MHWIRTH_UK_LIMITED - Accounts

The directors present their annual report and financial statements for the year ended 31 December 2020.

The principal activities of the company are the manufacture, installation of drilling systems and equipment and provision of associated lifecycle support services within the global offshore oil and gas industry.

The results for the year are set out on page 3.

The directors do not recommend payment of a final dividend (2019 - £Nil). An interim dividend of £1,714,000 (2019 - £686,000) was paid during the year.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The company's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).

The company's current policy concerning the payment of trade creditors is to:

• settle the terms of payment with suppliers when agreeing the terms of each transaction;

• ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and

• pay in accordance with the company's contractual and other legal obligations.

Trade creditors of the company at the year end were equivalent to 30 day's purchases, based on the average daily amount invoiced by suppliers during the year.

In order to assist you to fulfil your duties under the Companies Act 2006, we have prepared for your approval the financial statements of MHWirth UK Limited for the year ended 31 December 2020 which comprise the profit and loss account, the balance sheet, the statement of changes in equity and the related notes from the company’s accounting records and from information and explanations you have given us.

This report is made solely to the Board of Directors of MHWirth UK Limited, as a body, in accordance with the terms of our engagement letter dated 11 May 2021. Our work has been undertaken solely to prepare for your approval the financial statements of MHWirth UK Limited and state those matters that we have agreed to state to the Board of Directors of MHWirth UK Limited, as a body, in this report. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than MHWirth UK Limited and its Board of Directors as a body, for our work or for this report.

It is your duty to ensure that MHWirth UK Limited has kept adequate accounting records and to prepare statutory financial statements that give a true and fair view of the assets, liabilities, financial position and loss of MHWirth UK Limited. You consider that MHWirth UK Limited is exempt from the statutory audit requirement for the year.

We have not been instructed to carry out an audit or a review of the financial statements of MHWirth UK Limited. For this reason, we have not verified the accuracy or completeness of the accounting records or information and explanations you have given to us and we do not, therefore, express any opinion on the statutory financial statements.

All figures relate to continuing operations.

For the financial year ended 31 December 2020 the company was entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.

The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements.

The members have not required the company to obtain an audit of its financial statements for the year in question in accordance with section 476.

MHWirth UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is One Fleet Place, London, United Kingdom, EC4M 7WS. The company's principal activities and nature of its operations are disclosed in the directors' report.

The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards.

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 £000.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

In preparing these financial statements, the Company has applied the recognition, measurement and disclosure requirements of the International Financial Reporting Standards as adopted by the EU ("Adopted IFRS"), making amendment where necessary in order to comply with the Companies Act 2006. The Company has also taken advantage of the available FRS 101 disclosure exemptions in relation to the following:

• presentation of a statement of cash flows and related notes;

• disclosure of the objectives, policies and processes for managing capital;

• disclosure of key management personnel compensation;

• disclosure of the categories of financial instrument and the nature and extent of risks arising on these financial instruments;

• disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;

Where required, equivalent disclosures are given in the group accounts of Akastor AS. The group accounts of Akastor AS are available to the public and can be obtained as set out in note 24.

The consolidated financial statements of Akastor AS include the disclosures required by IAS 36 Impairment of assets, IFRS 7 Financial Instruments: Disclosure and IFRS 13 Fair Value Measurements, both relating to financial instruments. As a consequence, the Company has also taken the exemption under FRS 101 not to include the equivalent disclosures.

The financial statements have been prepared under the going concern basis. The directors believe this basis to be appropriate after considering various factors and performing reviews of financial and other data. These reviews include holding discussions with management and other operational personnel, as well as discussions with other group companies and head office. Consideration is given to historic results and forecast information. This monitoring process is ongoing and gives adequate emphasis to both internal and external factors. The company has net current assets of £true1.6m (2019: £2.5m) at the year end, including cash of £1.4m (2019: £2.6m) and no bank borrowings (and therefore no covenant requirements).

The company continued to trade successfully within the constraints of the succeeding government-applied lockdowns which during 2020 and maintained good activity in the main Overhaul, Service and, latterly, Training business streams and workshop efficiency recovered through familiarity with stringent hygiene management procedures. IT-based tools/systems implemented in support of mandated home-working for office staff proved highly effective and enabled disruption to operational activity and management to be avoided. Disruption to Service activity was more evident due to delay/reduction of offshore activity in Q2/3 that necessitated intermittent use of the government’s furlough scheme but the business stream recovered substantially in Q4.

The directors’ projections for 2021 took account, to the best of their ability, of likely impact from the continuing effects of the pandemic and anticipated UK market activity forecast (with support to Equinor Mariner drilling package expected to be a mainstay) to establish a budget that provided an acceptable operating position to generate sufficient funds to meets its liabilities as they fall due during the year. In the event of more challenging operating conditions, the company also has the ability to continue to trade through utilisation of existing cash reserves.

Based on their reviews, the directors are confident that the company will continue in business for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the annual report and financial statements.

Turnover represents the amounts (excluding value added tax) invoices to thrid parties for the provisions of engineering and project management services. Revenue is recognised on provision of the related services or the dispatch of goods.

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.

At each reporting end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the stocks, production or conversion costs and other costs in bringing them to their existing location and condition.

Costs in relation to partially complete projects are treated as work in progress to the extent the turnover relates to those projects is unrecognised at the balance sheet date. From January 2018, following the adoption of IFRS 15, Revenue from Contracts with Customers, these costs have been reclassified as contract costs.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

Financial assets are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

When any of the above-mentioned conditions for classification of financial assets is not met, a financial asset is classified as measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognised initially at fair value and any transaction costs are recognised in profit or loss when incurred. A gain or loss on a financial asset measured at fair value through profit or loss is recognised in profit or loss, and is included within finance income or finance costs in the statement of income for the reporting period in which it arises.

Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.

Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.

The company has made an irrevocable election to recognise changes in fair value of investments in equity instruments through other comprehensive income, not through profit or loss. A gain or loss from fair value changes will be shown in other comprehensive income and will not be reclassified subsequently to profit or loss. Equity instruments measured at fair value through other comprehensive income are recognised initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to retained earnings when the equity instrument is derecognised or its fair value substantially decreased. Dividends are recognised as finance income in profit or loss.

Financial assets, other than those measured at fair value through profit or 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 of the investment have been affected.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.

Financial liabilities are classified as measured at fair value through profit or loss when the financial liability is held for trading. A financial liability is classified as held for trading if:

•     it has been incurred principally for the purpose of repurchasing it in the near term, or

•     on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or

•     it is a derivative that is not designated and effective hedging instrument.

Financial liabilities at fair value through profit or loss are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss.

Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

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 inventories 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.

At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within tangible fixed assets, apart from those that meet the definition of investment property.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other tangible fixed assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

Government grants are recognised when there is reasonable assurance that the grant conditions will be met and the grants will be received.

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 company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

An assessment as to the ability of the Company to recover the value of all stock for above its original cost is made at each financial period end. A provision is made for any amounts that are not considered to be recoverable either due to the net realisable value being less than cost for that stock or due to the level of stock resulting in a risk of stock obsolescence. Due to the nature of this provision an estimate is made as to the amounts that will be recoverable which involves judgment based on knowledge of the stock held and the market, taking into accounts the current order book.

The company holds investments in unlisted companies. In line with the accounting policies set out in note 1 these investments are carried at fair value. As this investment is in an unlisted company there is significant estimation in relation to calculating the carrying value as the fair value is based on unobservable inputs mainly based on internal assumptions used in the absence of quoted prices from an active market or other observable price inputs.

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined benefit schemes amounted to 1 (2019 - 1).

In the Spring Budget 2020, the UK Government announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

Further changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 (on 24 May 2021). These include an increase to the main rate to 25% from April 2024. Deferred taxes at the balance sheet date have not been measured using these enacted tax rates as it is not required for balance sheet dates prior to this, the director's believe there is no material effect to the financial statements.

The charge for the year can be reconciled to the (loss)/profit per the profit and loss account as follows:

Tangible fixed assets includes right-of-use assets, as follows:

During the year the company fully disposed of 17.7% Class AI units of investments in NES LP, a company with its registered address at 44 Esplanade, St Helier, Jersey, JE4 9WG.

The fixed asset investment was carried at fair value, as a level 3 financial asset. Changes in fair value have been designated as being recognised in profit or loss.    

In some contracts the Company receives payments from customers based on explicit billing schedules. Contract assets primarily relate to the Company’s conditional right to consideration for completed performance obligations under those contracts. These are transferred to receivables (trade debtors) once this right has become unconditional (typically on invoicing).

Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The total costs charged to income in respect of defined contribution plans is £140,000 (2019 - £135,000).

Contributions amounting to £19,000 (2019 - £21,000) were payable to funds at the year end.

On 11 December 2020 a special resolution was passed that the issued share capital of the company be reduced from £2,609,433 to £10,000 by cancelling and extinguishing 2,599,433 of the issues ordinary shares of £1 each in the company, each of which is fully paid up and the amount by which the share capital is so reduced be credited to distributable reserves.

The company has undetaken a guarentee in favour of Customes and Excise for £200,000 (2019 - £200,000) with Den Norske Bank ASA.

Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:

The immediate parent company is MHWirth AS, incorporated in Norway.

The ultimate parent and controlling company is Akastor AS, incorporated in Norway.

The largest and smallest group in which the results of the company are consolidated is that headed by Akastor AS, incorporated in Norway. The consolidated financial stateemtns of this group are available to the public and maybe obtained from Akastor AS, Building B, Oksenøyvein 10, 1366 Lysaker, Norway.