MACCAFERRI_LTD - Accounts

The directors present the strategic report for the year ended 31 December 2021.

We were confident that 2021 would result in improved results compared to 2020 which had included the early phases of the Coronavirus pandemic. However, whilst confident, there was still uncertainty how the pandemic would impact the marketplace for Maccaferri Ltd and its subsidiary Linear Composites as various restrictions were still in force and working from home guidance where possible still in place.

Our personnel were still working from home for most of the year, with a return to the offices in mid November 2021 for office based personnel. As we had been working from home since March 2020, there were no measured adverse impacts to the business productivity or with our relationships with customers and suppliers.

Accordingly, we had set our budget for 2021 higher than the 2020 result and also ahead of our 2019 actual results pre-pandemic. Unlike during the first lockdown in Spring 2020, we were more confident that any future waves would not close construction sites and that our factory would still be able to operate as it had done without interruption in 2020.

The 2021 budget for Maccaferri Ltd was set at Gross Sales of £15.1m with an EBIT of £1.0m before Management Charges to our parent company. We re-forecast on a quarterly basis and each forecast resulted in a better performance for both sales and profit than the previous quarter.

2021 started very strongly with both sales and profits being ahead of budget. We believed that an element of this was due to post-lockdown pent up demand with businesses trying to recover on works previously delayed. We believed that it was likely that trading later in the year would slow once the pent up demand had been cleared, however, this did not occur. We finished the year strongly with a record set of results; Gross Sales of £18.6m with an EBIT of £2.6m before group charges.

The results achieved in the UK were echoed by other group companies around the world. Our key challenges faced during 2021 were ensuring we had sufficient and appropriate stocks to supply our customers, not only due to freight issues but mainly for our factories to keep up with the demand. We had already obtained BBA certification for our mesh products from the group’s manufacturing facility in Brazil which enabled us to source from two locations thereby ensuring smoother supplies of our products required throughout the year. Regular stock meetings were held and an updated stock management tool developed to help highlight any supply issues and prioritization of supply from the factories.

Cash Management is always a key focus for us and this was the case throughout 2021; At 31st December 2021 the combined UK cash position was slightly short of £3.2m which compared favorably to £2.4m at 31st December 2020. The loan value our subsidiary (Linear Composites) has with HSBC also reduced from £2.84m to £1.97m over the year. The resultant Net Financial position of the UK combined business is now in the best position it has been in recent memory. Ongoing inventory monitoring and continued debtor management were keys to achieving these results.

2022 has started positively for both Maccaferri Ltd and its subsidiary Linear Composites; both are ahead of budget after the first four months of trading. Maccaferri Ltd original 2022 budget was gross sales of £16.1m which is lower than the results of 2021, but still higher than the previous 5 years average results. This continued the upward trend of growth for both revenue and profitability; 2020 well below the growth line and 2021 well above the growth line. Our latest forecasts also predict that we will be ahead of budget by the end of the year and our construction order book at over £6.5m is also at the highest level it has been.

The conflict in Ukraine is resulting in increased costs and further uncertainty, as is the case for all businesses. So far we have been able to pass any increased costs onto the market and we continue to monitor the situation. We have not been affected by any supply issues to date. Maccaferri Ltd did have a supplier for a limited selection of our product lines who were based in Belarus which we have since moved to another supplier with the assistance of our HQ Geosynthetics department.

The parent company position has also been progressing according to plan. As stated in our last business review, a legally binding agreement in the Italian Courts was reached in December 2020 from a group calling themselves “The Adhoc Group”, led by Carlyle Group, to acquire 100% of the shares of Officine Maccaferri S.p.A. This was agreed and the shares were transferred to a trust (“Trust Maccaferri”) whilst the group concludes the process to have the Concordato status removed (Italian equivalent to the UK’s creditor protection). A meeting with the creditors to allow them to vote on the plan was delayed from Feb 22 to April 22. On 11th May 2022, the Court of Bologna recorded the outcome of the vote on the composition with creditors; 98.5% of the total creditors admitted to vote, voted in favour of the Concordato proposal. The next step is the planned meeting on the 20th September 2022 when the approval judgement (“omologazione”) hearing will take place. As previously mentioned, the Adhoc group are a majority creditor with a 54.7% share and with over 98% of creditors approving the plan, we remain confident that the remainder of the process should be a formality.

The company's primary market is the construction industry. The company is reliant on the performance of this industry and, therefore, any change in its level of activity is likely to affect the company's results.

In addition to selling products made by the Maccaferri Group, the company also has arrangements with other manufacturers to sell their products in the UK and Ireland. With some suppliers the company has a sole supplier arrangement so there is a risk that the manufacturer changes their strategy. The directors aim to manage this risk by maintaining strong relationships with all suppliers and demonstrating that we are an efficient entry point into the UK market.

Inflationary pressures on costs of labour could also become an issue as the general shortage of construction workers in the market drives up salaries. Without an interest rate rise to cool inflation, this will become an increasing risk.

The board of directors have discussed the potential risks to the business due to the pandemic and also the conflict in Ukraine. Ongoing, timely supply of products together with rising costs are the main risks to the business. We have various avenues of supply and have been able to pass costs increases onto the market thus far.

Key performance indicators are as follows:

2021 2020

Turnover (£) 18,590,411 12,498,045

Gross margin (%) 31.5 31.5

Operating margin (%) 8.9 (2.2)

Financial risk management objectives and policies

The company is exposed to a variety of financial risks which result from both its operating and investing activities. The board is responsible for coordinating the company's risk management and focuses on actively securing the company's short to medium term cash flows.

Market price fluctuation

The principal risk to the company is market price fluctuation. The directors aim to ensure that the company is operating efficiently and competitively in order to cope with any adverse price fluctuations and take full advantage of advantageous price movements. Trade debtors are carefully and closely managed to minimise the risk of default.

Interest rate risk

The company's principle financial instruments comprise bank loans, bank balances, trade debtors and trade creditors. The main purpose of these instruments is to fund the company's operations.

Currency risk

The bank balances comprise accounts in Sterling, Euros and US dollars. The company aims to maintain a small net balance at the bank across the currencies. In general the company has positive funds in Euros and US dollars and is exposed to movements in these currencies. The company makes significant purchases in Euros and sales in Euros with some Royalties and other trading invoices to group companies in USD leaving it exposed to movements in these currencies.

This report was approved by the board and signed on its behalf.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2021.

The principal activity of the company continued to be that of the sale of Maccaferri products together with geosyntetic products, concrete blocks and timber crib used in civil engineering industry.

The results for the year are set out on page 10.

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

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

The financial statements have been prepared on the going concern basis which assumes that the company will continue in operational existence for the foreseeable future. The directors have reviewed the working capital requirements of the company for a period of at least 12 months from the anticipated date of signing the financial statements.

The Covid 19 pandemic has undoubtedly had far reaching consequences around the world. It led to significant levels of uncertainty to most businesses and individuals making 2020 a very difficult year to navigate. Whilst the pandemic continued in 2021 with the world fighting various strains of the virus, the vaccination programs have been a great success enabling the economy to continue.

The Construction industry saw a positive recovery in 2021 with activity levels surpassing those expected. Maccaferri Ltd ended 2021 with a record year with sales exceeding £18m with an EBIT of £1.6m.

As part of their going concern assessment, the directors have prepared budgets and cash flow forecasts including its wholly owned subsidiary Linear Composites Ltd as the activities of both companies are considered to be inter-related and loan covenants in respect of Linear Composites Ltd are based on the consolidated result of both businesses.

During 2021, the directors prepared a 3 year plan to cover up to 31st December 2023. This plan included a plan to grow the business in terms of sales and profitability. 2021 actual results surpassed the plan for 2021. The directors have re assessed the plan to 31st December 2024 whilst we were initially expecting 2022 to fall back a little we now estimate the plan for 2022 would produce sales of £18.0m (this includes a couple of new projects) with an EBIT of £1.15m. The 2022 revised plan exceeds the plan prepared 12 months ago.

2023 plan predicts revenue of £17.7m with £806k EBIT. This also exceeds the plan prepared 12 months ago. We have a strong order book of around £6.0m for our construction services as we end the early stages of 2022 and some very good enquiries for our trading sector. The forecasts prepared also demonstrated that the loan covenants should all be met.

A positive 2021 has helped to restore a healthy level of cash into the business. The business reduced its net debt further at the end of 2021 having cash combined with its subsidiary of £3.2m with the loan owed by its subsidiary now down to a balance of £2m. All bank loan payments were met during 2021 and there is no reason why they will not throughout 2022 and to the end of the loan term in February 2024.

The latest forecasts indicate that for the foreseeable future the business is able to meet all of its financial obligations.

The business has seen further Material and Freight costs increases and lead time increases during 2022 to date due the conflict in Ukraine, however, these costs increases have largely been passed onto the customers whilst the business has also managed its stock in accordance with the lead times in order not to let customers down.

With the parent company position now being close to finalisation, as discussed within the business review and below, this also provides the platform for the business to continue with its growth plans over the next few years, investing in both our current workforce and new hires in the future to meet those goals.

The directors have considered the potential impact of the legal claim noted in note 21 of the accounts and they are of the opinion that the claim does not present a significant threat to the going concern status of the company.

On this basis, the directors are of the opinion that it is appropriate to adopt the going concern basis in the preparation of the financial statements.

Our parent company, Officine Maccaferri S.p.A has now changed its ownership and the process to bring the company out of Concordato, Italian equivalent to creditor protection, is progressing.

As discussed in the business review an agreement was reached on 2nd December 2020 from a group of investors calling themselves “The Adhoc Group”, led by Carlyle Group, to acquire 100% of the shares of Officine Maccaferri S.p.A. On 17th May 2021 100% of Officine Maccaferri S.p.A, parent company of Maccaferri Ltd, shares were transferred from the company SECI Societa Esercizi Commerciali Industriali S.p.A to the company Stellex Capital Holdings Luxembourg s.a.r.l, one of the 3 businesses included within The Adhoc Group. On the same date these shares were transferred from Stellex Capital Holdings Luxembourg s.a.r.l to Roberto Cassani, in his capacity of Trustee of the “Trust Maccaferri”, therefore the ultimate beneficial owner of Officine Maccaferri S.p.A and therefore Maccaferri Ltd, is currently Roberto Cassani until the concordato process is completed. As part of the process and agreed with the courts the parent company were able to inject further funds totalling €20m into the group in the Summer 2021 in the form of two bank loans with equal terms.

Following the completion of the Concordato process in 2022 the new owners will inject an additional €60m in the parent company.

The creditors met in April 2022 to vote on the proposal which found in favour of the process.

Shaw Gibbs (Audit) Limited were appointed as auditor to the 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 directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

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

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

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

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

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

We have audited the financial statements of Maccaferri Ltd (the 'company') for the year ended 31 December 2021 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity 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 company's affairs as at 31 December 2021 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 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 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

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 directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

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

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

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

•     certain disclosures of 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 directors' responsibilities statement, 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 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 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.

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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

1. At the planning stage of the audit we gain an understanding of the laws and regulations which apply to the company and how the management seek to comply with those laws regulations. This helps us to plan appropriate risk assessments.

    

2. During the audit we focus on relevant risk areas and review the compliance with the laws and regulations by making relevant enquiries and undertaking corroboration, for example by reviewing Board Minutes, health and safety reports from inspections undertaken by external parties, the accident books and other documentation.

    

3. We assess the risk of material misstatement in the financial statements including as a result of fraud and undertake procedures including:

   1. Reviewing the controls set in place by management

   2. Making enquiries of management as to whether they consider fraud or other irregularities may have taken place, or where such opportunity might exist

   3. Challenging management assumptions with regard to accounting estimates

   4. Identifying and testing journal entries, particularly those which appear to be unusual by size or nature

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 regulations. 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 is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

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.

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.

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

Maccaferri Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 9 Blenheim Office Park, Long Hanborough, Oxfordshire, OX29 8LN.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company is a parent company that is also a subsidiary included in the consolidated financial statements of its immediate parent undertaking established under non-UK law and is therefore exempt from the requirement to prepared consolidated financial statements under section 401 of the Companies Act 2006.

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

• the requirement of Section 7 Statement of Cash Flows;

• the requirements of Section 3 Financial Statement Presentation paragraphs 3.17(d);

• the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 141.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

• the requirements of Section 12 other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;

• the requirement of Section 33 Related Party Disclosures paragraph 33.7.

This information is included in the consolidated financial statements of Officine Maccaferri S.p.A as at 31 December 2021 and these financial statements may be obtained from Via John Fitzgerald Kennedy, 10, 40069 Zola Predosa BO, Bologna, Italy.

The financial statements have been prepared on the going concern basis which assumes that the company will continue in operational existence for the foreseeable future. The directors have reviewed the working capital requirements of the company for a period of at least 12 months from the anticipated date of signing the financial statements.true

The Covid 19 pandemic has undoubtedly had far reaching consequences around the world. It led to significant levels of uncertainty to most businesses and individuals making 2020 a very difficult year to navigate. Whilst the pandemic continued in 2021 with the world fighting various strains of the virus, the vaccination programs have been a great success enabling the economy to continue.

The Construction industry saw a positive recovery in 2021 with activity levels surpassing those expected. Maccaferri Ltd ended 2021 with a record year with sales exceeding £18m with an EBIT of £1.6m.

As part of their going concern assessment, the directors have prepared budgets and cash flow forecasts including its wholly owned subsidiary Linear Composites Ltd as the activities of both companies are considered to be inter-related and loan covenants in respect of Linear Composites Ltd are based on the consolidated result of both businesses.

During 2021, the directors prepared a 3 year plan to cover up to 31st December 2023. This plan included a plan to grow the business in terms of sales and profitability. 2021 actual results surpassed the plan for 2021. The directors have re assessed the plan to 31st December 2024 whilst we were initially expecting 2022 to fall back a little we now estimate the plan for 2022 would produce sales of £18.0m (this includes a couple of new projects) with an EBIT of £1.15m. The 2022 revised plan exceeds the plan prepared 12 months ago.

2023 plan predicts revenue of £17.7m with £806k EBIT. This also exceeds the plan prepared 12 months ago. We have a strong order book of around £6.0m for our construction services as we end the early stages of 2022 and some very good enquiries for our trading sector. The forecasts prepared also demonstrated that the loan covenants should all be met.

A positive 2021 has helped to restore a healthy level of cash into the business. The business reduced its net debt further at the end of 2021 having cash combined with its subsidiary of £3.2m with the loan owed by its subsidiary now down to a balance of £2m. All bank loan payments were met during 2021 and there is no reason why they will not throughout 2022 and to the end of the loan term in February 2024.

The latest forecasts indicate that for the foreseeable future the business is able to meet all of its financial obligations.

The business has seen further Material and Freight costs increases and lead time increases during 2022 to date due the conflict in Ukraine, however, these costs increases have largely been passed onto the customers whilst the business has also managed its stock in accordance with the lead times in order not to let customers down.

With the parent company position now being close to finalisation, as discussed within the business review and below, this also provides the platform for the business to continue with its growth plans over the next few years, investing in both our current workforce and new hires in the future to meet those goals.

The directors have considered the potential impact of the legal claim noted in note 21 of the accounts and they are of the opinion that the claim does not present a significant threat to the going concern status of the company.

On this basis, the directors are of the opinion that it is appropriate to adopt the going concern basis in the preparation of the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

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

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

Turnover from the sales of design services are recognised once the design has been completed. The design work is either performed by a third party supplier or in house. The fee is determined based on a combination of mark up added to the third party supplier invoice and/or time taken and based on the complexity of the design. Revenue is recognised in the accounts at the point of invoice being raise to the customer once the design has been completed.

Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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

Investment in subsidiaries are measured at cost less accumulated impairment.

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

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a average costs basis.

Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

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

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

The “percentage of completion method” is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets depending on their nature, and provided it is probable they will be recovered.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

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

Basic financial assets, which include 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.

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

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

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

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including 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.

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

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

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

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

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

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

Defined contribution pension plan

The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations.

The contributions are recognised as an expenses in the profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the company in independently administered funds.

Defined benefit pension plan

The company operates a defined benefit plan for certain employees. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependant upon several factors including but not limited to age, length of service and remuneration. A defined benefit plan is a pension plan that is not a defined contribution plan.

The liability recognised in the Statement of Financial Position in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the reporting date less the fair value of the plan assets at the reporting date (if any) out of which the obligations are to be settled.

The defined benefit obligation is calculated using the projected unit credit method. Annually the company engages independent actuaries to calculate the obligation. The present value is determine by discounting the estimated future payments using market yields on high quality corporate bongs that are denominated in sterling and that have terms approximating to the estimated period of the future payments ('discount rate').

The fair value of the plan assets is measured in accordance with FRS 102 fair value hierarchy and in accordance with the company's policy for similarly held assets. This includes the use of appropriate valuation techniques.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or creditors to other comprehensive income. These amounts together with the return on plan assets, less amounts included in net interest, are disclosed as 'Re-measurement of net defined benefit liability'.

The cost of the defined benefit plan, recognised in profit or loss as employee costs, except where included in the cost of an asset, comprises:

a) the increase in net pension benefit liability arising from employee service during the period; and

b) the cost of plan introductions, benefit charges, curtailments and settlements.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This costs is recognised in profit or loss as a 'finance expense'.

The scheme is now closed to new members and the assets of the scheme are held separately to those of the company.

The pension scheme surplus is recognised on the statement of financial position, and only when that could be recovered through a company contribution holiday.

The deferred tax relating to defined benefit liability is included within other deferred tax assets or liabilities and not offset against the defined benefit liability.

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 leases asset are consumed.

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

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

Government grants received include income received through the Coronavirus Job Retention Scheme.

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 company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

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

The company has a number of customer contracts that span two accounting periods.

Management applies judgement when assessing the percentage of completion for fixed price contracts and the subsequent net realisable value of contract work in progress, taking into account the most reliable evidence available at each reporting date. The future realisation of these amounts may be affected by future outcome of these contracts. Provisions are made for any losses which are foreseen.

In recognising provisions, the company evaluates the extent to which it is probable that is has incurred a legal or constructive obligation in respect to past events and the probability that there will be an outflow of benefits as a result. The judgements used to recognise provisions are based on currently known factors which may vary over time, resulting in the measurement of recorded amounts as compared to initial estimates.

Stocks are valued at the lower of cost and estimated selling price less costs to complete and sell. Costs comprise direct materials and are valued on an average cost basis.

Estimated selling price less costs to complete and sell, includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include the forecasted customer demand, the promotional, competitive and economic environment as well as the ageing of stock and the discontinuation of certain product lines by the key suppliers. These variables are monitored by the directors and a provision is in place to mitigate the relevant risks.

Having taken into consideration the historic and current level of bad debts, the directors consider it appropriate to have a general bad debt provision in place which is calculated based on the ageing of debts and disputes with customers. The relevant figure is then adjusted accordingly, if it is considered necessary, as a result of significant bad debts and/or due to underlying economic conditions which suggest a higher than normal risk of bad debts.

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

Their aggregate remuneration comprised:

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

The following entity was a 100% owned subsidiary undertaking:

Linear Composites Limited, registered in England and Wales with registered office 9 Blenheim Office Park, Long Hanborough, Witney, England, OX29 8LN.

Linear Composites Limited designs, develops and manufactures high performance reinforced plastic composites.

It was noted that a provision had been incorrectly allocated in the previous years between the other debtors and prepayments. As a result the other debtors have been restated to £205,122 (as previously stated £457,829) and the prepayments and accrued income to £958,400 (as previously stated £705,692).

Amounts owed to group undertakings includes a loan payable to Linear Composites Limited which is unsecured with no fixed terms of repayment and interest charged on the loan at 4.16%. During the financial year, interest of £94,322 (2020: £127,573) was paid to Linear Composites Limited.

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

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The company operates a defined benefit scheme. A full actuarial valuation was carried out on 1 April 2020 and updated to 31 December 2021 by Mr R J Sweet (Cartwright Group Ltd), Fellow of the Institute of Actuaries. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.

Assumed life expectations on retirement at age 65:

Amounts recognised in the profit and loss account

Amounts taken to other comprehensive income

The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:

Movements in the present value of defined benefit obligations

Movements in the fair value of plan assets

The actual return on plan assets was £35,000 (2020 - £42,000).

Fair value of plan assets at the reporting period end

Security and guarantees provided by Maccaferri Ltd to HSBC UK include a Composite Company Unlimited Multilateral Guarantee and general letter of pledge in respect of borrowings of its subsidiary Linear Composites Limited, which at the balance sheet date totalled £1.97m. In addition, Maccaferri Ltd has provided a Debenture including Fixed Charges over all present freehold and leasehold property; First Fixed Charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and First Floating Charge over all assets and undertakings both present and future.

In 2018, a legal claim with a total value of £2.4m was launched against the company and another party in relation to the procurement of 3rd party products to a construction site. The level of liability (if any) for the company and its co-defendant as well as the potential financial exposure for each party has not been established at this stage. The directors do not consider it appropriate to disclose additional information with respect to the ongoing claim as their view is that it will prejudice seriously the position of the entity in the ongoing dispute. The directors have considered the relevant risk in their going concern assessment and they are of the opinion that the claim does not present a significant threat to the going concern status of the company.  

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

Our parent company, Officine Maccaferri S.p.A has now changed its ownership and the process to bring the company out of Concordato, Italian equivalent to creditor protection, is progressing.

An agreement was reached on 2nd December 2020 from a group of investors calling themselves “The Adhoc Group”, led by Carlyle Group, to acquire 100% of the shares of Officine Maccaferri S.p.A. On 17th May 2021 100% of Officine Maccaferri S.p.A, parent company of Maccaferri Ltd, shares were transferred from the company SECI Societa Esercizi Commerciali Industriali S.p.A to the company Stellex Capital Holdings Luxembourg s.a.r.l, one of the 3 businesses included within The Adhoc Group. On the same date these shares were transferred from Stellex Capital Holdings Luxembourg s.a.r.l to Roberto Cassani, in his capacity of Trustee of the “Trust Maccaferri”, therefore the ultimate beneficial owner of Officine Maccaferri S.p.A and therefore Maccaferri Ltd, is currently Roberto Cassani until the concordato process is completed. As part of the process and agreed with the courts the parent company were able to inject further funds totalling €20m into the group in the Summer 2021 in the form of two bank loans with equal terms.

Following the completion of the Concordato process in 2022 the new owners will inject an additional €60m in the parent company.

The creditors met in April 2022 to vote on the proposal which found in favour of the process.

In addition to the above, on 20 June 2022 the company extended an existing operating lease for a further three years with a rent of £14,860 per annum.

As a wholly-owned subsidiary, the company is exempt from the requirements of Financial Reporting Standard 102 Section 33 to disclose transactions and outstanding balances with other wholly owned members of the group headed by Officine Maccaferri S.p.A.

The immediate parent company is Officine Maccaferri S.p.A a company incorporated in Bologna, Italy with a registered office of Via J.F. Kennedy 10, 40069 Zola Predosa, Bologna, Italy. Copies of the group financial statements can be obtained from Via J.F. Kennedy 10, 40069 Zola Predosa, Bologna, Italy.

Officine Maccaferri S.p.A has now changed its ownership and the process to bring the company out of Concordato, Italian equivalent to creditor protection, is progressing. Further details can be found in note 23, including the details of the ultimate controlling party.