DULAS_LIMITED - Accounts

The directors present the strategic report and financial statements for the year ended 31 December 2016.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was the provision of renewable energy products and services.

COMPANY PURPOSE

The key elements of the Company’s Purpose are:

• Delivering long term commercial success

• Serving the needs of our customers by delivering high quality, appropriate and effective solutions

• Making a real contribution to improving people’s lives and the protection of the environment

• Ensuring sustainable and rewarding employment in the renewable energy sector

HOW WE GENERATE VALUE

We achieve our objectives by utilising our assets, executing our strategic plan and operating our business responsibly through effective governance and adherence to our core values.

Our values are People, Ethics, Environment and Service

STRATEGIC REPORT

Business Review

The company has historically operated across a range of renewable technologies, and our diversity has protected the company against changes to our policy environment and markets. However, significant market uncertainty has been created over the last 2 years by UK Government policy changes, followed by the Brexit vote.

The Company continued to operate in its main areas of activity, while developing into new products and markets in response to UK policy changes.

The key activities completed were:

• a continued focus on reducing central overheads and developing tools to manage the business more efficiently and effectively

• implementation of a single centralised UK sales and account management organisation

• an on-going review of strategy identifying further new products, services and geographical markets

• the purchase of a 50% share in the manufacturer of our vaccine refrigerators

• continuing to innovate in the products and services offered through a clear commitment to R&D

• A focus on leadership development, which continues into 2017 with a broad training and coaching programme for the senior team

The Solar International business had another good year improving people’s lives through the provision of sustainable solutions. Key highlights were significant sales through UNICEF of our new Solar Direct Drive (SDD) fridges. A further range of smaller fridges has been developed to match the forecast demand issued by our main client. On-going development will complete the range of fridges by the end of 2017.

The Hydro business operated in line with management expectations, with an increase in workload in the run up to reductions in feed in tariffs. The build out of the resulting accredited projects gives the hydro business a clear pipeline of work through to the end of 2017. The Operations and Maintenance section of the team has won its first significant contract with a utility-scale client and has been busy delivering both planned and reactive maintenance and repair services.

The Solar UK business operated below expectations. The solar market has been hard hit by tariff changes, so Dulas now operates in the new build and commercial sectors, which have different drivers. The level of activity in this sector picked up towards the year end and we now have a significant pipeline of potential work.

The market for the wind monitoring business remains challenging, with market uncertainty with changes to government support mechanisms. However, the company has successfully launched its lattice mast and maintenance offerings and saw an increase in activity in the last quarter of 2016. The market now has fewer suppliers of these services, and we are successfully winning new clients and re-engaging with old ones.

The consultancy team has remained at a lower level of activity. The team has now won its first planning work in Ireland, following on from their successful launch there last year, and has a potential pipeline of larger projects in Scotland and Wales, the areas of the UK where the policy environment still supports onshore wind.

Overall the Company has responded well to our market changes and remains in a competitive position to take advantage of continuing, albeit reduced, activity in the UK renewables sector.

As a result of following through on its strategy, the Company has increased its profit in 2016.

Group Structure

In 2016, Dulas Ltd acquired a 50% shareholding in a key supplier to the Solar International business, Polestar Cooling Ltd. This did not give Dulas control over that company but it did secure significant influence.

During the year, the Board of Directors decided to hive up the trade, the assets and the liabilities of Chillwind Ltd into Dulas Ltd as part of its Wind Monitoring trade. This resulted in the dormancy of Chillwind Ltd at 31st July 2017.

There are two other entities in the group, Chillwind Holdings Ltd and Dulas Wind Services Ltd, and these were both dormant throughout the year.

As a result of these changes, Dulas Ltd is no longer required to produce consolidated financial statements and, in any case, consolidation would not provide an any more accurate representation of the performance and position of Dulas Ltd for the year ended 31st December 2016.

The resulting change to the company balance sheet is the impairment of the investment in Chillwind Ltd and its replacement with the value of purchased goodwill, which will now be amortised over its remaining useful economic life subject to annual impairment reviews.

Non-Group Investment

Note 24 explains the circumstances of an impairment of the investment in BayWa r.e. Solar Systems Ltd. The charge of £160,032 is a non trading item and has no impact on cash-flows.

Company Strategy

As mentioned above, the Group has responded to changes in UK government incentives for renewables through increasing the geographic scope of its operations and offering new products and services.

The Group’s updated strategy was approved by shareholders at the September 2016 Annual General Meeting and key elements are as follows;

• Overall: continue to develop new products and services that target optimisation of operating renewable energy assets

• Continue to focus on cost control and efficiency to increase productivity measures

• Solar International (fridges): Continue to innovate with new products and updated designs to suit a wider range of market segments, including the significant “ice-lined” market for grid-supported applications.

• Solar UK: continue to focus on new build and large energy users where the main driver is not the FiT regime

• Hydro: secure additional O&M contracts to supplement the on-going design and installation work in Scotland and Wales. Secure at least one new installation project to build out in 2017.

• Consultancy: continue to build on the successful launch in Ireland; develop new consultancy services in optimising existing assets.

• Wind monitoring: expand our work on permanent lattice towers; continue to focus on our safety and quality record when bidding for work with key clients.

The on-going objective is to achieve a long term sustainable business by targeting niche markets supported by the appropriate “lean” internal infrastructure. The Board will also continue to take early mitigating action should any markets show further signs of change.

The Board is confident that the successful deployment of this strategy will allow the Company to remain competitive and build stronger positions in its core and new markets.

FINANCIAL REPORT

This year the restructuring of the group, amplified in the earlier section titled Group Structure, brings all the business performance and all the net assets into Dulas Ltd, the company. For comparison of data to be meaningful in this narrative, the 2016 company data is compared with 2015 group data.

Revenues (2015 comparatives relate to group consolidated accounts)

This year total revenues of £9.4m (2015-£11.8m) were achieved.

Operating Results (2015 comparatives relate to group consolidated accounts)

Overall gross profit was £2.1m (2015-£2.4m) and post tax profits were £24,616 (2015 £40,700).

Net profit before tax was £62,311 (2015-profit £57,039).

Note that this includes an impairment of investment of £160,032. Excluding this, the profit before tax was £222,343.

Assets and Liabilities (2015 comparatives relate to group consolidated accounts)

Intangible fixed assets increased by £92,871 to £0.58m. This was the result of the accounting treatment of the hived up investment from Chillwind Ltd.

Tangible fixed assets decreased by £0.1m in the year.

Investments increased by £114,968: being the aggregate of the equity purchase in Polestar Cooling Ltd and an impairment of £160,032 in the investment in BayWa r.e Solar Systems Ltd.

Stock levels at £0.7m (2015-£0.5m) at the year- end show an overall increase of £0.2m, and relates to increased orders in the Solar International business around year end.

Debtor levels at £1.7m (2015-£1.7m) at the year-end remain unchanged.

Short term creditors at £1.9m (2015- £1.5m) at the year – end show an increase of £0.4m resulting from additional loan finance from investment and higher trading activity around year end.

Longer term creditors at £0.2m increased from £56,195 as a result of investing activities.

Employment (2015 comparatives relate to group consolidated accounts)

Staff numbers remained stable at 78 (2015-77)

Tax Policy

The company adopted a tax policy on 5th June 2017 and these accounts are certified as complying with that policy by the Fair Tax Mark (fairtaxmark.net). We are committed to paying all the taxes that we owe in accordance with the spirit of all tax laws that apply to our operations. We believe that paying our taxes in this way is the clearest indication we can give of our being responsible participants in society. We will fulfil our commitment to paying the appropriate taxes that we owe by seeking to pay the right amount of tax (but no more), at the right rate, in the right place and at the right time. We aim to do this by ensuring that we report our tax affairs in ways that reflect the economic reality of the transactions we actually undertake in the course of our trade. What we will not ever do is seek to use those options made available in tax law or the allowances and reliefs that it provides in ways that are contrary to the spirit of the law. Nor will we undertake specific transactions with the sole or main aim of securing tax advantages that would otherwise not be available to us based on the reality of the trade that we undertake. As a result the company will never undertake transactions that would require notification to HM Revenue & Customs under the Disclosure of Tax Avoidance Schemes Regulations or participate in any arrangement to which it might be reasonable anticipated that the UK’s General Anti-Abuse Rule might apply.  We believe tax havens undermine the UK’s tax system. As a result whilst we will trade with customers and suppliers genuinely located in places considered to be tax havens we will not make use of those places to secure a tax advantage, and nor will we take advantage of the secrecy that many such jurisdictions provide for transactions recorded within them. Our accounts will be prepared in compliance with this policy and will seek to provide all that information that users, including HM Revenue & Customs, might need to properly appraise our tax position. We will review this policy with our accountants annually to ensure that it is complied with.

Suppliers

The company has continued its commitment to trading fairly with its suppliers, aiming to pay within 30 days or within the terms agreed with specific suppliers.

DIVIDENDS

The total distribution of dividends for the year ended 31st December 2016 was £nil (2015 £nil).

POLITICAL AND CHARITABLE DONATIONS

During the year the group did not make any political donations (2015-£nil), but made charitable donations of £1,435 (2015 - £3,500).

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2016.

The principal activity of the company in the year under review was the provision of renewable energy products and services

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

The results for the year are set out on page 9.

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

On 6th June 2017 BayWa r.e. Solar Systems Ltd, in which Dulas Ltd has a 10% equity investment, announced that it was to cease trading by 31st August 2017. BayWa r.e. Solar Systems Ltd convened a shareholder meeting and discussed the cessation of trade and the estimated residual value to be distributed to shareholders. As a result of this information and of on-going financial monitoring, the Board of Dulas Ltd believes the carrying value of this investment of £220,032 at 31st December 2016 ought to be impaired to £60,000 reflecting the impact of this post-balance sheet event. The impairment charge of £160,032 is shown separately in the profit and loss account.

In accordance with the company's articles, a resolution proposing that Broomfield & Alexander Limited be reappointed as auditor of the company will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

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;

• •    state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• •    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.

We have audited the financial statements of Dulas Limited for the year ended 31 December 2016 set out on pages 9 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

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

As explained more fully in the Directors' Responsibilities Statement set out on page 6 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

In our opinion the financial statements:

• •    give a true and fair view of the state of the company's affairs as at 31 December 2016 and of its profit for the year then ended;

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

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

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 statementstrue, 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 and the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

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

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

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

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

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

Dulas Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 1, Dyfi Eco Park, MACHYNLLETH, Powys, UK, SY20 8AX. This is also the main trading address of the company.

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 on the historical cost convention. The principal accounting policies adopted are set out below.

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover represents amounts receivable for goods and services net of VAT and trade discounts. Turnover is recognised when the goods are physically delivered to the customer and when services have been rendered to the customer.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 9 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated and subsequently amortised over the period during which the company is expected to benefit.

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 credited or charged to profit or loss.

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.

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.

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

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

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.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. 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 estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

Stocks held for distribution at no nominal consideration are measured at cost, adjusted where applicable for any loss of service potential

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

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 Statement of Financial Position 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 trade and other receivables 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 liabilities classified as payable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the 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 trade and other payables and bank loans 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 receipts 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 payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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

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.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

The Company contributes to group and individual personal pension plans for the benefit of its employees. Contributions payable are charged to the profit and loss account in the year they are payable.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

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 are included in the profit and loss account for the period.

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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Goodwill is allocated to each of the cash-generating units that have benefitted from synergies of business combinations, irrespective of whether assets or liabilities were acquired as part of the combination. A cash-generating unit in which goodwill has been allocated is tested for impairment on an annual basis by comparing the carrying amount of the unit with the recoverable amount of each unit.

Judgements are made and regularly reviewed on the valuation of goodwill due to the carrying amount and recoverable amount being susceptible to market conditions.

Development costs which have been capitalised are written off over the period in which the company is expected to benefit, some judgement is used when predicting future benefits. This could impact upon the period that development costs are to be written off over.

Notes 13 and 24 explain impairment decisions made regarding investments in BayWa r.e Solar Systems Ltd and Chillwind Ltd.

In 2016 the group in which Chillwind Ltd is a subsidiary was restructured to meet the needs of its customers more effectively and to improve profitability through efficiencies. As part of the preparation for this the Board performed a detailed impairment review of the carrying value of the investment and made the decision to reduce it by £22,791.

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

Stock is reviewed on a line by line basis and a provision is made against any items considered to be obsolete or those that are unlikely to achieve their carrying value when a sale is made.

An analysis of the company's turnover is as follows:

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 the group personal pension plan amounted to 3 (2015 - 3).

Investment income includes the following:

Exceptional items relate to unusual transactions arising in the ordinary course of business. In 2015 an exceptional item was recognised in relation to the write off of the intercompany balance due from Chillwind Limited, amounting to £544,794. In addition there was a £462,985 diminution in value in the investment in Chillwind Limited.

Post year end BayWa R.E. Solar Systems Ltd investment was considered to be impaired and hence a provision of £160,032 was included in the financial statements.

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

The company adopted a tax policy on 5th June 2017. A copy is available on our website at dulas.org.uk and a summary is published in our directors’ report. The disclosure made in these financial statements complies with commitments made in that policy.

The company has continued to invest in R&D activities in line with on-going strategy. Of those investments, a considerable portion is believed to deliver significant profits over the next three years and has been capitalised and amortised accordingly.

On 15 January 2016 the Company acquired a 50% shareholding in Polestar Cooling Limited for consideration of £275,000.

During 2016 the trade and assets of Chillwind Limited have been hived up into Dulas Limited. As a result the value of the investment in Chillwind Limited has been transferred from fixed asset investments and is included as Goodwill at a value of £310,610 at the balance sheet date. The company's investment in BayWa r.e Solar Systems Ltd was impaired by £160,032.

The long-term loans are secured by fixed and floating charges over the assets of the company. The company has a mortgage on which interest of 3% per annum is charged and a commercial loan on which 8% interest per annum is charged.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

During the year the trade and assets of Chillwind Limited was hived up into Dulas Limited. Deferred tax asset was introduced to the balance sheet at a value of £37,169 as a result of the hive up.

Ordinary A shares carry full voting rights and must be sold back to the company at par once employment ceases.

Ordinary B shares carry full rights in respect of dividends and must be sold back to the company at par once employment ceases. They do not carry any voting rights.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

On 6th June 2017 BayWa r.e. Solar Systems Ltd, in which Dulas Ltd has a 10% equity investment, announced that it was to cease trading by 31st August 2017. BayWa r.e. Solar Systems Ltd convened a shareholder meeting and discussed the cessation of trade and the estimated residual value to be distributed to shareholders. As a result of this information and of on-going financial monitoring, the Board of Dulas Ltd believes the carrying value of this investment of £220,032 at 31st December 2016 ought to be impaired to £60,000 reflecting the impact of this post-balance sheet event. The impairment charge of £160,032 is shown separately in the profit and loss account.

The company is controlled by its employees who in turn hold one voting share each. There is no ultimate controlling party of Dulas Limited.

The remuneration of key management personnel is as follows:

The only trading entity in 2016 over which the company had control, joint control, or significant influence was Polestar Cooling Ltd.

During the year the company entered into the following transactions with related parties:

The following amounts were outstanding at the reporting end date:

After the year end, a valuation error in a stock line was identified that originated in January 2012. The discrepancy was £27,601. Although this amount is not material to the accounts, it would significantly distort trading performance if it was adjusted through the profit and loss account for 2016 or the comparatives. It was decided to adjust opening reserves at 1st January 2015 for this historical error.