Smiths Equipment Hire Limited - Limited company accounts 20.1

REGISTERED NUMBER: 00992884 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2022

FOR

SMITHS EQUIPMENT HIRE LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Statement of Comprehensive Income

8

Balance Sheet

9

Statement of Changes in Equity

10

Cash Flow Statement

11

Notes to the Cash Flow Statement

12

Notes to the Financial Statements

14

DIRECTORS:

Mr D Smith

Mr T G Smith

REGISTERED OFFICE:

De Havilland House

15-16 Avroe Crescent

Blackpool

Lancashire

FY4 2DP

REGISTERED NUMBER:

00992884 (England and Wales)

AUDITORS:

Jones Harris Limited

Statutory Auditors

17 St Peters Place

Fleetwood

Lancashire

FY7 6EB

The directors present their strategic report for the year ended 28 February 2022.

The company's principal activity during the period under review was the hiring of plant and equipment to the construction, maintenance and DIY markets.

REVIEW OF BUSINESS

The Company has continued its growth with turnover increasing by 26.7% on the previous year. Of this 7.9% was attributable to the 3 new depots opened during the year with the remainder of the increase being generated by existing operations.

The company presents the following key performance indicators.

2022

2021

2020

£

£

£

Turnover

16,108

12,713

12,213

Gross profit

7,907

6,162

6,180

Profit before tax

2,093

1,993

1,467

We have seen significant increases in all of our income streams during the year.

To enable the company to continue its growth we have invested £6.2m in Hire Fleet assets during the year. This investment has continued into the current year and will contribute towards the Company achieving its planned growth for the current year.

PRINCIPAL RISKS AND UNCERTAINTIES

The directors are confident that the risks associated to future profitability due to the COVID19 pandemic have now passed.

The main area of uncertainty currently lies with the potential impact on the Company from bad debts due to the general economic outlook for the entire country with rising inflation and the possibility of recession. We continue to closely monitor all of our customers and continue to invest in our credit control function.

The directors are however satisfied that the Company will continue to meet its objectives of continued growth and profitability.

ON BEHALF OF THE BOARD:

Mr D Smith - Director

17 June 2022

The directors present their report with the financial statements of the company for the year ended 28 February 2022.

DIVIDENDS

An interim dividend of £500 per share was paid on 1 August 2021. The directors recommend that no final dividend be paid.

The total distribution of dividends for the year ended 28 February 2022 will be £ 750,000 .

FUTURE DEVELOPMENTS

The directors and senior management are continuing to focus on and are confident of achieving the growth forecasts for the forthcoming financial year and continue to invest in staff training and development.

The directors and senior management measure the performance of the Company by reference to both financial and non-financial KPI's which include: -

- Individual depot P & L targets

- Staffing level and performance

- Return on Investment for each Hire Fleet category

- Fleet maintenance and availability

- Order conversions

- Marketing performance

DIRECTORS

The directors shown below have held office during the whole of the period from 1 March 2021 to the date of this report.

Mr D Smith

Mr T G Smith

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the 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 of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

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

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 company'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 company's auditors are aware of that information.

ON BEHALF OF THE BOARD:

Mr D Smith - Director

17 June 2022

Opinion

We have audited the financial statements of Smiths Equipment Hire Limited (the 'company') for the year ended 28 February 2022 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the 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 company's affairs as at 28 February 2022 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.

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 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 directors' 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 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 directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the 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 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 the audit:

-	the information given in the 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 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 company and its environment obtained in the course of the audit, we have not identified material misstatements in the 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, 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, 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 company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Based on our understanding of the entity and the industry in which it operates we identified principal risks of non-compliance with laws and regulations related to Health and Safety, Sale of Goods Act and other trading laws. We considered the extent to which non-compliance with these laws and regulations might have a material effect on the financial statements. We also considered the Companies Act 2006 as this has a direct impact on the financial statements. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of override of controls, and determined that the principal risks were related to the posting of inappropriate journals in order to impact profitability and misappropriation of stock. Significant accounting estimates which could give rise to management bias within the company are: depreciation and useful economic life of Fixed Assets.

Audit procedures performed in order to mitigate the risks highlighted include the following:

- Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud.

- Evaluation and testing of the operating effectiveness of the management's controls designed to prevent and detect irregularities.

- Reviewing key correspondence with regulatory authorities in relation to compliance with relevant regulations.

- Challenging assumptions and judgements made by the management as well as explanations given.

- Identifying and testing journal entries, in particular those posted with unusual account combinations.

- Testing specific controls based around stock procedures.

- Testing specific assets for existence and signs of impairment.

There are limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment.

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.

Charles Bryning FCA (Senior Statutory Auditor)

for and on behalf of Jones Harris Limited

Statutory Auditors

17 St Peters Place

Fleetwood

Lancashire

FY7 6EB

17 June 2022

REVENUE

4

16,107,738

12,712,554

Cost of sales

8,200,771

6,550,374

GROSS PROFIT

7,906,967

6,162,180

Administrative expenses

5,693,739

4,507,741

2,213,228

1,654,439

Other operating income

5

9,666

427,990

OPERATING PROFIT

7

2,222,894

2,082,429

Interest payable and similar expenses

8

130,239

89,898

PROFIT BEFORE TAXATION

2,092,655

1,992,531

Tax on profit

9

727,637

384,530

PROFIT FOR THE FINANCIAL YEAR

1,365,018

1,608,001

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,365,018

1,608,001

FIXED ASSETS

Property, plant and equipment

11

13,994,678

10,229,030

CURRENT ASSETS

Inventories

12

561,446

378,076

Debtors

13

2,910,593

2,699,165

Cash at bank and in hand

72,434

481,288

3,544,473

3,558,529

CREDITORS

Amounts falling due within one year

14

(4,990,497

)

(3,810,474

)

NET CURRENT LIABILITIES

(1,446,024

)

(251,945

)

TOTAL ASSETS LESS CURRENT LIABILITIES

12,548,654

9,977,085

CREDITORS

Amounts falling due after more than one year

15

(2,754,050

)

(1,306,661

)

PROVISIONS FOR LIABILITIES

19

(1,379,175

)

(870,013

)

NET ASSETS

8,415,429

7,800,411

CAPITAL AND RESERVES

Called up share capital

20

1,500

1,500

Capital redemption reserve

21

250

250

Retained earnings

21

8,413,679

7,798,661

SHAREHOLDERS' FUNDS

8,415,429

7,800,411

The financial statements were approved by the Board of Directors and authorised for issue on 17 June 2022 and were signed on its behalf by:

Mr D Smith - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 March 2020

1,500

6,190,660

250

6,192,410

Changes in equity

Total comprehensive income

-

1,608,001

-

1,608,001

Balance at 28 February 2021

1,500

7,798,661

250

7,800,411

Changes in equity

Dividends

-

(750,000

)

-

(750,000

)

Total comprehensive income

-

1,365,018

-

1,365,018

Balance at 28 February 2022

1,500

8,413,679

250

8,415,429

Cash flows from operating activities

Cash generated from operations

1

4,675,027

4,071,065

Interest element of hire purchase payments paid

(130,239

)

(89,898

)

Tax paid

(300,877

)

(139,827

)

Net cash from operating activities

4,243,911

3,841,340

Cash flows from investing activities

Purchase of tangible fixed assets

(6,757,394

)

(2,176,249

)

Sale of tangible fixed assets

718,533

740,851

Net cash from investing activities

(6,038,861

)

(1,435,398

)

Cash flows from financing activities

Capital repayments in year

1,439,714

(250,147

)

Movement on intercompany loan

294,691

(698,261

)

Equity dividends paid

(750,000

)

-

Net cash from financing activities

984,405

(948,408

)

(Decrease)/increase in cash and cash equivalents

(810,545

)

1,457,534

Cash and cash equivalents at beginning of year

2

481,288

(976,246

)

Cash and cash equivalents at end of year

2

(329,257

)

481,288

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

2022

2021

£

£

Profit before taxation

2,092,655

1,992,531

Depreciation charges

2,327,561

1,952,623

Profit on disposal of fixed assets

(54,348

)

(147,299

)

Finance costs

130,239

89,898

4,496,107

3,887,753

Increase in inventories

(183,370

)

(21,561

)

(Increase)/decrease in trade and other debtors

(481,487

)

56,697

Increase in trade and other creditors

843,777

148,176

Cash generated from operations

4,675,027

4,071,065

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 28 February 2022

28/2/22

1/3/21

£

£

Cash and cash equivalents

72,434

481,288

Bank overdrafts

(401,691

)

-

(329,257

)

481,288

Year ended 28 February 2021

28/2/21

1/3/20

£

£

Cash and cash equivalents

481,288

36,777

Bank overdrafts

-

(1,013,023

)

481,288

(976,246

)

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1/3/21

Cash flow

At 28/2/22

£

£

£

Net cash

Cash at bank and in hand

481,288

(408,854

)

72,434

Bank overdrafts

-

(401,691

)

(401,691

)

481,288

(810,545

)

(329,257

)

Debt

Finance leases

(3,041,623

)

(1,439,714

)

(4,481,337

)

(3,041,623

)

(1,439,714

)

(4,481,337

)

Total

(2,560,335

)

(2,250,259

)

(4,810,594

)

1.	STATUTORY INFORMATION

Smiths Equipment Hire 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 Company 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.

Going Concern

The accounts are prepared on the going concern basis, the company had net assets at the year end of £8,415,429. It also had net current liabilities of £1,446,024, however, the fixed assets are readily saleable and the company had available invoice finance capacity.

The directors going concern assessment covers 12 months and confirms that the company will continue in existence for the foreseeable future. The assessment covers the impact of Covid-19 and other related economic impacts.The company has clearly demonstrated profitability over the past 12 months during times of extreme uncertainty and there are no significant concerns at this time.

Turnover

Where turnover represents the value of hire services provided under contracts it is recognised to the extent that there is a right to consideration and is recorded at the value of the consideration due. Where a contract has only been partially completed at the balance sheet date turnover represents the value of the service provided to date based on a proportion of the total expected consideration at completion. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year.

Where turnover represents sales of goods it is shown net of VAT and trade discounts. Turnover is recognised when the goods are physically delivered to the customer.

Property, plant and equipment

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

Short leasehold

-

Over the remaining period of the lease

Plant and machinery

-

Between 5 and 12 years

Fixtures and fittings

-

33% on cost

Motor vehicles

-

20% on cost

Computer equipment

-

33% on cost

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.

Government grants

During the year the group received government support in the form of Statutory Sick Pay Rebates and the Kickstart employment scheme. These have been recognised under the accruals model and included within the Statement of Comprehensive Income.

Stocks

Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Cost includes all costs incurred in bringing each product to its present location and condition on a first in, first out basis.

Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal.

Financial instruments

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity date of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Short-term debtors and creditors

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in other operating expenses.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, 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.

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 estimated 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 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 profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

3.	CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company's accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Company's accounting policies and key source of estimation uncertainty

Estimates

Fixed assets

Accounting for fixed assets involves the use of estimates for (a) the useful live of the assets over which they are to be depreciated and (b) the existence and any amount of impairment.

Fixed assets are depreciated on a straight line basis over the estimated useful lives. When the company estimates useful lives various factors are considered including expected technology obsolescence and the expected usage of the asset. The company regularly reviews these assets useful lives and future economic utilization and the physical condition of the assets concerned.

The carrying value of the assets is assessed periodically to determine whether there are any indications of any impairment of the value beyond the depreciation charge. If this is the case, an impairment charge is taken against the carrying value of the assets and charged to profit and loss account. The impairment of fixed assets require management judgement in determining the amounts to be impaired, in particular judgement is used when assessing the future cash flows.

Provisions

Provisions for onerous hire contracts are recognised when the group believes that there is no longer a possibility of economic benefits being received under the contract. The group monitors the risk profile of the debtors and provides a bad debt provision based on the directors past experiences and assessment of the current economic climate.

Judgements

Determining if an arrangement constitutes a lease

The directors have concluded that none of the groups hire contracts with customers are dependent on the use of a specific asset or group of assets as the group can swap hire stock as required to provide tool and equipment hire services. These arrangements are therefore not leases.

4.

REVENUE

The revenue and profit before taxation are attributable to the one principal activity of the company.

An analysis of revenue by class of business is given below:

2022

2021

£

£

Equipment hire

10,810,656

8,873,308

Re-sales

1,294,713

1,127,837

Transport

1,016,876

724,357

Cross hire

2,210,246

1,408,321

Hire protect

314,337

201,930

Other sales

235,992

248,736

Training

224,918

128,065

16,107,738

12,712,554

5.	OTHER OPERATING INCOME

Other operating income contains the following government support grants: Coronavirus Job Retention Scheme £nil (2021 - £211,378), Statutory Sick Pay rebate £3,734 (2021 - £1,612), Retail, Hospitality and Leisure Grants £nil (2021 - £215,000), Kickstart Employment Scheme £5,933 (2020 - £nil). There are no unfulfilled conditions or contingencies attached to these grants, they have been recognised on a straight line basis in accordance with the accounting policies.

6.	EMPLOYEES AND DIRECTORS

2022

2021

£

£

Wages and salaries

4,596,789

3,787,802

Social security costs

441,275

363,876

Other pension costs

81,600

80,030

5,119,664

4,231,708

The average number of employees during the year was as follows:

2022

2021

Staff

166

147

2022

2021

£

£

Directors' remuneration

-

-

7.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

2022

2021

£

£

Other operating leases

668,688

523,032

Depreciation - owned assets

1,436,480

1,228,483

Depreciation - assets on hire purchase contracts

891,081

724,139

Profit on disposal of fixed assets

(54,348

)

(147,299

)

Auditors' remuneration

10,000

9,500

Income from operating leases

(10,810,656

)

(8,873,308

)

Other accountancy and tax services provided by the auditor

6,600

6,100

8.

INTEREST PAYABLE AND SIMILAR EXPENSES

2022

2021

£

£

Hire purchase

130,239

89,898