Dow Group Limited - Limited company accounts 18.2

REGISTERED NUMBER: SC280783 (Scotland)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 NOVEMBER 2018

FOR

DOW GROUP LIMITED

PREVIOUSLY KNOWN AS

DOW WASTE MANAGEMENT LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Statement of Comprehensive Income

8

Statement of Financial Position

9

Statement of Changes in Equity

10

Statement of Cash Flows

11

Notes to the Statement of Cash Flows

12

Notes to the Financial Statements

13

DIRECTORS:

Sheila P. Baxter

W. Marshall Dow

REGISTERED OFFICE:

23 Lenziemill Road

Lenziemill Industrial Estate

Cumbernauld

G67 2RL

REGISTERED NUMBER:

SC280783 (Scotland)

AUDITORS:

William Duncan (UK) Limited

Chartered Accountants

Statutory Auditor

4d Auchingramont Road

Hamilton

ML3 6JT

BANKERS:

Bank of Scotland

Town Centre

Cumbernauld

G67 1DQ

SOLICITORS:

Addleshaw Goddard LLP

19 Canning Street

Edinburgh

EH3 8EH

The directors present their strategic report for the year ended 30 November 2018.

REVIEW OF BUSINESS

Results and performance

The results for the year and the financial position of the company are as shown in the annexed financial statements. The

company provides waste recycling and waste management services, construction services, civil engineering services,

tipper hire and aggregate recycling services to customers throughout Scotland. The business has continued to invest and

grow over the last year whilst maintaining its existing customer base and generating new business from new customers.

Business environment

The business is based in Cumbernauld and works on sites throughout Scotland. The company now has over 70

employees and continues to employ additional staff through agencies and subcontractors.

Our culture

We have continued to build a culture and environment which attracts and retains people with the right capabilities for the

future, with ongoing training and improved working conditions. We have supported community projects, youth football

teams and small sports groups throughout the year. We have continued to renew and train our people, refreshing their

abilities and improving their strengths.

Dow - we care

We have continued to instill and advertise our values which are at the heart of what we do and how we must operate. We

start with the customer and prioritise delivering a great outcome for them. We have continued to deliver our care ethos

in our service and our marketing, with the use of social media campaigns and the livery of our fleet, promoting our

sustainability strengths.

Strategy

- Increased customer engagement

- Driving towards cost effective operations

- Multi brand, multi service

- Reduce our carbon impact

- Invest in new equipment which meets all environmental criteria

Challenges

Continuing and growing challenges faced throughout 2018 include:

- Cost of fuel continues to increase steadily

- Lack of skilled people in the marketplace

- Lack of interest from the insurance sector to cover the costs of training HGV drivers under the age of 25

- Delayed payments from larger PLCs pushing credit terms beyond the current accepted market terms

- Uncertainty over the cost of parts and vehicles post-Brexit

Priorities for 2019

We aim to continue to improve our strong performance whilst also focusing on new diverse developments to implement

further structure within the company, with that diversity bringing new investment, training and employment

opportunities. We also aim to increase our focus on customer service and to renew and replenish service equipment.

Key performance indicators

We use a range of financial and non-financial metrics to measure our performance. The key financial performance

indicators are turnover, gross margin and return on capital employed. The rate achieved for all materials diverted from

landfill during the year was 92%.

Turnover decreased from £17,405,063 last year to £14,724,309 this year, a decrease of 15.4%.

Profit on ordinary activities before taxation decreased to 2.81% from 3.07% last year.

Return on capital employed for the year was 16.55% compared to 26.42% last year.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties that could impact the company's performance and our mitigating activities.

Trading environment

Impact on sales, margins, costs, profit and cash of:

Economic conditions - the business is directly affected by the construction industry which is cyclical and typically lags

behind the general economic cycle by between 12 and 24 months.

Mitigating activities include prudent management through the different phases of the economic cycle, achieved by the

use of a flexible business model. We aim to have a sound capital structure and stringent financial management in

recognition of the cyclical nature of our market and to be able to withstand market shocks.

Competitor activity - in an already competitive market the company faces increased competition from large national

competitors and smaller local operators which could result in a reduced market share and lower revenue.

Mitigating activities include regular monitoring of our market share and the performance of our competitors. We

continue to create a commercial advantage by consistently providing the highest level of service at a price which offers

value to our customers. We also aim to excel in areas that provide barriers to entry to newcomers and by differentiation

of service, for example, avoidance of landfill through the process of Refuse Derived Fuels.

Health and safety/Environmental impact - compliance with laws and regulations governing occupational health and

safety matters and the wider environment is essential to ensure the safety of employees, the public and the environment

and avoid the risk of reputational damage to the company.

Mitigating activities include ensuring that we have adequate insurance cover and maintaining and updating appropriate

health and safety and environmental policies. We provide induction training for new staff and regular refresher training

for existing staff to reinforce the policies and ensure a safe working environment. We also offer a programme of support

to customers to allow them to fulfil their responsibilities to their own workforce when using our equipment.

Business strategy

We face a number of risks in the environment in which we operate as there are many competitors in this sector. We aim

to manage and monitor these risks and any factors which could impact our plans for long-term sustainable growth of the

company. We recognise that risk is inherent in all business activities and must be balanced when assessing returns.

Successful management of these risks is therefore key to accomplishing our strategic objectives and the long-term

sustainable growth of the business.

Management and staff

Reliance on key personnel

Availability of adequately qualified staff

Retention of adequately qualified staff

Mitigating activities include succession planning, commitment to open communication with staff and monitoring

employee satisfaction. Internal and external training is also available for all staff. Retention of staff is paramount to our

business goals and we focus on this to ensure continuity, efficient use of resources and increased productivity to achieve

maximum profit.

ON BEHALF OF THE BOARD:

Sheila P. Baxter - Director

9 August 2019

The directors present their report with the financial statements of the company for the year ended 30 November 2018.

CHANGE OF NAME

The company passed a special resolution on 15 March 2018 changing its name from Dow Waste Management Limited to Dow Group Limited.

DIVIDENDS

An interim dividend of £3,000 per share was paid on 30 November 2018. The directors recommend that no final dividend be paid.

The total distribution of dividends for the year ended 30 November 2018 will be £ 300,000 .

DIRECTORS

The directors shown below have held office during the whole of the period from 1 December 2017 to the date of this

report.

Sheila P. Baxter

W. Marshall Dow

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors 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), including Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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

company and of the profit or loss of the company 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;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's transactions and disclose with reasonable accuracy at any time the financial position of the 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 company and hence for taking reasonable steps for the prevention and detection of fraud

and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the

company's auditors are aware of that information.

ON BEHALF OF THE BOARD:

Sheila P. Baxter - Director

9 August 2019

Opinion

We have audited the financial statements of Dow Group Limited (the 'company') for the year ended 30 November 2018

which comprise the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in

Equity, Statement of Cash Flows and Notes to the Statement of Cash Flows, Notes to the Financial Statements, including

a summary of 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).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 30 November 2018 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

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 Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic

Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors

thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or

apparent material misstatements, we are required to determine whether there is a material misstatement in the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to

report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, 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 necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs

(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Andrew Steel (Senior Statutory Auditor)

for and on behalf of William Duncan (UK) Limited

Chartered Accountants

Statutory Auditor

4d Auchingramont Road

Hamilton

ML3 6JT

9 August 2019

TURNOVER

4

14,724,309

17,405,063

Cost of sales

12,412,371

14,994,408

GROSS PROFIT

2,311,938

2,410,655

Administrative expenses

1,829,277

1,785,243

OPERATING PROFIT

6

482,661

625,412

Interest payable and similar expenses

7

69,428

90,994

PROFIT BEFORE TAXATION

413,233

534,418

Tax on profit

8

80,203

107,403

PROFIT FOR THE FINANCIAL YEAR

333,030

427,015

OTHER COMPREHENSIVE INCOME

Revaluation of Land

291,002

-

Income tax relating to other comprehensive income

-

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

291,002

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

624,032

427,015

FIXED ASSETS

Tangible assets

10

2,805,497

2,371,249

CURRENT ASSETS

Stocks

11

51,344

84,428

Debtors

12

3,315,386

3,339,701

Cash at bank and in hand

927,521

1,383,579

4,294,251

4,807,708

CREDITORS

Amounts falling due within one year

13

4,183,722

4,811,920

NET CURRENT ASSETS/(LIABILITIES)

110,529

(4,212

)

TOTAL ASSETS LESS CURRENT LIABILITIES

2,916,026

2,367,037

CREDITORS

Amounts falling due after more than one year

14

(820,141

)

(551,731

)

PROVISIONS FOR LIABILITIES

17

(139,222

)

(182,675

)

NET ASSETS

1,956,663

1,632,631

CAPITAL AND RESERVES

Called up share capital

18

100

100

Revaluation reserve

19

570,363

279,361

Retained earnings

19

1,386,200

1,353,170

SHAREHOLDERS' FUNDS

1,956,663

1,632,631

The financial statements were approved by the Board of Directors on 9 August 2019 and were signed on its behalf by:

Sheila P. Baxter - Director

W. Marshall Dow - Director

Called up

share

Retained

Revaluation

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 December 2016

100

1,116,155

279,361

1,395,616

Changes in equity

Dividends

-

(190,000

)

-

(190,000

)

Total comprehensive income

-

427,015

-

427,015

Balance at 30 November 2017

100

1,353,170

279,361

1,632,631

Changes in equity

Dividends

-

(300,000

)

-

(300,000

)

Total comprehensive income

-

333,030

291,002

624,032

Balance at 30 November 2018

100

1,386,200

570,363

1,956,663

Cash flows from operating activities

Cash generated from operations

1

764,681

1,579,025

Interest paid

(23,831

)

(22,877

)

Interest element of hire purchase payments paid

(45,597

)

(68,117

)

Tax paid

(148,972

)

(143,374

)

Net cash from operating activities

546,281

1,344,657

Cash flows from investing activities

Purchase of tangible fixed assets

(955,615

)

(770,961

)

Sale of tangible fixed assets

27,456

109,424

Net cash from investing activities

(928,159

)

(661,537

)

Cash flows from financing activities

Loan repayments in year

-

(55,355

)

New HP agreements in year

891,065

714,340

Capital repayments in year

(541,840

)

(621,172

)

Amount withdrawn by directors

(123,405

)

(174,102

)

Equity dividends paid

(300,000

)

(190,000

)

Net cash from financing activities

(74,180

)

(326,289

)

(Decrease)/increase in cash and cash equivalents

(456,058

)

356,831

Cash and cash equivalents at beginning of year

2

1,383,579

1,026,748

Cash and cash equivalents at end of year

2

927,521

1,383,579

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

30.11.18

30.11.17

£

£

Profit before taxation

413,233

534,418

Depreciation charges

810,885

728,207

Profit on disposal of fixed assets

(25,972

)

(34,859

)

Finance costs

69,428

90,994

1,267,574

1,318,760

Decrease/(increase) in stocks

33,084

(78,511

)

Decrease/(increase) in trade and other debtors

102,573

(847,966

)

(Decrease)/increase in trade and other creditors

(638,550

)

1,186,742

Cash generated from operations

764,681

1,579,025

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of

these Statement of Financial Position amounts:

Year ended 30 November 2018

30.11.18

1.12.17

£

£

Cash and cash equivalents

927,521

1,383,579

Year ended 30 November 2017

30.11.17

1.12.16

£

£

Cash and cash equivalents

1,383,579

1,026,748

1.	STATUTORY INFORMATION

Dow Group Limited is a private company, limited by shares , registered in Scotland. The company's registered

number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006.

3.	ACCOUNTING POLICIES

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets.

Going concern

After reviewing the company's forecasts and projections, the directors have a reasonable expectation that the

company has adequate resources to continue in operational existence for the foreseeable future. The company

therefore continues to adopt the going concern basis in preparing its financial statements.

Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements and estimates. The

items in the financial statements where these judgements and estimates have been made include:

(i) Depreciation

Depreciation of fixed assets has been based on estimated useful lives and residual values deemed appropriate by

the directors. Estimated useful lives and residual values are reviewed annually and revised as appropriate.

(ii) Bad debts

Bad debt provisions are provided at rates deemed appropriate by the directors. Specific allowances are provided

for when it is known to the directors that the debtor is not recoverable in part or in full.

General allowances are provided based on the directors' cumulative knowledge and experience of the industry,

where it is deemed probable a portion of the debtors balance will become unrecoverable.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value

added tax. Turnover includes revenue earned from the rendering of services, namely the provision of waste

management services, and construction contracts.

Rendering of services

Turnover from the rendering of services is recognised by reference to the stage of completion of the contract.

The stage of completion of a contract is measured by comparing the costs incurred for work performed to date to

the total estimated contract costs. Turnover is only recognised to the extent of recoverable expenses when the

outcome of a contract cannot be estimated reliably.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Land

-

not provided

Short leasehold

-

25% on cost

Plant

-

25% on cost, 20% on cost and 10% on cost

Fixtures and fittings

-

50% on cost, 33% on cost and 20% on cost

Motor vehicles

-

50% on cost, 33% on cost and 20% on cost

Impairment of assets

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets

have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any

affected asset is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the

carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised

immediately in the income statement.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate

of its recoverable amount, but not in excess of the amount that would have been determined had no impairment

loss been recognised for the asset in prior years. A reversal of impairment loss is recognised immediately in the

income statement.

Government grants

The grants shown in the statement of financial position represent the total grants receivable to date less the

amount so far credited to the income statement.

Stocks

Stocks are valued at the lower of cost and estimated selling price less costs to sell.

Financial instruments

Basic financial instruments are recognised as follows:

(i) Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured

initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective

interest method less any impairment.

(ii) Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand.

Cash and cash equivalents are shown net of bank overdrafts, which are included as current borrowings in

liabilities on the statement of financial position.

(iii) Creditors

Short term trade creditors are measured at the transaction price. Other financial liabilities, including bank loans,

are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost

using the effective interest method.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the income statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the statement of financial position date.

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

statement of financial position date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership of the leased asset to the company. All other leases are classified as operating leases.

Assets held under finance leases are recognised initially at the fair value of the leased asset (or, if lower, the

present value of minimum lease payments) at the inception of the lease. The corresponding liability to the lessor

is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned

between finance charges and reduction of the lease obligation using the effective interest method so as to achieve

a constant rate of interest on the remaining balance of the liability. Finance charges are deducted in measuring

profit or loss. Assets held under finance leases are included in tangible fixed assets and depreciated and assessed

for impairment losses in the same way as owned assets.

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the lease

term.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to the income statement in the period to which they relate.

Provisions for liabilities

The company recognises a provision for annual leave accrued by employees as a result of services rendered in

the current period, and which employees are entitled to carry forward and use within the next 12 months. The

provision is measured at the salary cost payable for the period of absence.