ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Registered number: 00569618
DIRECTORS' REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 SEPTEMBER 2022 |
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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The directors have pleasure in presenting their Group Strategic Report for the year ended 30 September 2022.
The Group continues to operate in the demolition and waste management sector.
The Group has had another challenging year, even with an increase in turnover of 9%, as the Demolition business started back up after being practically dormant during the Covid-19 pandemic period and the waste management sector was still dealing with the aftershock of catastrophic fire to the operating plant.
The Directors sought to review the value of the property assets held in the group and obtained professional valuations of each property for the group to revalue its significant property holding, so as to more accurately reflect the strength of the asset-base held.
The Directors have continued to look at areas of the Group where cost savings can be achieved as well as looking at price structures to ensure the GP% moves closer towards 25%.
Demolition
The Directors’ response after pandemic was to gradually build up the work carried out by Syd Bishop & Sons (Demolition) Limited to work towards profitability but they recognised that this was not going to be achieved over a short period of time. The gross loss margin moved from 8% in 2021 to 17% in 2022, with the overall operating loss falling from £723k in 2021 to £591k in 2022. Administration expenses decreased by £0.5m due to a reduction in staff costs, whilst other operating income was £nil, following £0.25m furlough income in the prior period.
The Demolition company experienced losses totalling £0.5m in 2022 (2021: £0.6m) and the subsidiary has net liabilities totalling £4.5m (2021: £3.9m) at 30 September 2022 as a result.
Waste, Transport and Asbestos Landfill
The Waste, Transport and Asbestos Landfill parts of the business (comprising Pinden Limited, Erith Waste Management Limited and Asbestos Waste Management Limited) experienced an overall increase in turnover of 8% with gross profit margin static at 24%. The impact of inflationary pressures on all costs, specifically wage and fuel costs put significant pressure on the profitability, together with the damaging impact of the 2020 fire on the customer base. These had a significant effect upon the business which, together with the increased cost of finance and excluding provisions made against intercompany loans (which are eliminated in the group accounts), led the business to suffer a loss of £0.7m.
Waste Transfer Station
The impact of the fire in August 2020 continued to be felt in 2022 as the Company tried to rebuild its general waste customer base. Further pressure came from the increased cost of energy to supply the plant, and the significant wage pressures felt as economic inflationary pressure mounted. However, the Directors have sought to secure energy security in the future by looking at a renewable energy solution for the site.
Transport
The skip business maintained its position in the market, but the continued pressure on drivers’ wages cannot be discounted. The Directors sought to incentivise members of the transport team with increasing productivity bonuses to maintain the appropriate staffing levels. Furthermore, the Directors have instigated a review of the digital presence of the business to help maintain and improve the position in the market.
Asbestos Landfill
The market is tough, but the position has remained steady with no further contraction.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Group summary
The Group headed by Watch It Come Down Limited (‘the Group’) has net assets totalling £10.9m at 30 September 2022 (2021: £5.5m) and net current liabilities totalling £3.5m (2021: £5.7m). The increase in net assets is due to a £7.1m surplus arising upon revaluation of group properties, outweighing the group’s £1.6m loss in the period.
The Group meets its working capital requirements through cash generated from operations and bank funding.
At 30 September 2021, the Group breached its bank covenants, and the breaches continued throughout the year until they were waived by the Bank in September 2022 (hence the reduction in net current liabilities as bank liabilities were no longer all ‘due within one year’). Subsequent to the year-ended 30 September 2022, the Group again breached its bank covenants, and tax liabilities totalling £2.3m were overdue for payment.
In November 2023, the main trading company in the Group, Pinden Limited, arranged a £5.5m commercial bridging loan which is enabling the tax liabilities to be paid under the terms of a payment arrangement, and Shawbrook Bank loans and invoice discounting facilities have been settled early. The bridging loan is repayable in November 2024, less than 12 months after the date of these accounts being approved, and the Group intends to either sell property that is not required for the day to day running of the Group’s business, or arrange new, longer-term bank facilities, ahead of the repayment date.
During the year, the Group started to see an improvement in its order book and the unaudited management accounts for the year to 30 September 2023 show an improvement in results. The Directors are confident that further improvements will be seen in the year ended 30 September 2024, as they build the solid foundations towards profitability.
The Directors feel confident about the trading future of the business and look forward to the year ahead.
The Group uses financial instruments including bank loans, invoice discounting and hire purchase agreements. These instruments expose the Group to several financial risks, which are described below:
Funding risk
The Group finances its operations through a combination of equity, bank loans, invoice discounting, hire purchase contracts and working capital. The Group undertakes short-term cash forecasting to monitor its expected cash flows against its cash availability and finance facilities. The Group also undertakes longer term cash forecasting to monitor its expected funding requirements in order to meet its current business plan, in the context of its existing facilities, and to identify and address its requirement for future funding facilities.
Interest risk
The Group finances its operations through a mixture of profits and bank and hire purchase borrowings.
Liquidity risk
In normal trading periods, the Group seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet ongoing operations and future development. Short term debt finance flexibility is achieved by invoice discounting, hire purchase and bank loans which helps to smooth the cashflow in a seasonally affected industry.
Currently liquidity risk is being managed by the directors in accordance with the usual procedures, but utilising the short term bridging facilities in place. The directors have/are close to securing an invoice discounting facility which together with planned property sales will address any liquidity risk for the longer term.
Credit risk
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The Group principal financial assets are cash and trade debtors. In order to manage credit risk, the directors set limits for customers based on carrying out independent credit checks, credit agency and third-party references. Payment history is also monitored based on trading history. Credit limits are reviewed on a regular basis by the credit control team in conjunction with debt aging and collection history.
Competitive risks
The Group operates in competitive markets. The breadth of the client base reduces the possible effect of the loss of any one single client. The Group focuses on providing clients with a high level of service and wide range of services. This enables the Group to maintain long-term relationships with clients and attract new custom.
Compliance risk
Compliance is central to everything the Group does, particularly the operation of a landfill site, recycling facility and waste transfer stations alongside carrying out demolition services and managing a large fleet of vehicles and plant and machinery. The Group has continually invested in people and systems whilst engaging with external professional bodies and stakeholders to ensure the business the highest standards and levels of compliance.
The financial key performance indicators of the group are detailed for the last 4 years below
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The directors present their report and the financial statements for the year ended 30 September 2022.
The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), 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 the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments 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 Group 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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £1,638,590 (2021 - loss £753,406).
No dividends were recommended for the year ended 30 September 2022.
The directors who served during the year were:
Please see the Strategic Report for a description of these.
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WATCH IT COME DOWN LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Demolition activities
The Directors’ response after the covid pandemic was to gradually build up the work carried out by the Group’s demolition company, Syd Bishop & Sons (Demolition) Limited (‘SBS’), to work towards profitability, and it was recognised that this was not going to be achieved over a short time period. SBS’s operating loss fell from £0.7m in 2021 to £0.6m in 2022 and net liabilities totalled £4.5m (2021: £3.9m) at 30 September 2022 as a result.
Waste management and skip hire
The Waste, Transport and Asbestos Landfill parts of the business (comprising Pinden Limited, Erith Waste Management Limited and Asbestos Waste Management Limited) experienced an overall increase in turnover of 8% with gross profit margin static at 24%. The impact of inflationary pressures on all costs, specifically wage and fuel costs put significant pressure on the profitability, together with the damaging impact of the 2020 fire on the customer base. These had a significant effect upon the business which, together with the increased cost of finance and excluding provisions made against intercompany loans (which are eliminated in the group accounts), led the business to suffer a loss of £0.7m.
During the year, the Group started to see an improvement in its order book and the unaudited management accounts for the year to 30 September 2023 show an improvement in results. The Directors are confident that further improvements will be seen in the year ended 30 September 2024, as they build the solid foundations towards profitability.
Group summary
The Group headed by Watch It Come Down Limited (‘the Group’) has net assets totalling £10.9m (2021: £5.5m) and net current liabilities totalling £3.5m (2021: £5.7m). The increase in net assets is due to a £7.1m surplus arising upon revaluation of group properties, outweighing the group’s £1.6m loss in the period.
At 30 September 2021, the Group breached its bank covenants, and the breaches continued throughout the year until they were waived by the Bank in September 2022 (hence the reduction in net current liabilities as bank liabilities were no longer all ‘due within one year’). Subsequent to the year-ended 30 September 2022, the Group again breached its bank covenants, and tax liabilities totalling £2.3m were overdue for payment.
In November 2023, the main trading company in the Group, Pinden Limited, arranged a £5.5m commercial bridging loan which is enabling the tax liabilities to be paid under the terms of a time to pay arrangement, and Shawbrook Bank loans and invoice discounting facilities have been settled early. The bridging loan is repayable in November 2024, less than 12 months after the financial statements have been approved.
The directors believe it is appropriate, to prepare the consolidated financial statements to 30 September 2022 on a going concern basis.
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WATCH IT COME DOWN LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The directors are imminently expecting to agree a new Working capital facility for the Group, but acknowledge that long-term bank facilities are not yet in place, and Group and Company property assets have not yet been sold, at the date of these financial statements. This represents a material uncertainty over the Group and Company’s ability to continue to trade as a going concern. However, given the significant value in the property assets held in the Group amounting to £15m, together with further Group tangible assets of £6m, the Directors are very confident that a long-term refinance will be achievable ahead of the repayment date, alongside the sale of the Group’s development land asset.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATCH IT COME DOWN LIMITED
We have audited the financial statements of Watch It Come Down Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 30 September 2022, which comprise the Group Statement of comprehensive income, the Group and Company Balance sheets, the Group Statement of cash flows, the Group and Company Statement of changes in equity and the related notes, 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).
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 indicate in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
We draw attention to note 2.4 in the financial statements, which indicates that conditions exist which indicate that a material uncertainty exists that may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Key audit matters
Except for the matter described in the Material uncertainty related to going concern section, we have determined that there are no other key audit matters to be communicated in our report.
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WATCH IT COME DOWN LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATCH IT COME DOWN LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.
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WATCH IT COME DOWN LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATCH IT COME DOWN LIMITED (CONTINUED)
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 Auditors' 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 Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Identifying and assessing potential risks related to irregularities
In identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
∙The nature of the industry and sector in which the Group and Company operates; the control environment and business performance including key drivers for performance targets.
∙The outcome of enquiries of management, including whether management was aware of any instances of non-compliance with laws and regulations, and whether management had knowledge of any actual, suspected, or alleged fraud.
∙Supporting documentation relating to the Group and Company's policies and procedures for:
- Identifying, evaluating, and complying with laws and regulations
- Detecting and responding to the risks of fraud
∙The internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.
∙The outcome of discussions amongst the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
∙The legal and regulatory framework in which the Group and Company operates, particularly those laws and regulations which have a direct effect on the financial statements, such as the Companies Act 2006, pensions and tax legislation, or which had a fundamental effect on the operations of the Group and Company, including General Data Protection requirements, Anti-bribery and Corruption and regulations associated with the Group and Company’s waste carrier registrations, waste operations permits and landfill permit.
Audit response to risks identified
Our procedures to respond to the risks identified included the following:
∙Reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with the provisions of those relevant laws and regulations which have a direct effect on the financial statements.
∙Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud.
∙Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities.
∙Enquiring of management about any actual and potential litigation and claims.
∙Performing analytical procedures to identify any unusual or unexpected relationships which may indicate risks of material misstatement due to fraud.
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WATCH IT COME DOWN LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATCH IT COME DOWN LIMITED (CONTINUED)
We have also considered the risk of fraud through management override of controls by:
∙Testing the appropriateness of journal entries and other adjustments.
∙Challenging assumptions made by management in their significant accounting estimates, and assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
∙Evaluating the rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
There are inherent limitations in the audit procedures described above, and the further removed noncompliance with laws and regulations are from the events and transactions reflected in the financial statements, the less likely we would become aware of them. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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 Auditors' 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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditors
Lancashire Gate
21 Tiviot Dale
Stockport
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2022
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CONSOLIDATED BALANCE SHEET (CONTINUED)
AS AT 30 SEPTEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
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COMPANY BALANCE SHEET
AS AT 30 SEPTEMBER 2022
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COMPANY BALANCE SHEET (CONTINUED)
AS AT 30 SEPTEMBER 2022
The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and has not presented its own statement of income and retained earnings in these financial statements. The loss after tax of the parent company for the year was £268,762 (2021: £775,143)
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Watch It Come Down Limited ('the Company') is a private limited company domiciled and incorporated in England and Wales.
The address of its registered office and its principal place of business is Waldens Depot, Waldens Road, Orpington, Kent, BR5 4EU. The principal activites of the Company continue to be providing management services to group companies. The trading subsidiaries' principal activites continued to be those of demolition, landfill and waste management operations, skip hire and asbestos waste management.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
In preparing the separate financial statements of the parent company, advantage has been taken of the following disclosure exemptions available in FRS 102:
- No Statement of Cash Flows has been presented for the parent company. Monetary amounts in these financial statements are stated in pounds sterling and are rounded to the nearest whole £1, except where otherwise indicated.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Demolition contracts
When the outcome of contracts can be estimated reliably, contract revenue and costs are recognised and revenue and expenses respectively by reference to the stage of completion at the end of the reporting period. Reliable estimation of the outcome of demolition contracts required estimates of the stage of completion, future costs and collectability of billings. The stage of completion is measured by surveys of work performed. When the outcome of a contract cannot be estimated reliably, revenue is only recognised to the extent of contract costs incurred that it is probable will be recoverable. When it is probable that the total contract costs will exceed contract revenue on a demolition contract, the expected loss shall be recognised as a expense immediately, with a corresponding provision for an onerous contract. Revenue in respect of variations to contracts is recognised when it is probably it will be agreed by the customer. Revenue from the saleable materials which are retreived from demolition sites is recognised when they are delivered to the customer. Revenue from landfill and waste recycling operations is recognised when the waste is deposited. Revenue from skip hire is recognised when the skips are delivered. Revenue from asbestos disposal is recognised on the date on which the customers' waste material is disposed of.
Page 22
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
The financial statements have been prepared on a going concern basis. The following paragraphs set out the basis on which the directors have reached their conclusion.
Demolition activities
The Directors’ response after the covid pandemic was to gradually build up the work carried out by the Group’s demolition company, Syd Bishop & Sons (Demolition) Limited (‘SBS’), to work towards profitability, and it was recognised that this was not going to be achieved over a short time period. SBS’s operating loss fell from £0.7m in 2021 to £0.6m in 2022 and net liabilities totalled £4.5m (2021: £3.9m) at 30 September 2022 as a result.
Waste management and skip hire
The Waste, Transport and Asbestos Landfill parts of the business (comprising Pinden Limited, Erith Waste Management Limited and Asbestos Waste Management Limited) experienced an overall increase in turnover of 8% with gross profit margin static at 24%. The impact of inflationary pressures on all costs, specifically wage and fuel costs put significant pressure on the profitability, together with the damaging impact of the 2020 fire on the customer base. These had a significant effect upon the business which, together with the increased cost of finance and excluding provisions made against intercompany loans (which are eliminated in the group accounts), led the business to suffer a loss of £0.7m.
During the year, the Group started to see an improvement in its order book and the unaudited management accounts for the year to 30 September 2023 show an improvement in results. The Directors are confident that further improvements will be seen in the year ended 30 September 2024, as they build the solid foundations towards profitability.
Group summary
The group headed by Watch It Come Down Limited (‘the Group’) has net assets totalling £10.9m (2021: £5.5m) and net current liabilities totalling £3.5m (2021: £5.7m). The increase in net assets is due to a £7.1m surplus arising upon revaluation of group properties, outweighing the group’s £1.6m loss in the period.
At 30 September 2021, the Group breached its bank covenants, and the breaches continued throughout the year until they were waived by the Bank in September 2022 (hence the reduction in net current liabilities as bank liabilities were no longer all ‘due within one year’). Subsequent to the year-ended 30 September 2022, the Group again breached its bank covenants, and tax liabilities totalling £2.3m were overdue for payment.
In November 2023, the main trading company in the Group, Pinden Limited, arranged a £5.5m commercial bridging loan which is enabling the tax liabilities to be paid under the terms of a time to pay arrangement, and Shawbrook Bank loans and invoice discounting facilities have been settled early. The bridging loan is repayable in November 2024, less than 12 months after the financial statements have been approved.
The directors believe it is appropriate, to prepare the consolidated financial statements to 30 September 2022 on a going concern basis.
The directors are imminently expecting to agree a new Working capital facility for the Group, but acknowledge that long-term bank facilities are not yet in place, and Group and Company property assets have not yet been sold, at the date of these financial statements. This represents a material
Page 23
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
uncertainty over the Group and Company’s ability to continue to trade as a going concern. However, given the significant value in the property assets held in the Group amounting to £15m, together with further Group tangible assets of £6m, the Directors are very confident that a long-term refinance will be achievable ahead of the repayment date, alongside the sale of the Group’s development land asset.
Goodwill
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
Amortisation is provided on the following basis:
Goodwill - Five years straight line
Page 24
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
The landfill site is depreciated over its expected useful economic life, as calculated by the proportion of the site which has been filled with waste, relative to its estimated total capacity.
No depreciation is provided on assets under construction. When complete, the asset is transferred to the relevent class and depreciated in accordance with the above policy. Fair values are determined from market based evidence normally undertaken by professionally qualified valuers.
Page 25
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Stocks are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads.
At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.
Page 26
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Consolidated statement of comprehensive income in the same period as the related expenditure.
Aftercare costs are those of reinstating the landfill site at the end of its usage, and of monitoring the site thereafter, as required by the Environment Agency. Provision is made based on the costs estimated at the balance sheet date. The provision is allocated over the estimated useful life of the site, based on the current rate of landfill. The provision is calculated in present-value terms.
Page 27
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Specifically, management make judgements relating to the depreciation of the landfill site. This charge is based on the estimated level of fill as a proportion of the space within the landfill cells available. The carrying value of the landfill site at 30 September 2022 was £383,931 (2021: £264,203). Management also make judgements in relation to the provision made for aftercare costs. The total aftercare costs were calculated by an independent expert and a proportion of this is included within the accounts based on the level of fill of the entire site. The carrying value of the aftercare provision at 30 September 2022 was £2,470,957 (2021: £2,438,754).
Page 28
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The whole of the turnover is attributable to demolition and waste management activities.
Page 29
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 30
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 31
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
10.Taxation (continued)
The Group has trading losses of £5,236,282 (2021: £2,931,836) available to carry forward against future trading profits.
The Company has trading losses of £44,554 (2021: £nil) available to carry forward against future trading profits. On 1 April 2023, the standard rate of corporation tax in the UK increased from 19% to 25%.
Page 32
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 33
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 34
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
12.Tangible fixed assets (continued)
Page 35
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
At the balance sheet date, Freehold property and Landfill sites have been revalued to £14,036,774 and £383,931 respectively. The valuations at 30 September 2022 were carried out by a third party, Avison Young on behalf of the bank, on an open market value for existing use basis.
Page 36
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
At the balance sheet date, Freehold property has been revalued to £6,200,000. The valuations at 30 September 2022 was made by the directors, on an open market value for existing use basis.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 38
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 39
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 40
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Page 41
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
21.Deferred taxation (continued)
Page 42
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Revaluation reserve
The revaluation reserve comprises the cumulative effect of revaluations of freehold land and buildings.
Capital redemption reserve
The amount to replenish the Company's capital.
Profit and loss account
The cumulative profit and loss, net of distributions to owners.
At the year-end, the Company had a cross-company guarantee in favour of Shawbrook Bank Limited. The cross-company guarantee was in relation to bank loans and invoice discounting facilities provided to the Group, totalling £4,841,186 (2021: £4,957,418), none of which is recognised as a liability of the Company.
The Company also had a mortgage debenture in favour of Shawbrook Bank Limited over all the assets of the Company. The guarantee and debenture were removed subsequent to the year-end when the Company arranged new short-term facilities.
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £95,809 (2021: £104,976). Contributions totalling £73,419 (2021: £51,376) were payable to the fund at the balance sheet date and are included in creditors.
Page 43
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The Group is controlled by the board of directors.
Page 44
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