The directors present the strategic report for the year ended 30 September 2023.
Principal activities
The principal activity of the group in the year under review was the collection, recycling, and production of resources in addition to other ancillary services. Waste collection services to the hospitality, retail, energy, healthcare, local authorities, commercial, industrial and construction sectors are provided.
Waste such as glass, food, dry mixed recycling, general residual, cardboard, paper, plastics, inert demolition spoil, soils, wood, green garden, asbestos, incinerator bottom ash, household, road sweepings, civic amenity is collected. This is undertaken by the fleet of trade refuse vehicles, skips, tippers, grabs and articulated vehicles which transport it to the Material Recycling Facilities.
Valuable products - cardboard, paper, washed sands & gravels, concrete, metals, refuse derived fuel, biomass, topsoil and animal bedding - are produced.
Headquartered in Midlothian, in central Scotland, the business services all of Scotland and the North East of England from ten sites.
The group achieved record turnover of £52.2m (2022: £49.2m) in the year to 30 September 2023; an increase of 6%. This generated an operating profit of £3.4m (2022: £2.4m) and a profit after tax of £1.3m (2022: £1.7m).
The FY23 trading performance was resilient and produced the Group’s highest revenue and profit to date in a challenging economic environment; the escalation of the Ukrainian war, volatility following the Truss premiership, supply chain challenges, higher fuel costs, increasing finance costs and rising people costs.
Our Collection and Compaction (Trade Waste) division continued to expand with consistent quality customer service and incremental infill selling underpinning the trading performance. In a sluggish market impacted by the Construction and Demolition sector slowdown, Complementary Services vehicles struggled to achieve high utilisation. Collection, Processing & Disposal grew significantly in the year with the new aggregate washplant processing well and strong returns seen from our wood processing site in Petterden.
2024 Outlook
The start of 2024 has been extremely difficult for everyone at NWH following the passing of our CEO Mark Williams. He led and grew the business with unparalleled knowledge, force of personality, commitment and purpose for over 20 years. His devotion to the NWH Family was and remains inspirational. Mark’s passing has undoubtedly left a huge void in the business but, under the stewardship of the senior management team that Mark established during his tenure, the business is well positioned to build on recent trading success. We know Mark would have wanted us to keep driving the business forward, and for us to make him proud.
Under the leadership of our Managing Director Gavin Money, the business is well placed to build on the robust 2023 trading performance. Gavin joined from a large competitor where he worked for five years, as Regional General Manager and latterly Operations Director.
As the uncertain economic climate and softer markets ease, the diversity of our sectors, geographies and service offering, as well as the significant amount of repeat work we undertake, will accelerate further growth.
The business strategy was refreshed. Our Purpose, Values, Mission and Vision hold true and remain unchanged.
The business is focused on delivering sustainable growth across all three divisions - Collection & Compaction, Complementary Services and Collection, Processing & Disposal. Margin improvement will come from increased efficiencies from the new plants at both our Aggregates and Wood recycling facilities, large muckshifting jobs and operationally efficient route in-fill selling. The investment in recent senior sales appointments has been the catalyst for some recent, large tender wins.
Acquisition targets which meet the business’ strategy and will continue to be considered.
Our waste processing diverts from landfill and our production of secondary materials results in the avoidance of CO2 in displacing traditional, extractive raw materials. We shall continue to promote and leverage our work that significantly reduces carbon emissions and pressure on the Earth’s limited natural resources through our business model.
Key Performance Indicators ("KPIs")
One of the main tools to address risk is the extensive use of KPIs and continuous commercial planning within the long term strategic framework. As part of a rolling monthly performance cycle, the company monitors KPIs such as new business pipeline, service levels, collection movements and tonnages, vehicle and plant utilisation, processing throughput, profitability and liquidity on a daily and weekly basis which are reviewed both operationally and at board level.
Principal Risks and Uncertainties
The nature of the company's business and strategy are subject to a number of risks. The directors are of the opinion that the adopted risk management processes assist to identify, monitor and mitigate these risks.
Risk Management Commitees
The company operates a Risk, Health and Safety Committee with the purpose of reviewing and making recommendations on the adequacy and reliability of risk identification, mitigation and reporting. It fulfils the Board’s corporate governance and supervisory responsibility for risk, health and safety and for developing policy to ensure best practice as well as the health and wellbeing of staff, contractors and visitors to the sites.
The committee meets quarterly ensuring the objectives, measures and targets of the company’s policy are appropriate, adhered to and reported on. Risks addressed include regulatory, people & safety, business continuity, legal, reputational, environmental and community. A risk management plan is prepared and reviewed annually.
The Safety, Health, Environment, Fire and Quality Committee meets monthly and comprises all site managers. Its findings feed into the monthly Operational and Main Board meetings as well as the Risk, Health and Safety Committee.
The principal risks and uncertainties that affect the business are:
Compliance
This is the largest risk facing the business whether it is from health and safety legalisation, environmental regulation or vehicular rules. Compliance has maximum focus in the business and is addressed through constant review and can be seen in the company’s core values. The Compliance Director sits on the Board with responsibility for delivering a fully compliant business.
Macroeconomic climate
A challenging economic environment has been created by a cycle of interest rate rises, increased costs and geopolitical crises. The company’s strategy is robust enough to counter these headwinds.
Environment
The company is cognisant of its environmental responsibilities and processes and systems are in place to manage the impact on, as well as protect and enhance, the environment. There is strict adherence to the SEPA and EA waste management regulations.
Credit risk
The company's principal financial assets are bank balances, cash and trade debtors. The company's credit risk is primarily attributable to its trade debtors. Credit Risk is managed by monitoring the aggregate amount and duration of exposure to any one customer. Trade debtors are insured on an individual account basis. The amounts presented in the balance sheet are net of allowances for doubtful debts, estimated by company's management based on prior experiences and their assessment of the current environment.
Liquidity risk
The financial risk management policy is to ensure continuity of funding for operations via facilities where limits have been established based on growth requirements of the business, together with inter-company debt and through acquiring an element of the Group's fixed assets under finance leases as appropriate. The group has an Invoice Finance Facility with RBS, providing flexibility to meet the growth requirements of the business. No treasury transactions or derivatives are entered into.
Waste recycling is a regulated sector which can impact the revenue opportunities. The Scottish Government and its delivery body, Zero Waste Scotland, have introduced ambitious waste recycling policies such as waste reduction targets for food and a landfill ban on municipal biodegradable waste by next year. Major Scottish cities continue to introduce Low Emission Zones which are designed to target the most polluting vehicles; our fleet has been modernised to ensure it is compliant with the new regulations. The business has visibility of changes to the legal environment and the prevailing political sentiment and plans accordingly.
Human resources
People are the company’s greatest asset, and as the business expands, the reliance on high-calibre employees becomes increasingly crucial. To support this growth, significant investment has been made and will continue to be directed towards enhancing both capacity and capability throughout the organisation. Furthermore, the apprenticeship program and the Driver Academy play a pivotal role in this strategy. These initiatives not only bolster the workforce but also ensure a steady influx of skilled, dedicated drivers, meeting the ongoing demand for quality and efficiency in operations.
End markets
The company operates in the construction sector which has experienced challenges in previous years. The risk faced by the company is significantly diversified as there is increasing sales activity in other markets eg hospitality, local government, facilities management, manufacturing, industrial, commercial, retail and leisure.
Commodities market
Volatility in global commodity prices can impact the revenues generated from the resource produced. Working with industry partners helps to mitigate any downside risk.
Business infrastructure
The business is reliant on various software and IT systems. Further improvements to our operational systems continued to be implemented throughout the business offering greater stability, analysis and reporting capability.
Acquisitions
A key plank of the growth strategy is through acquisitions. There are many potential deals sourced and only those that are aligned to the strategy of, and have a strong culture fit with, NWH are progressed. This disciplined approach limits the risk of poor integration.
The directors of the company, in line with their duties under s172 of the Companies Act 2006, believe that they have acted in the way they consider to be both in good faith and would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so have regard (amongst other matters) to the:
likely consequences of any decisions in the long-term
interests of the company’s employees
need to foster the company’s business relationships with suppliers, customers and others
impact of the company’s operations on the community and environment
desirability of the company maintaining a reputation for high standards of business conduct
need to act fairly as between shareholders of the company.
The Board understands the importance of engaging with all its stakeholders and regularly discusses issues concerning employees, customers, suppliers, environment and community, regulators and shareholders which inform its decision-making processes.
Sustainability is central to the company’s vision “to secure a sustainable future by improving the social, economic and environmental wellbeing of our communities. This will be achieved by our commitment to our people, our communities and our planet”.
This is underpinned by the five values of the business:
Safety first
Beyond compliance
Aim higher
Think national, act local
The NWH family
Employees
We believe the core strength of the group is its people and we are committed to being a responsible business and employer. The group aims to recruit, develop, motivate and retain the best talent. For the business to succeed we need to engage and enable our people to perform at their best, develop their skills and capabilities, while ensuring we operate as efficiently and productively as possible.
Training remains important to the company and continued investment in this area is planned. We actively encourage our employees to take up training courses, and when possible, we offer work experience placements in partnership with local schools.
Communication with employees is vital and an open approach is taken. There is regular email correspondence to all staff detailing the latest business activity, news (prior to public release), CSR activity and recruitment. Periodic updates to drivers, through in-vehicle software, focuses on business updates and safety campaigns. The internal Facebook page gives a platform for two-way communication. In addition, there are monthly business reviews and Q&A sessions, for drivers and non-drivers, which provides direct access to the MD to respond to queries and outline plans for the business.
We continue to work closely with all our customers, supporting them and working jointly to develop their, and our, businesses. Our team of business development managers and account managers regularly engage with all our customers to drive growth.
In addition, we communicate with our customers to provide updates on the business and our service offering. We interact with all customers through social media and marketing channels.
Suppliers
We value the supplier base as partners and our aim is to have strong stable working relationships with them. We seek to be fair and transparent in our dealings and we honour our arrangements with them.
The company undertakes regular meetings and calls with our suppliers as well as engage with them on social media.
Environment and community
The company is committed to positive and responsible courses of action regarding those aspects of the business which impact upon the environment. This is demonstrated by maintaining an Environmental Management System, which meets the requirements of ISO 14001 and is focused on preventing pollution and continuously improving the company performance. The strategy addresses the following key areas:
Review environmental impacts pre-work
Improve materials (design out banned chemicals) and ensure resource used throughout the supply chain is non-restricted
Increase employee awareness and training
Protect natural resources
Recycle materials and minimise waste
Engage with customers and regulatory authorities
Safely transport and dispose of waste materials
Our dedication to supporting local private charities and the communities we serve remains a key focus area for The NWH Group. In 2023, we proudly continued our longstanding partnership with Entrepreneurial Scotland, extending support to an intern for the fourth consecutive year. Additionally, we embarked on educational initiatives, visiting primary schools to impart valuable lessons on recycling practices and the importance of minimising landfill. Recognising the significance of investing in our workforce, we facilitated and funded the training of four new driver apprentices. Further we continued our ongoing support for Children 1st, our partner charity. As we look ahead to 2024, we are excited to announce our intention to allocate £21,000 to a community fund program. This initiative will enable the NWH Group to contribute funds to the most deserving charities within the regions we serve, fostering positive change and a meaningful impact in our communities.
Governance and regulation
The Board’s intention is to behave responsibly and to ensure that the management team operates the business in a responsible manner, acting with the high standards of business conduct and the good governance expected of a business of our nature and size and in full alignment with the laws and regulations. In doing so, we believe we will deliver our long-term business strategy and further develop our reputation in the waste recycling sector.
We are accredited to the industry’s leading Safety Schemes in Procurement (SSIP) schemes. All aspects of our business operations, from our financial stability and quality management systems to health and safety practices and employment policies have been assessed and approved. Our management processes comply with the stringent requirements of both ISO 14001 and ISO 9001 (Quality Management System Standard). These accreditations from leading industry bodies provide independent assurance that we meet the rigorous criteria for private and public sector projects, both regionally and nationally.
We have a risk and control framework to ensure that the company complies with all legal and regulatory requirements pertinent to our industry.
The Board has a close working relationship with the shareholders and hold regular meetings and discussions to drive the business towards its long-term business strategy. The company is committed to considering properly their input and challenges.
The Board provides relevant information to the shareholders on a regular basis, including monthly Board packs containing analysis of performance against the key metrics.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 September 2023.
The results for the year are set out on page 13.
Ordinary dividends were paid amounting to £540,000. The directors do not recommend payment of a 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's policy is to consult and discuss with employees in matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The Company appointed Carbon Footprint Ltd to independently assess its greenhouse gas (GHG) emissions in accordance with the UK Governments ‘Environmental Reporting Guidelines: Including Streamlined Energy and Carbon reporting Guidance’.
The GHG emissions have been assessed following the Welsh Public Sector Net Zero Carbon Reporting Guide 2022-2023. It uses the Greenhouse Gas Protocol for Carbon Accounting and the conversion factors are from the UK 2023.
The table below summarises the GHG emissions for 2023 and 2022:
Scope | Activity | Location Based tCO2e 2023 | Location Based tCO2e 2022 |
Scope 1 | Vehicle fuel usage | 12,478 | 9,244 |
Site gas | 5 | 64 | |
Company car travel | 24 | 65 | |
Scope 1 Sub Total | 12,507
| 9,373
| |
Scope 2 | Electricity generation | 149 | 207 |
Scope 2 Sub Total | 149
| 207
| |
Scope 3 | Well To Tank | 2,901 | 2,282 |
Electricity transmission & distribution | 14 | 23 | |
Cash opt out car travel | 1 | 1 | |
Employee-owned car travel (grey fleet) | 20 | 6 | |
Waste | 6 | - | |
Flights | 4 |
| |
Scope 3 Sub Total | 2,946
| 2,312
| |
Total tonnes of CO2e | 15,601 | 11,892 | |
Tonnes of CO2e per employee | 43 | 34 | |
Tonnes of CO2e per £m turnover | 294 | 241 | |
Total energy consumption (kWh)* | 49 | 135 |
* Total energy consumption UK Electricity, UK Site Gas and vehicles owned by the company and employees (grey fleet)
Energy Efficiency Actions
The group is fully aware of its obligations as a business user of electricity and gas and CO2 greenhouse gas emissions and there is a desire to decrease fuel consumption where possible. New technologies, operational efficiencies in business processes and minimising unnecessary travel are all under constant review.
With sustainability at the core of its operations, the NWH Group has already reported a 92% reduction in on-site fuel usage by transitioning to alternative sources; this is coupled with a 63% reduction in the employee vehicle carbon footprint through the adoption of electric vehicles.
Building on this success, the NWH Group has embarked on the next phase of its sustainability journey by initiating the transition of its HGV fleet to fully electric vehicles. The acquisition of the Volvo articulated lorry is the first step in this transformative process, demonstrating the company's unwavering dedication to reducing its environmental impact.
The NWH Group is committed to achieving its carbon negative goals and has a clear strategy and plan in place to do so.
We have audited the financial statements of NWH Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group 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's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and 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 accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 £540,000 (2022 - £545,908 profit).
NWH Holdings Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Unit 5 Mayfield Industrial Estate, Mayfield, Dalkeith, Midlothian, EH22 4AD.
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 consolidated group financial statements consist of the financial statements of the parent company NWH Holdings 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 September 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.
At 30 September 2023, the group had net current liabilities of £9,342,975 (2022 - £10,541,810).
The directors are required to prepare the statutory financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. The directors’ assessment of going concern considers the group’s principal risks and is dependent on a number of factors including financial performance and access to funding facilities.
The directors have prepared detailed financial projections for a period extending over 12 months from the date of approval of these financial statements. These projections have also been sensitised to reflect plausible downside scenarios. Based on these projections, the directors have a reasonable expectation that the group has adequate resources with sufficient levers available to continue in operational existence for the foreseeable future and to meet its obligations as they fall due.
Taking all of the above into account, the directors consider that it is appropriate to prepare the financial statements on the going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue relates to the collection and processing of materials, sale of recycled materials and skip hire.
Revenue from collection services is recognised when the materials have been collected and the loads weighed upon return to the processing facility. Revenue from processing services is recognised at the point in time when the processing service takes place. Revenue from the sale of recycled materials is recognised when the significant risks and rewards of ownership of the goods have transferred to the buyer. Turnover from skip hire is recognised on despatch of the skip to the customer.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
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.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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.
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.
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, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
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.
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 street 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.
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 key sources of estimation uncertainty in applying accounting policies in the financial statements are:
- Useful economic lives of intangible and tangible assets
- Residual values of tangible assets
- Bad debt provisioning
- Stock to tip provisioning
The annual amortisation or depreciation charge for intangible and tangible assets is sensitive to changes in the estimated useful economic lives and residual values of assets. The useful economic lives and residual values are assessed annually and amended when necessary to reflect current estimates, based on technological advancements, future investments, economic utilisation and physical condition of the assets.
The directors review the debtors ledger for customers who have overdue balances. Provision are made against balances which present a credit risk to the company. The directors also monitor customers' insured limits to mitigate the risk of bad or doubtful debts.
Stock to tip provisions are measured at the directors best estimate the company's obligations in respect of unusable or unsellable materials held on site.
The directors consider there to be one geographical market of turnover, the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge/(credit) 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:
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 30 September 2023 are as follows:
(1) Unit 5, Mayfield Industrial Estate, Mayfield, Dalkeith, Midlothian, EH22 4AD.
Included within trade debtors is £8,082,153 (2022: £7,482,005) which is subject to an invoice discounting arrangement.
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 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Hire purchase liabilities are secured over the assets they were used to acquire.
The Royal Bank of Scotland holds a bond and floating charge over the whole assets of the company together with cross guarantees between NWH Holdings Limited and other group companies. The total amount of debt over which group cross guarantees had been provided amounted to £10,195,454 (2022: £10,704,545).
RBS Invoice Finance Ltd (RBSIF) hold a floating charge in relation to the purchased debts. RBSIF's floating charge shall insofar as it relates to the purchased debts, but no further or otherwise, rank in priority to the bank's floating charge.
Bank loans are represented by term loans and revolving credit facilities. They are repayable over periods up to 72 months and attract interest at 1.75% to 3.4% over the base rate.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Ordinary shares hold the right to one vote. Dividends are allotted in proportion to shareholdings. If the company was to be dissolved on a winding up basis distributions would be shared in proportion to shareholdings. Issued shares hold no right of redemption.
Growth shares are held by certain members of senior management and have no dividend entitlement or voting rights.
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:
Amounts contracted for but not provided in the financial statements:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The company has taken advantage of the exemption provided by paragraph 33.1A of Financial Reporting Standard 102 and accordingly has not disclosed any transactions with 100% held group undertakings.
Dividends totalling £540,000 (2022 - £546,000) were paid in the year in respect of shares held by the company's directors and their partners.
The following loans with directors existed during the year. The loans are interest free and have no fixed date for repayment.