SWALE_HEATING_HOLDINGS_LI - Accounts

The director presents the strategic report for the year ended 30 September 2021.

Swale Heating Holdings Limited was incorporated on 17 December 2020. Subsequently, on 15 January 2021, following a de-merger and group reorganisation, the entire share capital of the subsidiary Swale Heating Limited was transferred to Swale Heating Holdings Limited.

The principal activity of the group continues to be that of installing, servicing and maintaining central heating and hot water systems within domestic dwellings both in the private ownership and affordable housing sectors.

The various marketplaces in which we operate continue to be challenging with tendered prices remaining extremely competitive in the affordable housing sector, together with some evidence of budgetary constraints. At the same time, the private installations market appears to have been impacted by several factors, not least of which is the economic uncertainty and lack of consumer confidence caused by uncertainty over Brexit, and subsequently added to by COVID, and then post year end, by the impact of the war in Ukraine.

The group has historically operated within its own working capital availability although due to the COVID-19 pandemic, the group entered into discussions with Barclays Bank Plc, with a view to securing a ‘Coronavirus Business Interruption Loan’ ("CBIL"). A £2,000,000 CBIL was subsequently agreed with the bank and the money was received in October 2020.

Management continually monitor the key risks facing the group, together with assessing the controls used for managing these risks.

The principal risks and uncertainties facing the group are as follows:-

• Economic downturn – the group acknowledges the importance of maintaining close relationships with its core customer base in order to be able to identify the early signs of a lack of capital investment or any potential financial difficulties. Sales trends in its major markets are constantly reviewed to enable early action to be taken in the event of sales declining.

• Competitor pressure – the principal market in which the group operates is considered to be relatively competitive, and therefore competitor pressure could result in losing sales to key competitors. The group manages this risk by providing a quality service and products and maintaining strong relationships with its key customers.

• Reliance on key suppliers – the group’s purchasing activities could expose it to over reliance on certain suppliers and inflationary pricing pressures. The group manages this risk by ensuring there is enough breadth in its supplier base and by constantly seeking to find potential alternative suppliers that may be used, if necessary. Despite this strategy, the supply chain challenges brought about by COVID 19 have impacted boiler and parts availability during the current year.

• Loss of key personnel – this could cause significant operational difficulties for the group. Management seek to ensure that key personnel are appropriately remunerated to ensure that good performance is recognised and an appropriate talent management and succession programme is operated.

The group has in recent years expanded both the variety and geographical position of its work streams. This strategy has continued to focus primarily on building the brand and the volume of private sales within the London and the South East area by virtue of significant investment in advertising, together with seeking out additional opportunities within the affordable housing sector.

Some highlights of the business from this financial year include:

• Contract renewal for an existing client of approximately 7,000 properties

• Other contract awards through the South East Consortium Gas Contractors framework

• Maintenance of high levels of customer satisfaction and compliance across all clients

• Significant investment in IT Hardware to help facilitate, initially homeworking due to COVID, and subsequently a hybrid working model

• Subsequent to year end, securing a major contract for another G15 Housing Association

We continue to look for additional opportunities to increase our contracted activity levels.

The balance sheet shows the group’s net assets at the year-end have decreased from £2,912,417 to £2,897,162.

The Director uses and reviews both financial and non-financial key performance indicators to track the group's success against its strategic business objectives.

The two key financial indicators for the group in relation to the continuing business are:-

The group additionally continues to focus on key non-financial indicators and considered the below to be the key indicators. These were all impacted by some of the challenges faced in the period, and for the period of these accounts, these KPI's were:-

• First time job completion rates – 75.7% (2020 - 79.2%)

• Gas Safety Compliancy rates – 99.9% (2020 - 99.8%)

• Access rate – 80.5% (2020- 81.5%)

Section 172 of the Companies Act 2006 requires a director of a group to act in the way he considers, in good faith, would most likely promote the success of the group for the benefit of its members as a whole (having regard to the stakeholders and the matters set out in s172(1)(a-f) of the Act).

When the director takes any decisions, he takes due account of the following;

•    the likely consequences of any decision in the long term;

•    the interests of the company's employees;

•    the need to foster the company's business relationships with suppliers, customers and others;

•    the impact of the company's operations on the community and the environment;

•    the desirability of the company maintaining a reputation for high standards of business conduct; and

•    the need to maintain fairness between all stakeholders of the company, including shareholders,     employees, customers and suppliers.

The director achieves the above in a variety of ways, including, but not limited to the following:

•    An inclusive relationship with employees, where openness is encouraged.

•    The building of important and open relationships with key suppliers and customers.

•    Regular in-depth management meetings, where all departments' interests are considered where     possible, before any decisions are taken that might affect them, and also in order to fully evaluate any     major project or plan under consideration, as well as maximise expert input on new projects.

•    Management meetings used to disseminate company strategy and decision-making processes.

•    By developing an array of procedures to cover all aspects of work, as well as forms to document such     procedural compliance.

•    Operating responsibly within a governance culture and framework that is appropriate to the company's     nature and size.

On behalf of the board

The director presents his annual report and financial statements for the year ended 30 September 2021.

The results for the year are set out on page 12.

The trading profit for the year, after taxation, was £259,744 (2020: £634,230).

Ordinary dividends were paid amounting to £253,009. The director does not recommend payment of a further dividend.

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

The group manages its cash and borrowing requirements centrally to maximise interest income and minimise interest expense, whilst ensuring that the company has sufficient liquid reserves to meet the operating needs of its businesses.

Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits.

Liquidity risk in respect of creditors is managed by ensuring sufficient funds are available to meet amounts due.

The group’s policy is to give full and fair consideration to applications for employment made by disabled persons, having regard to their particular aptitudes and abilities. Disabled employees receive appropriate training to promote their development within the company. Employees who become disabled are retained in their existing posts where possible or retrained for suitable alternative posts.

Regular meetings are held between senior management and employees to discuss matters of concern. Employees are kept well informed about the progress and position of the group by means of regular communication.

As noted in the Strategic Report, the business has had some success in ‘work winning’ during the financial year and the directors seek to build on this by continuing to look for opportunities to secure additional social housing activity, as well as continuing to expand our private activity.

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

The group is complying with the requirements of the Streamlined Energy and Carbon Reporting by declaring emissions within scope 1, 2 and 3 and will set a base year from the figures declared for the year ended 30 September 2020.

Energy consumption for the company in tonnes of carbon dioxide equivalent (tCO2e) through leased offices and vehicle fleet is shown below.

Energy consumption

UK energy use for the year to 30 September 2021 from the following fuel types:

UK energy use for the year to 30 September 2020 from the following fuel types:

Methodology

We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2021 UK Government’s Conversion Factors for Company Reporting.

Most of the group's installation works were carried out by sub-contractors. The company does not have details of fuel consumption for those vehicles nor does it have tracking information. Therefore, the fuel usage by sub-contractors has been estimated based on average fuel consumption of our employed installers, using a company vehicle.

Measures taken to improve energy efficiency

Measures taken include:

• Adopting more accurate map planning which accounts for some of the reduction in fuel consumption since last year.

• Arranging quotes for scaffolding to access the solar panels on the roof to carry out repairs and maintenance to get them working at full capacity.

• Employing a Sustainability Manager who has been tasked with producing a Sustainability plan for the business, and to work towards Swale Heating gaining the ISO50001 accreditation for Energy efficiency.

• Fitting electric vehicle charging points in the office car park.

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 auditor of the company 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 auditor of the company is aware of that information.

As permitted by paragraph 1A of Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 certain notes which are required to be disclosed in the directors’ report have been omitted and they are included in the Strategic Report on pages 1 to 4. These notes relate to the review and analysis of business during the current year.

The director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus he continues to adopt a going concern basis in preparing the annual financial statements.

Further details regarding the adoption of the going concern basis can be found in note 1.3 to the financial statements.

The director is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the director is 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 ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Swale Heating Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2021 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 the parent company's affairs as at 30 September 2021 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 Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the director's 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 strategic report and the director's 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 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.

As explained more fully in the director's responsibilities statement, the director is 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 director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the director is responsible for assessing 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

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

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

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Use of our report

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

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the period was £253,009.

Swale Heating Holdings Limited (the 'company') is a private company limited by shares, domiciled and incorporated in England and Wales. The registered office is Heard Way, Eurolink Industrial Estate, Sittingbourne, ME10 3SA.

The company's principal activity is that of a holding company. The group consists of Swale Heating Holdings Limited and its subsidiary, Swale Heating Limited.

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 £1.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

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

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

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;

• Section 26 ‘Share based Payment’: Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

The group financial statements consolidate the financial statements of the company and its subsidiary undertaking, Swale Heating Limited, made up to 30 September 2021.

The group financial statements have been prepared in accordance with the principles of merger accounting. The profits of Swale Heating Holdings Limited and its subsidiary undertaking Swale Heating Limited have been included in the financial statements for the whole of the year ended 30 September 2021. Comparative figures have been presented as if the companies had been combined throughout the previous period and at the previous balance sheet date.

All financial statements are made up to 30 September 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

At the time of approving the financial statements, taking into consideration all relevant factors and other evidence available to the director in respect of the company's trading prospects (including the COVID-19 pandemic), the director remains satisfied that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is recognised, excluding value added tax where applicable, as follows:

• Installation of central heating systems: the invoiced value of work done.

• Service contracts: Revenue from the rendering of services is measured by reference to the stage

of completion of the service transaction at the end of the reporting period, provided that the

outcome can be reliably estimated. When the outcome cannot be reliably estimated, revenue is

only recognised to the extent that expenses recognised are recoverable.

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. Items within Equipment, fixtures and fittings are depreciated on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Investments in subsidiaries

Investments in subsidiaries are initially measured at the fair value of the interest acquired. Fair value at inception has been ascertained by reference to the net assets of the subsidiary at that date. The uplift in fair value relative to the shares acquired by way of a share-for-share exchange have been credited to the share premium account. Transaction costs are expensed to the profit or loss account as incurred.

Subsequently, the investment in subsidiary is measured at deemed cost less impairment. Impairment losses are recognised in the profit and loss account as incurred.

Unlisted investments

Unlisted investments held as fixed assets are stated at cost less provision for any permanent diminution in value.

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

Recoverable amount is the higher of fair value less costs to sell and value in use.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. A reversal of an impairment loss is recognised immediately in profit or loss.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell, calculated on a first in first out basis. 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.

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 other short-term liquid investments with original maturities of three months or less.

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

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

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

Financial assets 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 group 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 group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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

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

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the group 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 group.

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 group’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.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

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 if, and only if, there is 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.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss 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 leased asset are consumed.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

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 in the period are included in profit or loss.

In the application of the group’s accounting policies, the director is 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 critical judgements that the directors have made in the process of applying the company’s policies that have the most significant effect on the amounts recognised in the statutory financial statements are discussed below:

In assessing whether there have been any indicators of impairment of assets, the directors have considered both external and internal sources of information such as market conditions, counterparty credit ratings and experience of recoverability. There have been no material indicators of impairments identified during the current financial year.

The key assumptions concerning the future, and other key sources of estimation uncertainty, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Where an indication of impairment exists the directors will carry out an impairment review to determine the recoverable amount, which is the value in use. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the asset or the cash generating unit and a suitable discount rate in order to calculate present value.

The group establishes a provision for receivables that are estimated not to be recoverable. When assessing recoverability the directors consider factors such as the ageing of receivables, past experience of recoverability, the credit profile of individual or groups of customers.

The group depreciates tangible assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes.

The company received dividends amounting to £275,000 from its subsidiary during the year.

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

Their aggregate remuneration comprised:

There were no employees in the parent company for the current period.

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

As at 30 September 2021, gross taxable losses carried forward totalled £1,032,041 (2020: £1,325,517). A deferred tax asset (see note 18) has been recognised in respect of taxable losses carried forward, in accordance with the group's accounting policies.

Details of the company's subsidiaries at 30 September 2021 are as follows:

On 9 October 2020 the group company drew-down £2,000,000 in respect of a Coronavirus Business Interruption Loan (‘CBIL’) facility from Barclays Bank Plc. The loan is repayable over three years from the draw-down date with an initial six month capital repayment holiday.

During the first year, in accordance with the loan agreement, interest and charges of £50,765 were borne by HM Government.

The loan has a variable interest rate of 2.34% above the Bank of England Base Rate.

The loan is secured by way of the bank’s existing security held over the company’s assets, including a fixed and floating charge over all of the property and undertakings of the group.

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

On 3 March 2021, HM Government announced that the rate of corporation tax would increase from 19% to 25% for companies with profits over £250,000. As this was substantively enacted in Finance Bill 2021 on 24 May 2021, the company has accordingly re-calculated the carrying value of the deferred tax asset using the 25% rate of corporation tax. The deferred tax asset set out above is expected to reverse within 2 years and relates to the utilisation of tax losses against future expected profits.

The group operates a money purchase (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 and charge represent contributions payable by the group to the fund and amounted to £391,773 (2020: £375,364). At the balance sheet date, £70,606 (2020: £67,274) was payable to the fund and is included within other creditors.

Under the principles of merger accounting the comparative figures have been presented as if the companies had been combined throughout the previous period and at the previous balance sheet date.

There is no comparative in respect of called up share capital as the shares in the parent company were issued wholly during the current year being 1 Ordinary share at par on incorporation and 46,250 Ordinary shares at par on 15 January 2021.

Other reserves comprise the difference in the nominal value of the share capital of Swale Heating Limited and Swale Heating Holdings Limited, as well as the value of the share premium account and capital redemption reserve as at the date of the reorganisation.

On 17 December 2020, as the first step of a group reorganisation, the entire share capital of Swale Heating Limited was acquired by Pierson Holdings Limited for total consideration of £1.

Subsequently, on 15 January 2021, the entire share capital of Swale Heating Limited was acquired by Swale Heating Holdings Limited (formerly Swale Heating Holdings (2020) Limited) as part of a Demerger Agreement between Swale Heating Limited, Swale Heating Holdings Limited, Pierson Holdings (2020) Limited and Headspace Holdings Limited whereby, upon the cancellation of certain shares in Pierson Holdings (2020) Limited, Swale Heating Holdings Limited issued shares to Pierson Holdings (2020) Limited's shareholders in consideration for the acquisition of Swale Heating Limited.

The group had a commitment in respect of a service and support agreement to make monthly payments until April 2021, with an overall commitment at the balance sheet date of £Nil (2020: £22,344).

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

Included within the above is an operating lease for land and buildings. This lease has a term of 20 years with tenants' break clauses every five years.

The current annual commitment in respect of this lease amounts to £140,000.

The group was controlled throughout the current period by Mr I M Pierson by virtue of his 100% beneficial holding of the ordinary shares of Swale Heating Holdings Limited, and prior to the reorganisation of Swale Heating Limited he also controlled that company.

1. i.    During the year, the group was invoiced £140,000 (2020: £140,000) in respect of property rentals from

    

   Pierson Properties Limited invoiced the group an amount of £2,437 (2020: £Nil) in respect of expenses incurred on its behalf.

    

   In addition, the group invoiced a total of £686 (2020: £97,590) to Pierson Properties Limited in the course of usual trading activity. The group also incurred expenditure on behalf of Pierson Properties Limited, amounting to £825 (2020: £21,069).

    

   Finally, the group advanced a loan of £2,000,000 to Pierson Properties Limited. The loan is interest free until the balance sheet date, after which, interest is charged at a market rate of 2.34% above the Bank of England base rate.

    

   At 30 September 2021, the total balance due from Pierson Properties Limited amounted to £754,074 (2020: £356,187) and is included within other debtors.

    

2. ii.Energy Academy Limited, a company under common control, incurred expenditure on behalf of the group during the year amounting to £67,136 (2020: £5,015), of which £55,752 (2020: £2,406) related to wage costs.

The group incurred expenditure on behalf of Energy Academy Limited to the sum of £65,180 (2020: £46,740), and made purchases from Energy Academy of £52,342 (2020: £41,957).

At the reporting date, £322,904 (2020: £322,202) was due from Energy Academy Limited. This amount is included within other debtors.

1. iii.    At the balance sheet date, included in other debtors is a loan amount due fromof £180,210 (2020: £176,685). The company incurred accountancy fees of £3,525 (2020: £5,800) on behalf of the related party during the year.

On 15 April 2021 the company changed its name from Swale Heating Holdings (2020) Ltd to Swale Heating Holdings Ltd.