Don Valley Engineering Group Limited - Limited company accounts 20.1

REGISTERED NUMBER: 06389130 (England and Wales)

Don Valley Engineering Group Limited

Group Strategic Report, Report of the Directors and

Consolidated Financial Statements For The Year Ended 31 July 2020

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

5

Consolidated Income Statement

7

Consolidated Other Comprehensive Income

8

Consolidated Balance Sheet

9

Company Balance Sheet

10

Consolidated Statement of Changes in Equity

11

Company Statement of Changes in Equity

12

Consolidated Cash Flow Statement

13

Notes to the Consolidated Cash Flow Statement

14

Notes to the Consolidated Financial Statements

15

DIRECTORS:

A Priestley

I Trotter

L Ashurst

S Doleman

R Baker

REGISTERED OFFICE:

Sandall Stones Road

Kirk Sandall

Doncaster

DN3 1QR

REGISTERED NUMBER:

06389130 (England and Wales)

AUDITORS:

Allotts Business Services Ltd, Statutory Auditor

Chartered Accountants

Sidings Court

Lakeside

Doncaster

South Yorkshire

DN4 5NU

The directors present their strategic report of the company and the group for the year ended 31 July 2020.

The principal activities of the group in the year under review were those of mechanical engineering, particularly that of bulk material handling & processing and malting process plant. Within these sectors the group provide design consultancy, turnkey projects, supply of spares and asset management.The group also provide site mechanical installation for their projects and to third parties

REVIEW OF BUSINESS

In the financial year under review the company experienced the effects of a global pandemic for the first time. The lockdown in March was a major shock to the entire economy.

Prior to the lockdown period, the company already had contingency plans in place allowing most of the staff to work from home if required. After a short break in output from the factory, whilst government guidance and legislation became clear, robust procedures on hygiene and social distancing were implemented that permitted the workshop to operate with minimal risk or disruption.

The site construction activity was completely curtailed for a month due to construction site closures and the inability of our workforce to obtain accommodation. As some of our activities were on sites that were classed as essential services, we were soon able to gain some traction and work recommenced initially on just two sites. Over the period May to July further work at customer sites became available and our entire Construction workforce were fully employed again before the end of July.

By careful movement and segregation of labour throughout the organisation, our measures have been so successful that we did not have a single case of coronavirus reported of any of our workforce during this financial year.

The furlough scheme was also used to offset the effect of the short-term downturn in activity as customers put Capex projects on hold. Strong financial management through this period allowed the Directors to look beyond the crisis with high confidence for the future.

Under these extremely challenging circumstances the Directors consider this year's performance to be outstanding.

There is still some uncertainty over Brexit but there also appears to be some opportunities created with European customers with UK assets and operations.

The company has a healthy order book including the successful conversion of one large tender into an order in excess of £5M; this was received in August 2020 so had no effect on the reporting year.

The overall pipeline of enquiries is still high despite the dip caused by Covid-19; we expect a number of these business opportunities will be converted into orders in the coming months.

The results for the year demonstrate a profitable performance despite extremely challenging circumstances. The directors are expecting a fourth year of profitable performance ahead.

During the year the group underwent a reorganisation which involved the transfer of ownership of each subsidiary and freehold property from Don Valley Engineering Holdings Limited to Don Valley Engineering Group Limited.

PRINCIPAL RISKS AND UNCERTAINTIES

The principle risk facing the business at present is the impact a second wave of Covid-19 may cause. Other risks include the economy, general concerns within the UK markets on the effects of "Brexit" both on the UK markets and competitors operating in the overseas market. A no deal "Brexit" or negotiated "Brexit" could alter tariffs and duty levels to change our competitive position compared with other competitors.

KEY PERFORMANCE INDICATORS

The directors consider the following key performance indicators relevant to the group:

2020

2019

Gross Profit %

38.9%

30.9%

Overheads / turnover ratio

30.6%

19.6%

Stock /cost of sales ratio

14.7%

10.4%

Staff costs /turnover ratio

42.8%

25.0%

Liquidity ratio

136.8%

118.7%

The directors consider the KPI's to be reasonable.

ON BEHALF OF THE BOARD:

A Priestley - Director

16 November 2020

The directors present their report with the financial statements of the company and the group for the year ended 31 July 2020.

DIVIDENDS

No dividends will be distributed for the year ended 31 July 2020.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 August 2019 to the date of this report.

A Priestley

I Trotter

L Ashurst

S Doleman

R Baker

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors, Allotts Business Services Ltd, Statutory Auditor, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

A Priestley - Director

16 November 2020

Opinion

We have audited the financial statements of Don Valley Engineering Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2020 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31 July 2020 and of the group's profit for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the group 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 group's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

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

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

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the 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 Report of the Directors.

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

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

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

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

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent 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 group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

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

Steven Pepper FCA (Senior Statutory Auditor)

for and on behalf of Allotts Business Services Ltd, Statutory Auditor

Chartered Accountants

Sidings Court

Lakeside

Doncaster

South Yorkshire

DN4 5NU

16 November 2020

TURNOVER

3

7,638,536

6,458,180

Cost of sales

4,669,221

4,461,845

GROSS PROFIT

2,969,315

1,996,335

Administrative expenses

2,333,751

1,268,282

635,564

728,053

Other operating income

258,898

6,145

OPERATING PROFIT

6

894,462

734,198

Interest receivable and similar income

3,684

1,275

898,146

735,473

Interest payable and similar expenses

7

53,255

25,340

PROFIT BEFORE TAXATION

844,891

710,133

Tax on profit

8

42,233

(62,140

)

PROFIT FOR THE FINANCIAL YEAR

802,658

772,273

Profit attributable to:

Owners of the parent

802,658

772,273

PROFIT FOR THE YEAR

802,658

772,273

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

802,658

772,273

Total comprehensive income attributable to:

Owners of the parent

802,658

772,273

FIXED ASSETS

Intangible assets

10

(215,242

)

(283,220

)

Tangible assets

11

1,799,488

1,795,763

Investments

12

1

-

1,584,247

1,512,543

CURRENT ASSETS

Stocks

13

685,982

462,598

Debtors

14

2,608,635

4,321,714

Cash at bank and in hand

1,521,150

776,176

4,815,767

5,560,488

CREDITORS

Amounts falling due within one year

15

3,520,491

4,683,650

NET CURRENT ASSETS

1,295,276

876,838

TOTAL ASSETS LESS CURRENT LIABILITIES

2,879,523

2,389,381

CREDITORS

Amounts falling due after more than one year

16

(1,189,382

)

(1,506,638

)

PROVISIONS FOR LIABILITIES

20

(15,210

)

(10,470

)

NET ASSETS

1,674,931

872,273

CAPITAL AND RESERVES

Called up share capital

21

100,000

100,000

Retained earnings

1,574,931

772,273

SHAREHOLDERS' FUNDS

1,674,931

872,273

The financial statements were approved by the Board of Directors and authorised for issue on 16 November 2020 and were signed on its behalf by:

A Priestley - Director

L Ashurst - Director

FIXED ASSETS

Intangible assets

10

-

-

Tangible assets

11

1,672,211

-

Investments

12

2,413,953

2,210,132

4,086,164

2,210,132

CURRENT ASSETS

Debtors

14

477,813

6,837

Cash at bank

484,551

462,654

962,364

469,491

CREDITORS

Amounts falling due within one year

15

1,417,668

1,404,895

NET CURRENT LIABILITIES

(455,304

)

(935,404

)

TOTAL ASSETS LESS CURRENT LIABILITIES

3,630,860

1,274,728

CREDITORS

Amounts falling due after more than one year

16

1,171,157

1,402,401

NET ASSETS/(LIABILITIES)

2,459,703

(127,673

)

CAPITAL AND RESERVES

Called up share capital

21

100,000

100,000

Retained earnings

2,359,703

(227,673

)

SHAREHOLDERS' FUNDS

2,459,703

(127,673

)

Company's profit/(loss) for the financial year

2,587,376

(227,673

)

The financial statements were approved by the Board of Directors and authorised for issue on 16 November 2020 and were signed on its behalf by:

A Priestley - Director

L Ashurst - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 August 2018

1

-

1

Changes in equity

Issue of share capital

99,999

-

99,999

Total comprehensive income

-

772,273

772,273

Balance at 31 July 2019

100,000

772,273

872,273

Changes in equity

Total comprehensive income

-

802,658

802,658

Balance at 31 July 2020

100,000

1,574,931

1,674,931

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 August 2018

1

-

1

Changes in equity

Issue of share capital

99,999

-

99,999

Total comprehensive income

-

(227,673

)

(227,673

)

Balance at 31 July 2019

100,000

(227,673

)

(127,673

)

Changes in equity

Total comprehensive income

-

2,587,376

2,587,376

Balance at 31 July 2020

100,000

2,359,703

2,459,703

Cash flows from operating activities

Cash generated from operations

1

889,175

355,095

Interest paid

(38,106

)

(18,611

)

Interest element of hire purchase payments paid

(3,147

)

(2,769

)

Factoring charges

(12,002

)

(3,960

)

Tax paid

67,580

(4,969

)

Net cash from operating activities

903,500

324,786

Cash flows from investing activities

Purchase of intangible fixed assets

(7,200

)

314,689

Purchase of tangible fixed assets

(105,368

)

(22,542

)

Sale of tangible fixed assets

19,500

8,466

Interest received

3,684

1,275

Net cash from investing activities

(89,384

)

301,888

Cash flows from financing activities

Loan repayments in year

(45,060

)

-

Capital repayments in year

(10,054

)

49,502

Amount withdrawn by directors

(14,028

)

-

Share issue

-

99,999

Net cash from financing activities

(69,142

)

149,501

Increase in cash and cash equivalents

744,974

776,175

Cash and cash equivalents at beginning of year

2

776,176

1

Cash and cash equivalents at end of year

2

1,521,150

776,176

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

2020

2019

£

£

Profit before taxation

844,891

710,133

Depreciation charges

30,848

17,504

(Profit)/loss on disposal of fixed assets

(9,484

)

497

Finance costs

53,255

25,340

Finance income

(3,684

)

(1,275

)

915,826

752,199

Increase in stocks

(223,384

)

(462,598

)

Decrease/(increase) in trade and other debtors

1,659,527

(4,809,757

)

(Decrease)/increase in trade and other creditors

(1,462,794

)

4,875,251

Cash generated from operations

889,175

355,095

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 July 2020

31.7.20

1.8.19

£

£

Cash and cash equivalents

1,521,150

776,176

Year ended 31 July 2019

31.7.19

1.8.18

£

£

Cash and cash equivalents

776,176

1

3.	ANALYSIS OF CHANGES IN NET (DEBT)/FUNDS

At 1.8.19

Cash flow

At 31.7.20

£

£

£

Net cash

Cash at bank and in hand

776,176

744,974

1,521,150

776,176

744,974

1,521,150

Debt

Finance leases

(49,502

)

10,054

(39,448

)

Debts falling due within 1 year

(68,134

)

18,816

(49,318

)

Debts falling due after 1 year

(1,197,401

)

26,244

(1,171,157

)

(1,315,037

)

55,114

(1,259,923

)

Total

(538,861

)

800,088

261,227

1.	STATUTORY INFORMATION

Don Valley Engineering Group Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the General Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

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

Basis of consolidation

Subsidiaries are included in the financial statements from the date control commences until the date control ceases. Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

The purchase method is used to account for the acquisition of subsidiaries. The identifiable net assets are incorporated into the financial statements on the basis of the fair value to the group from the effective date of control, and the results of subsidiary undertakings acquired during the financial year are included in the group's results from that date. As a consequence the results for the group to 31 July 2019 represent a trading period of six months from 1 February 2019 to 31 July 2019.

Turnover

Turnover is the total value of work completed in the period together with the value of incomplete contracts for the supply and installation of goods. Maintenance works and manufactured goods are recognised upon completion and delivery as appropriate.

In assessing the likely outcome of contracts, account is taken of overhead recovery and any expected costs to complete the contract and for subsequent works necessary under the contract to cover warranty and reworking.

Goodwill on consolidation

The negative goodwill arising on the acquisition of the subsidiary companies in 2019 is being amortised over its estimated useful life of five years from the date of acquisition.

Tangible fixed assets

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

Freehold land & buildings

-

2% on cost and not provided

Plant & machinery

-

33.33% on cost, 20% on cost and 10% on cost

Motor vehicles

-

33.33% on reducing balance

Depreciation is charged following the month of acquisition.

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost.

Stocks

Stock is valued at cost less a deduction for slow moving, damaged or obsolete stock. The directors consider the obsolescence policy annually in the light of each individual company's current operations and stockholding strategy. Materials stocks are written down by up to 100% of the the cost of each item depending upon the sales of each item within the previous 24 months. The current provisions are considered adequate to reduce its value to that which will be recoverable in the ordinary course of its present and future activities taking into account the period of holding and the expected future sales.

Work in progress represents the cost of labour and materials expended, plus an appropriate charge for overheads in respect of the manufacture of products and work undertaken over short periods which each

individual company has not completed or delivered at the balance sheet date.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

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

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

Expenditure on research and development is written off in the year in which it is incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those

held under hire purchase contracts are depreciated over their useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to the profit or loss over the relevant period. The capital

element of the future payments is treated as a liability.

Rentals paid under operating leases are charged to the profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The group operates a defined contribution pension scheme in respect of the directors and the employees. The assets of the scheme are held by trustees separately from the group's assets. The charge for pensions in the accounts represents the amount payable by the group in the period.

Investments in associates

Investments in associate undertakings are recognised at cost less any provision for impairment.

Government grants

Grants received in respect of capital expenditure are treated as deferred income in the balance sheet and are credited to the profit and loss account in equal instalments over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

Grants received in respect of revenue expenditure are credited to the profit and loss account in the year to which they relate.