of innovation, as a means of achieving long term prosperity, is an essential part of this strategy.
The group maintains key performance indicators as set out on page 2 around business growth and trading margins in addition to a suite of operational performance statistics that measure customer service, asset utilisation, driver and vehicle efficiencies; established with and monitored by our customers. Exceeding our customers' expectations is the overall standard set for the group's activities and the directors have every confidence that this standard will continue to be achieved.
Group Result
As a result of the focus on asset utilisation, the year saw a decrease in profit before tax to £8.7m (2022: £8.8m) on increased turnover of £89m (2022: £80.1m).
Capital Expenditure
The group continues to reinvest in regular fleet replacement. Asset investment was £6.5m (2022: £5.1m).
Principal risks and uncertainties
Liquidity & price risk
Liquidity risks are managed by regular forward projection of group performance and capital requirements and ensuring any requisite facilities are in place. Risk associated with input prices, including fuel, is reduced through long term procurement strategies and in collaboration with customers through pricing transparency. Consolidated borrowings and related costs are measured and managed against net assets and PBIT to achieve an optimum level of working capital.
Trade Credit
Credit risk is monitored by way of in-house credit control functions, regular outside credit checking and, where appropriate, credit insurance.
Financing
Financial instruments comprise: amounts receivable from customers; amounts payable to suppliers; short-term hire purchase asset finance; bank borrowing through overdraft and term loans; supplier financing. Currency, short term borrowings generally incur interest based on variable base rates with long term a mix of variable and fixed rates. Interest rate risk is not considered material to the fair value of current borrowings.
Fluctuations in currency exchange rates
The business risk arising from exposure to foreign currency fluctuations is regarded as low.
Pension Scheme funding
Our defined benefit scheme closed to future accruals in 2010. We have committed to funding the current scheme deficit over a fixed period, with additional contributions considered annually in consultation with the trustees of the scheme. We do not anticipate that this will affect ongoing operations and business development. The company now maintains a defined contribution scheme, available for all employees.
Financial performance is measured in terms of sustainable sales and profit growth and an adequate return on capital employed being achieved from each business unit, in addition to the measurement of liquidity referred to above. Operational performance is measured accurately and closely with the latest fleet telematics, in terms of fuel efficiency, driver performance and time management, which also enhance the reporting of customer service performance, further tailored to each customer's expectations and subject to ongoing monitoring and review by both parties.
The Board of John G Russell (Transport) Limited acknowledges its responsibility under section 172 (1) of the Companies Act 2006:
‘A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) the impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company’
The Board meet on a regular basis. Prior to Board meetings papers are circulated in respect of matters including, Health & Safety, HR, Operations, Commercial and Finance, amongst other matters. Board papers together with close day to day involvement with management and employees assist the Directors, individually and collectively, in discharging their broad duty but nevertheless single duty under section 172(1).
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2023.
The profit for the year, after taxation, amounted to £6,585,533 (2022 - £6,357,096).
Ordinary dividends were paid amounting to £264,368 (2022 - £264,368). The directors do not recommend payment of a further dividend.
Going Concern
The group has agreed bank facilities in place and expect to renew the facilities in the normal course of business. The financial statements are prepared on a going concern basis following a detailed assessment of the company's ability to continue as a going concern by the directors. The assessment involved the preparation of detailed trading projections covering the period to December 2024, which demonstrate that the company will generate sufficient operating cash flows to meet its obligations as and when they fall due. In the unlikely event of a significant downturn in trading levels, the directors consider the company to have a number of reasonable plausible options to continue to meet its obligations as they fall due. On this basis, the directors are satisfied that they can continue to adopt the going concern basis of accounting in preparing the financial statements.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In respect of advertising and applications for employment, we comply with the requirements of the Equality Act 2010. The group continues to invest in a blend of youth and experience to complement the existing teams within the business.
We recognise the benefits of an engaged workforce and will ensure employees have the correct levels of investment in terms of training, and suitable, flexible reward packages.
The group has chosen in accordance with Companies Act 2006, s.414C(11) to set out the group's strategic report information required by Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has been done so in respect of future developments.
In accordance with the company's articles, a resolution proposing that Johnston Carmichael LLP be reappointed as auditor of the group will be put at a General Meeting.
The group’s greenhouse gas emissions and energy consumption for the year are as follows:
Group emissions in tonnes of CO2e | 2023 | 2022 |
Scope 1 | 19,574 | 19,616 |
Scope 2 | 548 | 611 |
Intensity ratio | 104.81 | 102.68 |
kWh | 7,788,834 | 7,872,931 |
The group's intensity ratio above is tonnes of CO2e per 100,000km.
Methodology: Road diesel (trucks, vans and cars) and off-road (plant) gas-oil consumption comprise the majority of the energy consumption compared to buildings and other plant and electricity.
We have audited the financial statements of John G. Russell (Transport) Limited (‘the parent company’), and its subsidiaries (‘the group) for the year ended 31 March 2023, which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Company Statement of Financial Position, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Statement of Cash Flows, Company Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 responsibilities for the audit of the financial statements section of our report. We are independent of the group 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
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 group's and parent 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.
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' report 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 our knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters in relation to which 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' 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 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 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.
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 assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and parent company, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
VAT legislation;
Companies Act 2006;
Corporation tax legislation; and
UK Generally Accepted Accounting Practice.
We gained an understanding of how the group is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections, relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:
Management override of controls;
Revenue recognition.
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the group’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognizing that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £3,479,498 (2022 - £3,849,196 profit).
John G. Russell (Transport) Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Deanside Road, Hillington, Glasgow, United Kingdom, G52 4XB.
The group consists of John G. Russell (Transport) Limited and all of its subsidiaries.
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 amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company 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. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements where applicable:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company John G. Russell (Transport) Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 March 2023. 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 group.
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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The group has agreed bank facilities in place and expect to renew the facilities in the normal course of business. The financial statements are prepared on a going concern basis following a detailed assessment of the company's ability to continue as a going concern by the directors. The assessment involved the preparation of detailed trading projections covering the period to December 2024, which demonstrate that the company will generate sufficient operating cash flows to meet its obligations as and when they fall due. In the unlikely event of a significant downturn in trading levels, the directors consider the company to have a number of reasonable plausible options to continue to meet its obligations as they fall due. On this basis, the directors are satisfied that they can continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover relates to income from road freight transport and associated services and is recognised on the occurrence of a critical event, such as delivery of goods or as the services are provided.
Turnover is included at the fair value of the consideration received or receivable, 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.
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 profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries and associates are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account.
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 the profit and loss account.
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 balance sheet 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 certain 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 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 the profit and loss account.
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 the profit and loss account.
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 certain creditors and loans from fellow group companies, 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.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts 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 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 profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The 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. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in the profit and loss account as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to the profit and loss account in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
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 asset's fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet 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.
Rentals payable under operating leases, including any lease incentives received, are charged to the profit and loss account 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 leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
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 in the period are included in the profit and loss account.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The present value of defined benefit pension obligations is determined using actuarial valuations. These valuations involve making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuations, the underlying assumptions and the longer-term nature of these plans, these estimates are subject to significant uncertainty. In determining the appropriate assumptions to apply, the directors consult with qualified and independent actuaries as well as consider publicly available data.
More information on the defined benefit surplus at the reporting date is outlined at note 23.
Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions and projected disposal values.
The carrying value of tangible fixed assets and depreciation charged in the year are outlined at note 12.
The whole of the group's turnover is attributable to road freight transport and related activities and arose within the United Kingdom.
An analysis of other significant revenue is outlined below.
Grants received above include £nil (2022 - £35,944) received by the group under the Government's Job Retention Scheme.
The remainder of grant income represents an annual release of deferred government grant support.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 5 (2022 - 4).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
A change in the future UK Corporation tax rate to 25% with effect from 1 April 2023 was announced in the March 2021 budget and substantively enacted on 24 May 2021. This change will have a consequential effect on the group's future tax charge in the UK and as the 25% tax rate was substantively enacted prior to the reporting date, deferred tax expected to unwind after 1 April 2023 has been calculated at 25% as opposed to the current tax rate of 19%.
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 March 2023 are as follows:
Obligations under finance leases are secured over the assets to which they relate.
Obligations under finance leases are secured over the assets to which they relate.
Bank loans and overdrafts are subject to a standard security and a bond and floating charge over the assets of the company and group.
Finance lease payments represent rentals payable by the company or group for certain motor vehicles. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Short term timing differences outlined above are expected to reverse within 12 months.
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.
Contributions totalling £187,448 were payable to the fund at the reporting date.
The company operates a defined benefit scheme for qualifying employees.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out as at 31 March 2023 by Broadstone, independent and qualified actuaries. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.
Details of the key assumptions and closing liability are outlined below.
Assumed life expectations on retirement at age 65:
The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans funded as follows:
Movements in the fair value of plan assets
The actual return on plan assets was £330,000 (2022 - £1,384,000).
Fair value of plan assets at the reporting period end
The surplus of £1,767,000 on the defined benefit pension scheme has been recognised on the basis that the company has an unconditional right to receive any surplus funds held by the scheme once all its obligations have been met in a wind-up event.
The profit and loss reserve includes all current and prior period retained profits and losses.
Other reserves
Other reserves contain pre acquisition reserves.
The company has unlimited cross-guarantees with its subsidiary undertakings. At 31 March 2023, the net bank borrowings of other companies in the group amounted to £Nil (2022 - £Nil).
In March 2010, the company granted its defined benefit pension scheme, the John G. Russell (Transport) Ltd 1989 Retirement Benefit Scheme, a partial security against the scheme's future obligations, in the form of a contingent asset over freehold property at Ward Park Road, Cumbernauld, valued at around £900,000.
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 company has taken advantage of the disclosure exemptions available under Section 33 of FRS 102 whereby it has not disclosed transactions entered into with any wholly-owned entity of the group.
The company is controlled by Mr J G Russell, together with his wife Mrs I M Russell.