H W Martin Holdings Limited - Limited company accounts 20.1

REGISTERED NUMBER: 02941889 (England and Wales)

FOR

Page

Company Information  

1

Group Strategic Report  

2

Report of the Directors  

7

Independent Auditor's Report  

10

Consolidated Income Statement  

14

Consolidated Other Comprehensive Income  

15

Consolidated Statement of Financial Position  

16

Company Statement of Financial Position  

17

Consolidated Statement of Changes in Equity  

18

Company Statement of Changes in Equity  

19

Consolidated Statement of Cash Flows  

20

Notes to the Consolidated Statement of Cash Flows

21

Notes to the Consolidated Financial Statements

22

DIRECTORS:

H W Martin

K Martin

N C Faulconbridge

L A Morley

REGISTERED OFFICE:

Fordbridge Lane

Blackwell

Alfreton

Derbyshire

DE55 5JY

REGISTERED NUMBER:

02941889 (England and Wales)

INDEPENDENT AUDITOR:

BDO LLP, statutory auditor

Two Snowhill

Birmingham

B4 6GA

The Directors present their Strategic report for the H W Martin Group of Companies ("the Group") for the year-ended 31 July 2022.

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW

The principal activity of H W Martin Holdings Limited ("the Company")  during the year under review was that of a holding company and provision of management services to its subsidiaries, which together encompass the Group. The principal activities of the Group during the year under review were those of:

-

the design, installation and maintenance of traffic management systems on motorways and high speed dual carriageways;

-

the design, installation, service and hire of traffic control systems;

-

waste recycling, management, collection and treatment to local authorities and the recycling industry;

-

the collection, disposal and management of commercial waste and recyclable materials;

-

commercial fencing and vegetation management and control contractors to the rail, civil engineering and highways industries;

-

plant, vehicle and machinery provision, maintenance and refurbishment;

-

the manufacture of steel galvanised palisade, welded mesh and woven mesh security fencing and gates;

-

the design and installation of permanent and temporary vehicle restraint systems and acoustic environmental barriers;

-

the design, manufacture and servicing of trailers and truck bodies for abnormal and specialist loads;

-

the design, manufacture and servicing of specialist vehicles and equipment for the traffic management industry;

-

the supply of advanced variable messaging systems for the highways industry; and

-

the hire of specialist vehicles and trailers to the traffic management and wider construction industry.

The Group's profit for the financial year is £23,280,342 (2021: £20,346,852 profit).

The Group's key financial and performance indicators for the year are:

1.

Record turnover achieved of over £224 million, representing an increase of 12% (2021: £200 million);

2.

Profit before tax increased by 17% to £29.3 million (2021: £25.0 million);

3.

Profit before tax margin increased by 0.5 percentage points to 13.1% from 12.6%; and

4.

Total equity increased by 15% to £124.5 million (2021: £105.5 million).

The Company's non-financial key performance indicators for the year are:

-

Employee accident frequency rate (AFR) per 100,000 hours worked is 0.09 (2021: 0.15).

The Group has delivered excellent financial results; significantly increasing sales whilst further improving net profit margin.

The Group maintains an exceptionally strong financial position with significant cash reserves and very low gearing to encourage further investment and expansion of operations and infrastructure.

The commercial fencing, vegetation management and ecology services activities have continued to enjoy high levels of growth whilst improving net margins. Contracts for works on HS2 remains an important factor and transition from the Enabling Works to the Permanent Works phase has been successfully implemented.

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW - continued

Lochrin Bain once again delivered good results and is well placed with an extensive product range of palisade, welded mesh, and woven mesh fencing systems in all security rated ranges SR1, SR2 and SR3 to supply an expanding portfolio of clients and industries.

High industry demand has provided H W Martin Safety Fencing Limited with the platform for significant growth in the year, achieved whilst maintaining profit before tax margins over 10% (2021: 12%). A purpose-built operating base, stock yard, training, and welfare facility for the vehicle restraint system activity, close to M1 Junction 28, will be completed in 2023 and will allow for further growth and operational efficiencies.

H W Martin (Traffic Management) Limited has continued its exponential growth with sales exceeding £100 million (2021: £88 million) to meet the demands of its client base for an industry leading service. Amber Langis, which has increasingly provided services to H W Martin (Traffic Management), under a joint management structure, will be a division of the parent company in the next financial year.

The Group's waste and recycling activity has achieved a 7% growth in turnover whilst also improving profit before tax by 15%.  H W Martin Waste Limited has successfully retained its existing contracts including entering a new seven-year contract for the management of the household waste recycling centres of Derby City Council and Derbyshire County Council. Investment at the Company's material recycling facilities (MRF's) will continue as advances in waste processing machinery, treatment and energy extraction provide new opportunities.

The "King Group" (King Trailers Limited, King Transport Equipment Limited, King Highway Products Limited and Safety Vehicle Hire & Lease Limited) has significantly increased profit before tax by 23% (2021: 23%) providing an attractive financial return and access to new and innovative products which will benefit the wider Group. A focus on larger 'blue chip' clients has provided rewards  most notably a seven-year contract with Kier to provide a large fleet of traffic management vehicles.

The recent acquisition of Highway Support Services Limited and subsidiaries, funded from Group reserves, will extend the Group skill base, particularly in highway design and project management, demonstrating main board commitment to further investment and expansion.

Overall Group continuity of the current level of business activity will be provided by existing medium to long term contracts with local authorities, National Highways, HS2, Network Rail and their agents. Opportunities to secure further contracts are also expected from the current Client base.

Group profits continue to be reinvested in the business. Significant cash reserves are purposefully maintained to allow an ongoing program of vehicle fleet and equipment renewals, operational property purchases and development, acquisition of organisations which will bring benefits to existing Group companies and access to new markets, and to allow for market fluctuations on existing activities.

The Group continues to look to ways to improve its environmental performance and reduce the environmental impact of its activities and remains committed to a management system conforming to the 14001 Environmental Standard.

PRINCIPAL RISKS AND UNCERTAINTIES

The identification, assessment and management of opportunities and associated risks are an integral element of the business of the Group. Principal risks are:

Legislation and regulation

The impact of new legislation and regulation on operations may potentially increase costs. This risk is considered as a part of the tender approval process. Many contracts include provisions which allow the Group to pass increased costs so arising to the Client.

Competitive risk

All major contracts are subject to periodic competitive tender and therefore the renewal of these contracts is not guaranteed. The Group continues to maintain a very competitive cost base to give the best possible commercial advantage and actively targets long-term contracts.

Recyclable material

market prices

The Group's waste and recycling activities are subject to fluctuating returns as prices of recyclable material vary due to worldwide demand. This risk is considered during the tender process and mitigated by a focus on securing contracts which deliver service rather than material lead returns, and by actively pursuing market price risk share with out Clients.

Health and safety

The Group acknowledges that its employees work within a hazardous environment and training is given to reflect and mitigate this risk. Policies and procedures are continually monitored and reviewed. The Group has achieved the 45001 Safety Management System standard and maintains its commitment to the Contractors Health and Safety Scheme (CHAS).

Financial risk

The main risk arising from the Group's financial instruments is liquidity risk. This risk is managed by maintaining a high cash reserve providing sufficient liquidity to finance the Group's operations and to meet unanticipated costs.

SECTION 172(1) STATEMENT

The Directors are required to explain how they undertake their duties in respect of requirements under Section 172(1) ("S172(1)") of the 2006 Companies Act to promote the success of the Group for the benefit of the Shareholders and other key stakeholders. This S172(1) statement explains how the Group's Directors ("the Board") have considered the interest of all key stakeholders.

The Directors of the Group act in the way they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:

1. the likely consequences of any decision in the long term;

2. the interests of the Group's employees;

3. the need to foster the Group's business relationships with suppliers and customers;

4. the impact of the Group's operations on the community and environment;

5. maintaining the Group's reputation for high standards of business conduct; and

6. the need to act fairly between members of the Group.

The Board considers its employees, customers, suppliers and shareholders to be its major stakeholders. The directors of the Group and the operating companies have a responsibility to ensure good relationships are maintained with key stakeholders, as they are recognised as being vital for the long-term success of the Group. The Board has recognised that there are various factors that could affect the relationships with key stakeholders. These factors, and how they are managed, have been discussed in the "Principal risks and uncertainties" section of the Strategic report. Key performance indicators which help the Board to understand the strength of the Group's relationships with key stakeholders have been presented and discussed further in the "Principal activities and business review" section of the Strategic report.

SECTION 172(1) STATEMENT - continued

When taking decisions for the long-term future of the Group, the Board informally takes into consideration the interests of all key stakeholders in its deliberations. Significant events and decisions taken during the year with respect to investment and growth of the Group have been discussed further in the "Principal activities and business review" section of the Strategic report.

The Board considers that appropriate remuneration, benefits and employment procedures are in place which fairly reward its employees in relation to the local communities in which they operate and identify opportunities for employee development where practical. Action taken during the year with respect to engagement with employees has been discussed further in the "Engagement with Employees" section of the Strategic report.

The Board endeavours to maintain good long-term supplier relationships by contracting on standard business terms and prompt payment within agreed terms. There are long-standing relationships with some key suppliers to ensure the quality and continuity of the supply chain. The Board receive regular updates on both existing and new customer relationships to ensure any decision making takes into account the commercial and service requirements of the customer base. Action taken during the year with respect to engagement with suppliers and customers has been discussed further in the "Principal activities and business review" section of the Strategic report.

The Board recognises that the Group has to maintain the highest standards of integrity in the conduct of each of the Group's operations throughout the country. Consequently, the Board aims to ensure all of its operations minimise harm and contribute as far as practical to the local communities in which it operates. The Board recognises the importance of maintaining high standards of business conduct and operates according to a full suite of policies. These include Health & Safety, protecting the environment, looking after our people and maintaining the high quality of our service. Action taken during the year with respect to carbon efficiency has been discussed further in the "Streamlined Energy and Carbon Reporting (SECR)" section of the Report of the Directors. Health & Safety developments have also been discussed in the "Principal risks and uncertainties" section of the Strategic report.

The Board has taken the following key decisions during the year:

-

The purchase of a regional depot in Witham, Essex and its development into a bespoke operational centre serving the East of England, demonstrating a long-term commitment to employees and clients in this region;

-

The acquisition of Highway Support Services Limited and subsidiaries post year-end to extend the Group skills base in highway design and project management;

-

Further significant and ongoing capital investment in the material recycling facilities ("MRF's"), operated by H W Martin Waste Limited, to increase input capacity, improve product quality and generate economic efficiencies;

-

The purchase of over five acres of land to provide a bespoke stock yard, operating base, training, and welfare facilities close to junction 28 of the M1 motorway which will be developed over the coming months. This will allow for continued expansion and continuity of contracts;

-

The roll-out across the group of an electronic purchase invoice authorisation system, improving the robustness of internal controls in this area and streamlining the process for efficiency;

-

The refocus of a senior director to the overall strategic development of the Group; and

-

The transfer of all rail-related operations to King Transport Equipment Limited to improve management reporting in this area.

ENGAGEMENT WITH EMPLOYEES

A policy of equal opportunity employment is followed at all times by the Group. During the year, the policy of providing employees with information about the Group has been continued through internal media methods in which employees have also been encouraged to present their suggestions and views on the Group's performance. Regular meetings are held between local management and employees to allow a free flow of information and ideas.

The Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by a handicapped or disabled person. Where existing employees become disabled, it is the Group's policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training and career development and promotion to disabled employees wherever appropriate.

ON BEHALF OF THE BOARD:

N C Faulconbridge - Director

13 January 2023

The Directors present their report with the financial statements of the Group for the year-ended 31 July 2022.

DIVIDENDS

An interim dividend of £40.00 per share on the Ordinary £1 shares, totalling £1,000,000, was paid on 26 May 2022.

The directors recommend a final dividend of £220.00 per share on the Ordinary £1 shares. However, the minority shareholder, who owns 40% of the Ordinary £1 shares, waived their right to a final dividend for the year-ended 31 July 2022. As such, the total final dividend recommended for the majority shareholder, who owns 60% of the Ordinary £1 shares, is £3,300,000.

The total distribution of dividends for the year-ended 31 July 2022 will be £4,300,000.

FUTURE DEVELOPMENTS

The Group is stable and will continue to invest in its existing operations going forwards so as to maximise revenues, profits and cash flows.

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the strategic report and in the notes to the financial statements.

DIRECTORS

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

H W Martin

K Martin

N C Faulconbridge

Other changes in directors holding office are as follows:

L A Morley was appointed as a director after 31 July 2022 but prior to the date of this report.

BREXIT RISK

The Directors are continuing to monitor the potential impact on its customers and suppliers, market access and possible effects on foreign currency exchange rates.

GOING CONCERN

The Group funds both day-to-day operations and longer-term strategic development from its liquid resources, including working capital generated from operations. The Directors have considered the level of the liquid resources and the expected future profitability of both the Group and the wider Group, and are satisfied that, under anticipated trading conditions, there are sufficient available resources for the Group to meet its trading requirements through a period of at least 12 months from the date of signing these financial statements to 31 January 2024. For this reason, they have concluded that it is appropriate to use the going concern basis on presenting these financial statements.

COVID-19

Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. The Directors have considered the reasonably plausible impact of the COVID-19 outbreak on the Group's trading and cash flows. The Directors consider the potential impact of COVID-19 to be minimal on the grounds of the Group's performance since the outbreak began and post year-end, the type of service they provide as a Group and the continued liquidity support of the wider Group.

STREAMLINED ENERGY AND CARBON REPORTING (SECR)

This SECR report sets out cumulative energy consumption information for all entities included in the consolidated financial statements for the years ending 31 July 2022 and 31 July 2021, in accordance with The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

The Group's energy consumption results from the carrying on of all principal activities of the Group and included direct emissions (fuel use from transport, natural gas), indirect emissions (electricity purchased and used for operations) and other indirect emissions (heating oil), all of which was purchased directly by the Group within the UK.

The total energy use was collated in kilowatt hours and converted to kilograms of CO2 using government conversion factors. The Group has adopted kilograms of CO2 per £1 of turnover as its key energy intensity ratio. The Group consumed the following:

2022

2021

Energy type

Kilowatt hours

(millions)

CO2

emissions

(kilograms)

Kilowatt hours

(millions)

CO2 emissions

(kilograms)

Scope 1

Gas

1.86

339,653

1.87

343,101

Burning oil

1.16

286,222

1.39

342,883

Transport fuel

67.42

16,339,482

63.63

15,221,836

Scope 2

Electricity

5.32

1,029,667

5.84

1,240,192

75.76

17,995,024

72.73

17,148,012

Per £1 of turnover

0.081

0.086

Action to reduce energy consumption across the group during the year to 31 July 2022 included increased recycling of tyres from our vehicles, and increased use of more energy-efficient LED lighting on newer vehicles.

Energy reduction initiatives for the year commencing 1 August 2022 will continue to target transport and use of vehicles, which accounts for over 90% of the Group's consumption. Hybrid and fully electric vehicles will be purchased to replace existing company owned vehicles where practical. New intelligent, gyroscopic tracking systems will continue to be fitted to all vehicles, allowing poor driver behaviour associated with increased consumption (such as harsh acceleration, harsh braking, excessive idling, etc) to be identified and corrected.

DIRECTORS' RESPONSIBILITIES STATEMENT

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

Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.  In preparing these financial statements, the directors are required to:

-

select suitable accounting policies and then apply them consistently;

-

make judgements and accounting estimates that are reasonable and prudent;

-

state whether applicable 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 and the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR

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

AUDITOR

The auditor, BDO LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

N C Faulconbridge - Director

13 January 2023

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 Group or 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 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 included in the Group Strategic Report and Report of the Directors, other than the financial statements and our auditor's report 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.

Other information (continued)

We have nothing to report in this regard.

Auditor's responsibilities for the audit of the financial statements

Auditor's responsibilities for the audit of the financial statements (continued)

Extent to which the audit was 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, 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:

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:

-

We made enquiries of management and the directors, including obtaining and reviewing supporting documentation, concerning the Group's policies and procedures relating to:

-

identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

-

detecting and responding to the risks of fraud and whether they had knowledge of any actual, suspected or alleged fraud; and

-

the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.

We corroborated our enquires through the review of board minutes.

-

We obtained an understanding of the legal and regulatory frameworks applicable to the Group based on our understanding of the business, sector experience and discussions with management. The most significant considerations for the Group are compliance with UK Accounting Standards, the Companies Act 2006, corporate taxes, VAT legislation, employment taxes and health and safety legislation.

-

We discussed amongst the engagement team to assess how and where fraud might occur in the financial statements, any potential indicators of fraud and non-compliance with laws and regulation.

Based on our understanding of the environment and assessment of the incentive and opportunity for fraud and non-compliance with laws and regulations gained from the above work we designed and executed the following procedures:

-

We reviewed correspondence with the relevant authorities to identify any irregularities or instances of non-compliance with laws and regulations.

-

We tested the appropriateness of accounting journals and other adjustments made in the preparation of the financial statements. We obtained a complete population of all journals in the year and test any which we considered were indicative of management override.

-

We reviewed the Company's and Group's accounting policies for non-compliance with relevant standards. Our work also included considering significant accounting estimates for evidence of misstatement or possible bias and testing any significant transactions that appeared to be outside the normal course of business.  

-

We also tested manual journals posted to revenue that were either material or fell outside of our expectations based on our understanding of the Group and Company, agreeing them to supporting documentation to check that they were appropriate, correctly recorded and supported by appropriate evidence.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Auditor's responsibilities for the audit of the financial statements (continued)

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 Parent 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 Parent 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 Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Gareth Singleton (Senior Statutory Auditor)

for and on behalf of BDO LLP, statutory auditor

Two Snowhill

Birmingham

B4 6GA

16 January 2023

BDO LLP is a limited liability partnership registered in England and Wales (with

registered number OC305127).

TURNOVER

4

223,726,015

199,622,983

Cost of sales

(161,684,594

)

(145,094,776

)

GROSS PROFIT

62,041,421

54,528,207

Administrative expenses

(32,922,609

)

(29,545,127

)

29,118,812

24,983,080

Other operating income

73,036

-

OPERATING PROFIT

29,191,848

24,983,080

Interest receivable and similar income

135,556

21,902

Interest payable and similar expenses

7

-

(68

)

PROFIT BEFORE TAXATION

8

29,327,404

25,004,914

Tax on profit

10

(6,047,062

)

(4,658,062

)

PROFIT FOR THE FINANCIAL YEAR

23,280,342

20,346,852

Profit attributable to:

Owners of the parent

23,138,582

20,229,966

Non-controlling interests

141,760

116,886

23,280,342

20,346,852