ASG_INDUSTRIAL_HOLDINGS_L - Accounts

The directors present the strategic report for the year ended 31 March 2021.

The Company is part of the group which is headed by Aero Services Global Group Limited (hereafter referred to as "the Group). ASG Industrial Holdings Limited, acts as a non-holding company with 100% ownership of ASG Aerospace Limited, Aero Services. Global Limited, ASG Tooling Limited and AS.G Nominees Limited.

The results for 7 of the subsidiaries owned prior to 31st March 2021 are included for 12 months with only 5 months of pre-disposal results for Datum Tooling Design Ltd included.

The results for the year under review reflect the beginning of our recovery following the “devastating” impact of global lockdowns and the resultant severe reduction in travel, on the Aerospace industry. From January 2022, turnover has risen by a monthly average of 38% based on the prior 12 months run rate from January 2021 to December 2021. This has continued throughout the calendar year of 2022, with sales of over £45m forecast for the year ending 31st March 2023.

It has widely been reported that both of the key OEMs (Airbus and Boeing) have started to increase their build rates of aircrafts. We took the opportunity of the previous uncertain period and conducted a full review of our businesses which resulted in certain major reorganisations and the disposal of a non-strategic part of the Tooling Division. We believe the group is now poised to take full advantage of the upswing in the Aerospace industry that we are witnessing. This expected upswing is “underpinned” by the aircraft backlog orders of circa 13,000 which was not materially impacted by the lockdown, and the severe low demand in travel and tourism.

The turnover for the year to 31st March 2023 is expected to be significantly higher than the reported turnover in these accounts. We are reliably informed by OEMs that the rate of aircraft manufacture is likely to increase during calendar years 2023 and 2024. We are forecasting a further significant increase in turnover for year ending 31st March 2023 and a much-enhanced profitability to EBITDA levels of c£6m.

In spite of all the disruptions noted above, the group managed to make a profit at EBITDA level of £1.5m. Depreciation of £1.7m and non-cash amortisations of £0.9m are recurring costs, with non-recurring exceptional/reorganisation costs of £0.75m, resulted in an operating loss of £1.9m (of which £0.9m is non-cash). After interest paid of £2.4m the Statutory Loss amounted to £4.3m.

In spite of the above, the group generated cash at operating level of £0.4m.

Financial Stability

Financial stability remains a major aspect of our strategy and in pursuance of this the Group is in the process of credit approval to increase the group invoice discounting facility by a further £2m, including the Tooling Division for the first time. This will further support our growth, ongoing working capital needs, and capital investment to support ASGG’s strategy in meeting the demands of customers as growth returns to the aerospace sector.

We have remained in constant communication with our key funders and we are grateful for their continued support.

Growth Strategy

We remain committed to our sustainable growth strategy by adopting a “partnership” approach with our customers, suppliers, funders and other stakeholders.

Within this context we endeavour to extend our reach through ongoing discussions with a “low” cost joint venture in India and enhancing our footprint in Germany and the EU.

We are also focused on a few highly selective acquisitions in the UK and Europe with a view of further enhancing the Group’s core competencies, customer reach and operational efficiencies.

Alongside this, the Group has continued to invest in capital expenditure in supporting our growth, with £1.0m invested in the financial period ending March 2022. Further investment of over £3m has been committed for the financial year ending March 2023.

As ASG Industrial Holdings Limited is an intermediate holding company within the Aero Services Global Group Limited group it does not individually monitor key performance indicators. Analysis of key performance indicators are given in the consolidated financial statements of Aero Services Global Group Limited.

The directors present their annual report and financial statements for the year ended 31 March 2022.

The principal activity of the company continued to be that of a holding company.

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

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

MHA Moore and Smalley were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the 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.

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the Company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of principal risks and uncertainties and key future developments and research.

The directors confirm that:

•     so far as each director is aware, there is no relevant audit information of which the Company's auditor is unaware, and

•     the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

We have audited the financial statements of ASG Industrial Holdings Limited (the 'company') for the year ended 31 March 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity 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).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 March 2022 and of its loss 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 Auditor's 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.

In our evaluation of the directors' conclusions, we considered the risks associated with the Company's business model, including effects arising from macro-economic uncertainties such as Covid-19 and Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the period of at least twelve months from the date when the financial statements are authorised for issue. In accordance with the above, we have nothing to report in these respects.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this Auditor's report is not a guarantee that the Company will continue in operation.

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 company and its 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, 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 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 company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

• enquiries with management, about any known or suspected instances of non-compliance with laws and regulations or fraud within the business;

• challenging assumptions and judgements made by management in their key accounts estimates, in particular in relation to provisions and future performance in light of the impact of Covid-19;

• auditing the risk of management override of controls, including thorough testing journal entries and other adjustments made by management for appropriateness; and

• reviewing board minutes and legal and professional expenditure to identify any evidence of ongoing litigation or enquiries.

We identified the following areas as those most likely to have a material impact on the financial statements:

Because of the field in which the client operates, we identified the following areas as those most likely to have a material impact on the financial statements: Health and Safety; employment law; anti-bribery and corruption; and compliance with the UK Companies Act.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

ASG Industrial Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is c/o A2e Investments, No. 1 Marsden Street, Manchester, M2 1HW.

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.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income

The financial statements of the company are consolidated in the financial statements of Aero Services Global Group Limited. These consolidated financial statements are available from its registered office.

The directors have prepared detailed profit and cash flow forecasts for the period to March 2026. These show that based on the forecast trading position and use of its currently agreed invoice discounting facility and borrowings, the group will have sufficient liquidity to meet its liabilities as they fall due.true

The directors have also instructed an independent professional body complete a reverse stress test report which indicates that a significant change in fortunes would have to be suffered by the group for it not to be a going concern. There are no indiciators that this would be the case, however, in such a scenario the group would be able to continue operating for a period of at least 12 months following approval of the financial statements. In such circumstances additional options may be available to mitigate the impact on the group’s liquidity and cash flow including:

(i) further reductions in operating and capital expenditure;

(ii) extension of debt facilities

Group revenue has grown significantly rising 36% on average per month from January 22 to September 22 (vs 12 month period January-December 21), as the Aerospace sector continues to ramp up production with pre-pandemic levels of travel now being witnessed. We are also witnessing a steady rise in build rates planned over the period covered in our forecast to higher levels than 2019. This has resulted in an increase in group sales of c£1m per month. The sharp rise in sales has naturally caused its own working capital pressures with our supply chain affected by the current global and economical market conditions. To enable us to continue to meet demand, we have secured short and medium term material supplies to support our strong orderbook.

As a result of hedging our supply chain, gross margin is forecast to rise steadily over this period via a mix of tactical and strategic contracts. We are currently in discussions with key customers relating to new work which is driving turnover growth even further. In addition to this, we are deep in to the production process to satisfy substantial purchase orders already won in the financial year March 2023. We have successfully won contracts totalling over £26m since April 2022 and are confident of exceeding our sales forecast for 2023 of £44m.

Capital expenditure has been a key factor in supporting our growth, with £1.2m invested in the financial period ending March 2022. Further investment of over £3m has been committed for the financial year ending March 2023.

The directors have continued a regular dialogue with the lenders regarding the challenging trading environment. The lendors have agreed to capitalise contractual interest payments due September 2022 and March 2023 in order to allow the group to replenish our cash reserves and provide the organic funding we need for strategic capex and growth. Alongside this, they have agreed to waive the covenant breaches for March 2022, September 2022 and March 2023.

The group closed the financial year with net cash at bank of £2.4m. In addition, the group had £0.3m of headroom in the invoice discounting facility. We are in the process of credit approval to increase the group ID facility from £6m to £8m and to include B&H within that to generate additional liquidity.

No other financial support has been included in the forecasts, although the directors understand that the group would qualify for this support if required.

The impact of the Covid-19 pandemic has been thoroughly considered as part of the directors’ review of the going concern basis of preparation. Revenue, costs and timings of cash flows have been adjusted to reflect the impact of the pandemic. The group has taken advantage of the HMRC Job Retention Scheme for those staff who have been furloughed, the deferral of VAT payments and continues to make repayments against the CBILS (Coronavirus Business Interruption Loan Scheme) taken on in March 2021.

Based on the above, the directors did not consider there to be material uncertainties regarding the going concern assessment. They also believe that the group is able to meet its liabilities as they fall due, they, and therefore it is appropriate to adopt the going concern basis of preparation for the financial statements.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with 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.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, 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 company 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 company 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.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company 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 company.

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.

Finance costs

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

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.

Creditors

Short term 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.

Preparation of the financial statements requires management to make significant judgements and estimates. The areas where these judgements and estimates have been made include the following for:

Impairment of investments in subsidiaries

Management consider whether investments in subsidiaries are impaired on an annual basis. Where an indication of impairment is identified the estimation of recoverable value requires of the recoverable value of the cash-generating units (CGUs). This requires estimation of future cashflows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cash flows.

Recoverability of intercompany debtor balances

Where evidence exists that investments in subsidiaries are impairment, management consider whether the intercompany debtors due from the subsidiary are recoverable based on future profitability of the subsidiary undertakings.

The average monthly number of persons employed by the company during the year was 3 (2021: 3)

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

Details of the company's subsidiaries at 31 March 2022 are as follows:

Registered office addresses (all UK unless otherwise indicated):

On 16 December 2019 Realta Investments Ireland DAC issued loan funds amounting to £25,000,000. Interest on the loan is charged at 7% plus LIBOR, subject to a minimum floor of 2%, and is first paid on 30 September 2020 and every 6 months thereon. The loan is secured against all present and future assets of the Aero Services Global Group. The loan is repayable in full on 31 March 2025.

On 7 April 2020 Realta Investments Ireland DAC converted £6,000,000 of the previous loan funding into non-redeemable preference shares in Aero Services Global Group Limited. The remaining £19,000,000 bears the same terms as the original £25,000,000 funding issued.

The company has provided an unlimited guarantee along with fellow group companies under common control regarding the investment made by Realta Investments Ireland DAC relating to Project Zephyr. This security given contains fixed and floating charges and a negative pledge.

The company has taken advantage of the exemption available in FRS102 not to disclose transactions between the company and other wholly owned companies within the Aero Services Global Group. There were no related party transactions conducted with parties outside of the Aero Services Global Group.

The company's immediate parent company is Aero Services Global Group Limited, ultimate parent company of ASG Industrial Holdings Limited is Pasargad 1 Limited.

Copies of the consolidated financial statements of Aero Services Global Group Limited, which is both the smallest and largest group for which consolidated financial statements are prepared, may be obtained from No.1 Marsden Street, Manchester, England M2 1HW.

The ultimate controlling party of ASG Industrial Holdings Limited is Said Amin Amiri, who is the sole shareholder of Pasargad 1 Limited, the General Partner of Amiri Assets III LP, which has the majority of the voting rights of Aero Services Global Group Limited.