The directors present the strategic report for the year ended 30 April 2023.
Morris Leslie Limited is the group company which owns Morris Leslie Plant Hire Limited, Morris Leslie Plant Limited, Morris Leslie Auctions Limited, Morris Leslie Villages Limited, Morris Leslie Property Limited, and Causeway Tractors Limited.
The principal activities of the group remain the hire and sale of plant machinery and equipment, auction of vehicles and plant, provision of self-storage facilities, as well as renting of commercial properties, residential properties and land.
The directors are pleased to report a strong set of trading figures for the period with an encouraging performance delivered across the business.
Overall Group turnover at £72.476m was 1% ahead of prior year (2022: £71.744m).
Plant Hire achieved a £4.756m revenue increase to £49.122m, delivered by improved utilisation levels, increased hire rates and continued demand for plant sales equipment.
Causeway Tractors performance for the year was impacted by supply chain challenges resulting in lower sales, with revenue reducing from £18.39m to £13.32m.
Morris Leslie Auctions continued to perform well despite delivery challenges in the supply of new cars which resulted in lower volumes of auction entries. Van and plant sales continued to improve year on year.
Commercial and residential property as well as self-storage revenue remained strong throughout the year under review, with record occupancy levels continuing to be achieved and maintained within all property classes.
Morris Leslie Property Limited purchased the properties of Glenmor LLP (a related party) during the year for £3.13m (2 residential flats in London, and an office block (townhouse) in Edinburgh).
The directors are pleased to announce that group profits before tax are largely in line with the prior year at £12.444m (2022: £12.710m).
The group has continued to invest in capital expenditure during the year - £76.432m (2022: £81.944m). The reduction in capital expenditure relates to a change in product mix for the fleet replacement program in Plant Hire. The Plant Hire business continues to operate the most modern low emission fuel efficient fleet in the UK.
Despite the backdrop of a challenging economic climate, not just in the UK but globally, demand for construction equipment remains strong for both hire and sales.
The business continues to operate from a network of locations throughout the UK & remains well placed to support our customers both locally and nationally.
The Board would wish to record their appreciation for the continued support of our loyal hardworking colleagues who delivered a first-class service to our customers throughout the year.
There are several risks to the business which can impact each sector to varying degrees.
Economic – Demand for the hire & sale of products is linked to the UK Construction market activity levels which remained strong in the first half, although there was some evidence of increased uncertainty for the remainder of the year because of continuing inflationary pressures and interest rate hikes.
Global manufacturers have continued to be impacted by supply chain challenges which have impacted deliveries albeit at a significantly lower scale than the prior year. Consistency and reliability of deliveries continue to improve.
In the event of significant downturns, the group has previously shown that it is well placed to reduce exposure to the sectors by reducing fleet size and debt levels through selling assets globally.
Funding – The business is currently funded by committed term lending and hire purchase from a long-term pool of lenders for plant hire assets. The business has access to sufficient capital to fund any opportunities which may arise to deliver future growth. Asset funding is split between variable and fixed rate lending.
UK Competition – the sector remains competitive and price sensitive. Control of increasing costs, provision of a first-class customer service and operating a modern fleet remains our key differentiator from our competitors.
Currency fluctuations – The business imports machinery via Causeway Tractors Limited and there is a risk from currency fluctuations. This situation is closely monitored, and appropriate steps taken to mitigate the risk. All export sales are in Sterling so there is no direct currency exposure risk.
Morris Leslie Auctions Limited's performance is reliant on the volume for new and used car & van sales and fluctuations in these markets represent a risk.
The business seeks to continue its turnover and profit growth, primarily by expansion of the plant hire business throughout the UK when the opportunities arise. The group continues to create increased value by securing additional consents to grow and develop the commercial property business.
There are opportunities for each business area of the group in terms of new products, new customers, locations and new routes to market.
The directors consider key performance indicators are those that communicate the financial performance and strength of the group, being turnover, gross profit and profit before tax. In addition to these measures, throughout the business several additional performance metrics are used to measure rate, utilisation, asset residual values, occupancy, employee turnover, safety and customer account growth.
In accordance with its responsibilities in relation to s172 of the Companies Act 2006, through regular Board meetings, the Directors continually assess how strategic objectives promote the success of the Group and benefit its members, whilst considering the impact that operations have on other key stakeholders.
The Directors have taken into consideration, amongst other matters:
The interests of the company employees;
The impact of the company’s operations on the community and environment;
The need to act fairly and in good faith between members of the company;
The importance of maintaining a reputation for high standards of business conduct;
The need to foster the company’s business relationships with suppliers, customers and others;
The likely consequences of any decisions in the long-term.
The Board believe that considering our various stakeholders (employees, customers, suppliers, communities, Government and investors) whilst making key business decisions is not only the right thing to do, but is vital to the long term success of the company.
Key objectives in the year included; managing the increase in business volumes and reacting effectively to increased demand across multiple product lines and throughout our national depot network, whilst balancing a tight supply chain for new machines coming into the fleet.
Considerable effort was put in by many colleagues to ensure that our business continued to grow and was able to successfully service our customers during this period. Developing and fostering relationships with our partners (customers and suppliers) remains an ongoing priority for all members of our business.
On behalf of the board
The Directors present their annual report and financial statements for the year ended 30 April 2023.
The principal activity of the group continued to be that of plant hire, plant trading, vehicle auctions and the sale and rental of luxury holiday lodges. As a secondary activity the Group has a portfolio of commercial and residential properties which partially support the Group's trading activities.
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £255,000. The Directors do not recommend payment of a final dividend.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group is required to report on all emissions for the period from 1 May 2022 – 30 April 2023, under the Large and Medium Size Companies and Groups Regulations 2018.
Reporting data is for Morris Leslie Limited and Morris Leslie Plant Hire Limited.
As a result of continual investment in new fleet, we benefit from the latest engine technology and carbon efficiencies available in the market. The business operates an increasing number of hybrid and electric vehicles in our own-use fleet.
At an operational level we have invested in our IT systems and make best use of digital platforms for our trading activities, thus minimising our environmental impact where possible.
In calculating Greenhouse Gas (GHG) emissions, DEFRA conversion factors have been used.
| 2023 tCO2e | 2023 kWh | 2022 tCO2e | 2022 kWh |
Direct emissions |
|
|
|
|
Gas | - | - | - | - |
Use of fuel for transport | 2,796 | 11,983,457 | 2,762 | 11,802,151 |
| ---------- | --------------- | --------- | --------------- |
Total direct emissions | 2,796 | 11,983,457 | 2,762 | 11,802,151 |
| ---------- | --------------- | --------- | --------------- |
Indirect emissions |
|
|
|
|
Purchase of electricity | 337 | 1,717,902 | 397 | 2,053,271 |
Emissions from business travel in rental cars and employee-owned vehicles | 1,891 | 8,096,452 | 1,779 | 7,063,160 |
| --------- | --------------- | --------- | -------------- |
Total indirect emissions | 2,228 | 9,814,354 | 2.176 | 9,116,431 |
| --------- | --------------- | --------- | -------------- |
|
|
|
|
|
Total emissions | 5,024 | 21,797,811 | 4,938 | 20,918,582 |
| ===== | ========= | ===== | ======== |
|
|
|
|
|
Total carbon emissions per £m of revenue in the year to 30 April 2023 were 69.3 (2022 – 68.8) tCO2e.
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.
Included within the strategic report is an indication of the principal risks and uncertainties including the risks associated with the market conditions, competition, foreign currency risk, and legislative and compliance risks.
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the 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 the 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 or 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 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.
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.
As part of our planning process:
We enquired of management the systems and controls the group has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. Management informed us that there were no instances of known, suspected or alleged fraud;
We obtained an understanding of the legal and regulatory frameworks applicable to the group. We determined that the following were most relevant: Employment law (including payroll and pension regulations), health and safety; and compliance with the UK Companies Act.
We considered the incentives and opportunities that exist in the group, including the extent of management bias, which present a potential for irregularities and fraud to be perpetrated, and tailored our risk assessment accordingly; and
Using our knowledge of the group, together with the discussions held with management at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations and fraud;
Reviewing group board meeting minutes;
Reviewing key policies in place including the health and safety and PPE policy;
Reviewing the group's bronze FORS accreditation;
Reviewing the group's local auction license;
Reviewing the group's membership with the British Holiday and Home Parks Association;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the carrying value of tangible fixed assets and investments properties, investments, stock and trade debtors, along with the estimation of accruals; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
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 £337,165 (2022 - £39,981 loss).
Morris Leslie Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Caledonian House, Walnut Grove, West Kinfauns, Perth, PH2 7XZ.
The group consists of Morris Leslie 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, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.
The consolidated group financial statements consist of the financial statements of the parent company Morris Leslie 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 30 April 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The financial statements have been prepared on a going concern basis. The directors have considered relevant information, including the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. The directors have also taken into consideration the current economic climate and the likelihood of the UK entering a recession in 2023 and beyond. Forecast future cash flows have been prepared taking into account the trading outlook and group facilities in place with lenders.
Based on these assessments and having regard to the resources available to the company and group, the directors have concluded that there is no material uncertainty and that they can continue to adopt the going concern basis in preparing the annual report and financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for hire, 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.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rental income is recognised when it is probable that the economic benefit will flow to the company and the amount of revenue can be measured reliably, Rental income is accrued on a time basis, by reference to the lease agreement.
Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 5 years.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
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.
Assets which are due to be sold in the coming year are transferred out of fixed assets and held as stock.
Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.
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, associates and jointly controlled entities 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
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 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.
Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
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 creditors, bank loans 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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.
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.
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 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 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 leased asset are consumed.
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.
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.
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 in the period are included in profit or loss.
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.
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.
Value of tangible assets
The nature of the business is such that investment in fixed assets is carried out each year in order to ensure the Morris Leslie Group maintains a modern fleet of plant which enables them to service their customers and deliver the high standards of service the group prides itself on. As part of the investment process the Directors are required to assess the useful lives of these assets to accurately apply depreciation. These estimates are based on comparable depreciation rates applied by others in the same sector and the Directors' own knowledge and experience built up over many years.
Carrying value of investment properties
As part of the year end process the Directors have made an assessment as to the fair value of investment properties. Whilst no formal valuations have been carried out in the year, the Directors are involved in the property market on a regular basis and therefore have good working knowledge of current market values. Although there is some degree of estimation involved in arriving at fair values the Directors are content that any potential differences are wholly immaterial.
As detailed in note 1.10, the fixed asset investments in subsidiaries and associates are measured as cost less impairment. Management therefore carry out an annual impairment review in relation to these investments in order to ensure any required write down to the balance is correctly applied. As at 30 April 2023, no impairment was deemed necessary.
In arriving at the valuation of stock it may be necessary for management to make an assessment over the carrying value of stock items and where applicable apply a provision to amend this carrying value to a more accurate level. These provisions are arrived at using managements knowledge and understanding of the business and the industry in which it operates and focuses on potentially obsolete or old items for which the full value may no longer be recoverable.
Credit control is an important function which requires assessment, on an ongoing basis, of the recoverability of amounts due from trade debtors. Where recovery is in doubt, management will adequately provide against this specific debt and will arrive at such conclusions based on the knowledge of the debtor and their “ability to pay”.
Management estimate requirements for accruals using post year end information and information available from detailed budgets. This identified costs and income that are expected to be incurred or received for goods/services provided by and to other parties. Accruals are only released when there is a reasonable expectation that these costs will not be invoiced in the future.
An analysis of the group's turnover is as follows:
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 1 (2022 - 1).
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:
On 3 March 2021, the UK Budget 2021 announcements included measures to support economic recovery as a result of the COVID-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which became effective from 1 April 2023. The 25% rate was granted Royal Assent on 10 June 2021 and so was substantively enacted at the balance sheet date. As a result the closing deferred tax balances as at 30 April 2023 are recognised at 25% (2022 - 25%) and the corporation tax rate effective in the period is a pro-rated rate between the previous rate of 19% and the new rate of 25% at 19.49% (2022 - 19%).
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
Following a change in the expected lease term for one of the depots, a decision was made to write down certain assets which will remain at the depot following the end of the lease.
On the 31 October 2016, the group acquired control of Causeway Tractors Limited via a share exchange. This transaction gave rise to goodwill which was amortised straight line over 5 years.
The carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Investment property comprises a range of commercial and residential properties let to third parties. The fair value of the investment property brought forward has been arrived at on the basis of a valuation carried out by a number of professional surveying firms, who are not connected with the company, as at May 2018. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties. The Directors believe this still represents a fair value at 30 April 2023.
In addition, further properties were acquired in the year by a subsidiary, Morris Leslie Property Limited, and the Directors believe the acquisition price still represents a fair value at 30 April 2023.
The carrying value of investment property comprises:
Details of the company's subsidiaries at 30 April 2023 are as follows:
Details of associates at 30 April 2023 are as follows:
Details of joint ventures at 30 April 2023 are as follows:
* Investment held through Morris Leslie Property Limited.
Included within other creditors is a stocking facility amounting to £794,841 (2022 - £930,881) provided by Distribution Finance Capital Limited. This facility is secured against the assets concerned.
The amount included within other creditors relates to the stocking facility described in creditors due within one year.
At the year end the bank loans and overdraft are secured by a floating charge over the assets of the company and a standard security over specific land and buildings.
In September 2021 a loan facility of £800,000 was entered into. This facility is repayable in monthly instalments with a the final repayment due in December 2024. The loan is subject to interest charged at 2.5%.
In November 2021 a loan facility of £13,630,000 was entered into. This facility is repayable in quarterly instalments with the final repayment due in November 2026. The loan is subject to interest charged at a rate of 4.3%.
Bank overdrafts includes £2,980,082 (2022 - £Nil) received from an invoice factor. The year end balance is secured against £9,027,214 (2022 - £9,309,727) of trade debtors.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. 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 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. These leases are secured against the assets concerned.
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:
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.
Each ordinary share carries one vote and is entitled to participate pari passu with other ordinary shares in any dividend or capital distribution.
Share premium represents the excess paid over the par value of share on issue.
Non-distributable reserves represent the revaluation of properties less associated deferred tax liabilities and are not distributable to shareholders.
Profit and loss reserves include all current and prior period retained profits and losses.
The company is party with certain other group companies, being Morris Leslie Limited, Morris Leslie Plant Hire Limited, Morris Leslie Plant Limited, Morris Leslie Villages Limited, Morris Leslie Property Limited, and Causeway Tractors Limited, to an unlimited inter-company guarantee to HSBC for borrowings. At 30 April 2023 the amount guaranteed was £13,988,354 (2022 - £9,846,739).
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:
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
Amounts contracted for but not provided in the financial statements:
The remuneration of key management personnel is as follows.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
The company is controlled by Morris Y Leslie.