More annual reports from Billington Holdings Plc:
2023 ReportReport and Financial Statements Y EA R END ED 31 DECEMBER 2019 Contents 01 03 04 05 11 16 17 21 23 27 29 33 34 35 36 37 39 49 73 74 75 Chairman’s Statement Operating Divisions Five Year Summary Operational Review Financial Review Board Profile and Registered Office Report of the Directors Strategic Report Sustainable and Responsible Business Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Principal Accounting Policies Notes Forming Part of the Group Financial Statements Parent Company Statement of Financial Position Parent Company Statement of Changes in Equity Notes Forming Part of the Parent Company Financial Statements London School of Economics, London Chairman’s Statement I am pleased to report that in 2019 Billington achieved a record performance. Strong cash generation provides a solid foundation for the Group to progress. Revenue increased by 35.7 per cent to £104.9 million (2018: £77.3 offer our clients. The conclusion of 2019 noted an increasingly million) and profit before tax increased by 20.4 per cent to £5.9 competitive market and as Covid-19 has become more prevalent a million (2018: £4.9 million). small number of contract commencements have been deferred. The overall Earnings Per Share (EPS) for the year amounted to The easi-edge perimeter edge protection and fall prevention 39.8 pence compared with 33.6 pence in 2018, an 18.5 per cent business had its best ever year, with further investment in stock, increase. Our balance sheet continued to strengthen with Net high utilisation and new customer wins. The business entered Assets of £28.1 million at 31 December 2019 (31 December 2018: 2020 with a good degree of forward visibility although more £23.5 million), driven by strong cash generation leading to a gross recently has noted some project delays that could impact the cash balance of £17.9 million at 31 December 2019 (31 December utilisation of its products during 2020. 2018: £9.3 million), providing a solid foundation for the Group to progress. Peter Marshall Steel Stairs again achieved a strong performance, continuing to focus on securing larger contracts with our partner Sadly, after such a positive year we are now faced with the serious clients. We continue to invest in the business and while the potential consequences of the Covid-19. Since the escalation orderbook remains satisfactory a number of contract delays have of the pandemic, the Board has been focused on taking actions been noted. to preserve cash and protect liquidity in a way that does not compromise the long-term prospects of the business. These hoard-it continued to grow and in 2019 recorded its best include deferral of all non-essential capital expenditure, a hiring performance to date. With an excellent market position and a freeze, cost reductions, agreed additional banking facilities, focus on expanding the business into the residential construction deferral of VAT payments and utilisation of the Government’s Job market, the outlook remains positive in what is a competitive and Retention Scheme. In addition, the Board has decided to suspend price sensitive market. payment of the dividend which would ordinarily have been paid to shareholders in July 2020. We understand the importance of the dividend to our shareholders and will keep our dividend policy under review in the coming months. Pension Scheme The defined benefit pension (closed to future accrual in 2011) has performed well in the period with an increased surplus, despite a backdrop of continued volatility in the equity market. At 31 The Board believe these actions to be prudent with the uncertain December 2019 a surplus of £2,205,000 (2018: £1,630,000) along economic outlook, notwithstanding the non-discretionary nature with a corresponding deferred tax liability of £375,000, has resulted of much of our work and the covenant strength of our customers. Nevertheless, at this stage we are not able to quantify the impact on our full year results and consequently the Board does not believe it would be appropriate to provide forward looking financial guidance until greater clarity returns. In 2019 there was a slight reduction in the Group operating margin to 5.7 per cent (2018: 6.3 per cent), reflecting the nature of the contracts undertaken during the year and some pricing pressure in the structural steel business, particularly in the later part of the year. However, we continue to seek cost savings and the opportunity for margin improvement where appropriate. Whilst margin pressures remain in the structural steel market, we believe our continued focus on and delivery of larger contracts leaves the Company well positioned for the future. During the year our structural steel businesses, Billington Structures and Shafton Steel Services operated at near full capacity, delivering a number of exceptional projects, improving productivity and further increasing the range of services we can in a net recognised surplus of £1,830,000 (2018: £1,353,000). Dividend 2019 was an exceptional year for the Group and the Board, under ordinary circumstances would have sought to maintain its progressive dividend policy. However, prudently, we have resolved to suspend the dividend at this time. Liquidity and capital reserves There has been a significantly increased net cash inflow of £8.5 million during the year (2018: £1.2 million) resulting in gross cash balances of £17.9 million at the year end. Going forward the Group’s cash performance provides strong cover for its working capital requirements and a robust position from which to take the Group forward. Capital expenditure for 2020 is forecast to increase as the Group seeks to further enhance its manufacturing capabilities, and to replace some aged capital equipment when it is prudent to do so. 1 The Wave - Coventry Board movements and Our People 2019 was my first full year as Chairman of the Company and I have been extremely impressed by the skills, dedication and commitment to Billington shown by our people. I would like to take this opportunity to thank all our workforce for their efforts in 2019 and I know they will continue to deliver exceptional performances for Billington, particularly in the light of the new challenges we are facing. During the year we increased our workforce by 5.3 per cent. Through hard work and appropriate utilisation of the available resources we were able to deliver a 35.7 per cent increase in revenue. Economic Outlook Whilst the General Election in December 2019 and the UK’s departure from the European Union (EU) at the end of January 2020 has reduced some uncertainty, a measure will remain until the nature of the UK’s future trading relationship with the EU is resolved. The Group does source some products from Europe, either directly or indirectly via its network of suppliers and subcontractors, but we are conscious of not relying on one source for key supplies to mitigate the inherent risks to an acceptable level. The recent purchase of British Steel by Jingye on 9 March 2020 provides the Company and the wider steel industry with stability and increased certainty of uninterrupted supply moving forward. Current forecasts for the UK structural steelwork industry are for the market to increase by 3.9 per cent in 2020 and a further 3.6 per cent in 2021 following a fall of 2.4 per cent in 2019. These forecasts are likely to be subject to revision as the impact of Covid-19 is assessed. Opportunities exist across Europe and are being actively pursued by the Company. The successful delivery of the Company’s largest project to date in Europe in 2019 demonstrates the ability of the Group to successfully deliver significant projects outside of the United Kingdom. Ian Lawson Non Executive Chairman 20 April 2020 The Company remains alert and adaptable to the constantly evolving industry, political, health and economic environment and seeks to take measures, taking advice where appropriate, to mitigate risks to the business as far as possible. Current trading and outlook The current environment is dominated by the global Covid-19 pandemic and I am pleased to report that all our facilities currently remain operational in line with Government advice. Whilst there has been an inevitable reduction in volumes of certain products and services, we have taken measures to mitigate the effect of these. Our priority is the health, safety and wellbeing of our employees, suppliers and customers. We have taken a number of actions, in line with government guidance, to facilitate this and continue to monitor the situation to ensure we are employing best practice. Whilst the ultimate impact of the Covid-19 pandemic on industry, the economy and Billington is uncertain, we have a robust business, supported by a healthy balance sheet and committed workforce. Billington remains well placed to deal with the uncertain future ahead. Aldi, Darlington 2 Operating Divisions LO CAT I ONS Billington Structures Wombwell, Barnsley Shafton, Barnsley Yate, Bristol Nationally recognised and awardwinning steelwork contractor, with over 70 years’ experience. Plants in Barnsley and Bristol with capability to process over 40,000 tonnes of steel per annum. www.billington-structures.co.uk Shafton Steel Services Shafton, Barnsley State-of-the-art steel processing and profiling facility acquired in 2015. www.shaftonsteel.co.uk Tubecon Wombwell, Barnsley Yate, Bristol Tubecon is a specialist in complex steel structures. Operates primarily in the UK construction and rail infrastructure markets. www.tubecon.co.uk hoard-it Wombwell, Barnsley hoard-it provides re-usable and eco-friendly site hoarding solutions. www.hoard-it.co.uk 3 1. Gildersome, Leeds 2. Shafton, Barnsley 3. Wombwell, Barnsley 4. Tuxford, Nottinghamshire 5. Yate, Bristol 1 2 3 4 5 Peter Marshall Steel Stairs Gildersome, Leeds easi-edge Tuxford, Nottinghamshire Specialist company engaged in the design, fabrication and installation of highly engineered steelwork, staircases and balustrade systems. Leading provider of safety solutions to the UK construction industry. Primarily supplies perimeter edge protection and fall prevention systems. www.marshallstairs.com www.easi-edge.co.uk Five Year Summary 110 100 90 80 70 60 50 40 6 5 4 3 2 1 0 40 35 30 25 20 15 10 5 0 Revenue (£m) 9 . 4 0 1 Net Assets (£m) 3 . 7 7 5 . 3 7 3 . 3 6 8 . 6 5 2015 2016 2017 2018 2019 Profit Before Tax (PBT) (£m) 9 . 5 9 . 4 4 . 4 8 . 3 1 . 3 1 . 8 2 5 . 3 2 0 . 2 2 8 . 8 1 4 . 6 1 2015 2016 2017 2018 2019 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) (£m) 8 . 7 5 . 6 1 . 6 1 . 5 2 . 4 30 25 20 15 10 5 0 8 7 6 5 4 3 2 1 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Earnings per Share (EPS) (pence) 8 . 9 3 6 . 3 3 0 . 9 2 4 . 5 2 1 . 1 2 2015 2016 2017 2018 2019 400 350 300 250 200 150 100 50 0 Average Number of Employees 0 6 3 9 7 3 9 9 3 0 4 3 6 9 2 2015 2016 2017 2018 2019 4 Operational Review 2019 was another record year for Billington, reflecting the number of large projects that have been undertaken, resulting in revenues increasing by 36 per cent to £104.9 million and profit before tax increasing by 20.4 percent to £5.9 million. This exceptional performance is a real credit to the tireless dedication of our employees and I would like to thank them all for their efforts. All the businesses across the Group performed well and whilst we expect a good performance to continue, we recognise that due to the number of large contracts undertaken, 2019 was an exceptional year. Billington Structures and Shafton Steel Services Billington Structures is one of the UK’s leading structural steelwork contractors with a highly experienced workforce capable of delivering projects from simple building frames to complex structures in excess of 12,000 tonnes to all market sectors. With facilities in Barnsley and Bristol and a heritage dating back over 80 years, the business is well recognised and respected in the industry with the capacity of processing over 40,000 tonnes of steel per annum. The Shafton facility was acquired in 2015 and has been fully integrated into Group operations. Alongside the successful integration, two separate business areas have been developed on the site. The first undertakes activities for Billington Structures and has continued to enjoy a strong performance driven by high production volumes. The second, Shafton Steel Services, offers a complete range of steel profiling services to a large number of diverse engineering and construction companies, providing further opportunities to increase the capacity of the current business units as well as allowing for the development of new, value added, complementary products and services to enhance the comprehensive offering of the Group. During the year the business has traded very strongly, particularly through the execution of the £41 million of contracts announced in November 2018 and the further £30 million of large contracts secured in June 2019. The larger projects undertaken by Billington Structures during 2019 included: • • • • • • • Circle Square, Manchester 4 Wellington Place, Leeds Large Data Centre development, Europe Barnsley town centre redevelopment scheme – “The Glassworks” First Way, Wembley Pinewood Studios, Buckinghamshire Large Fulfilment Centre, North East of England I am pleased that Billington Structures was again recognised for a number of national awards being the public vote winner of the 2019 Tekla Awards for the Wellington Place development in Leeds and receiving a commendation for the Ingenuity House development in Birmingham at the 2019 Structural Steel Design Awards. Billington Structures maintains a satisfactory order book, providing a good degree of visibility for the remainder of the current year and the focus is both on the successful completion of existing contracts and the securing of new business for the remainder of 2020 and beyond. A very good number of opportunities exist, although there remains pricing pressure and uncertainty within the market. It is possible that projects anticipated for construction during the latter part of 2020 could be impacted by delays as developers and main contractors seek a period of review and are able to complete current projects under construction. 5 Wellington Place, Leeds During the period Billington Structures received a Tekla Award for multiple plots at Wellington Place in Leeds. 6 Peter Marshall Steel Stairs Based in Leeds, Peter Marshall Steel Stairs is a specialist Under the new leadership introduced in 2018 the business continues to grow. The momentum gained in 2018 continued in designer, fabricator and installer of bespoke steel staircases, 2019, producing a record result. balustrade systems and secondary steelwork. It has the capability to deliver stair structures for the largest construction projects and Notable projects in 2019 included: operates in sectors spanning retail, commercial offices, education, healthcare, rail and many more. During the year the business delivered another good performance, fulfilling a smaller number of larger contracts than has historically been the case, for principal contractors, Billington and other steelwork companies. • Wembley Stadium • Circle Square, Manchester • Northgate House, Oxford • Princes Quay Street, Hull, Liverpool • Centenary Square, Birmingham, Liverpool • Edinburgh Airport Notable projects undertaken in 2019 included: • 100 Liverpool Street, London • Ada Lovelace School, London • Bardon Hill, Leicestershire • Pinewood Studios, Buckinghamshire • Cobalt, Didcot • Large data centre development, Europe • Battersea development, London easi-edge easi-edge is a leading site safety solutions provider of perimeter edge protection and fall prevention systems for hire within the construction industry. Health and safety is at the core of the business which operates in a legislation driven market. In 2019 the business enjoyed its best ever year, carrying on the momentum from 2017 and 2018. The investment in stock available for hire continued, with a new improved barrier design implemented. easi-edge enjoyed high utilisation rates reflecting the market demand for their solutions, one of the higher margin segments for the Group. Projects undertaken by easi-edge on 2019 included: • 4 Wellington Place, Leeds • Large data centre development, Europe • Circle Square, Manchester • Ark Blake, London • Blundell Street, Liverpool • Merseyside Police, Liverpool • Two New Bailey, Manchester Significant progress continues to be made to establish the product as the number one choice for main contractors, housebuilders and developers in the construction industry. There has been a particular focus on growing the business in the residential construction market, where hoard-it’s range of printed boards and panels are proving attractive to developers looking for a professional site image. Our People Our workforce is at the heart and drive of everything we do, and we continue to strive to make Billington the best employer. During the year the Group increased its workforce by a further 5.3 per cent to 399. They were able to deliver a 36 per cent increase in turnover, reflecting the hard work undertaken, productivity gains and improved utilisation of resources. Attracting sufficient, experienced, quality people remains a challenge across the industry. The Group therefore continues its focus on developing its people and has a number of training initiatives to assist in overcoming this issue. Billington maintains close relationships with local education providers, supporting both Barnsley College and the University of Sheffield Engineering Department. The Company regularly attends educational career days, hosts school visits to its sites and seeks to develop talent from a young age with its range of internal training programmes across all departments of the business. Wage pressures continue to be an issue in the industry as companies compete for talent in a limited pool. To help mitigate against this Billington continues to actively promote its apprenticeship and graduate schemes, which are particularly focused on fabricator welders and technical staff. These programmes are geared to help the business maintain the necessary skills and expertise to meet both its current and future requirements. The business brought a strong forward order book into 2020. Recently, as a result of Covid-19, the company has noted a number Billington is an advocate, promotor and contributor to the British of project delays which are anticipated to affect the hire utilisation Constructional Steelwork Association’s CRAFT apprentice of its products throughout the duration of the pandemic. programme. The scheme has become the default path for the hoard-it hoard-it produces a unique range of re-usable temporary hoarding Company to train, educate and progress structural steelwork fabricators. The scheme ensures that the Company possesses the necessary and appropriate skills to enable it to deliver for its solutions which are environmentally sustainable and available clients and be at the forefront of new processes and techniques, on both a hire and sale basis tailored to the requirements of its driving manufacturing efficiencies. customers. 7 Health, Safety, Sustainability, Quality and the Environment Billington remains committed to health, safety, sustainability, quality and the environment. Across the Group we continue to be actively involved in a number of initiatives both locally and The Company strives to develop positive relationships with suppliers to ensure both parties understand each other’s problems and requirements. It will not use current or potential contracts to coerce suppliers into unsustainable offers. nationwide. The Group aims to be proactive in the identification, reporting and resolution of risks both on site and in our production facilities to ensure that we are able mitigate the risks and promote The Company treats its staff fairly in all aspects of their employment, valuing their contribution to the achievement of Company objectives and providing them with opportunities for safe ways of working. training and development. The safety and welfare of our employees and subcontractors is of paramount importance and is at the centre of all operations across the Group. During 2019 the Health and Safety department was further strengthened to ensure that continued progress can be achieved in enhancing working practices and improving the safety culture at all facilities and our on-site activities. The Company is proud of its long standing and committed partner relationships with its supply chain and in turn seeks to treat them fairly with timely payment for works and the implementation of a ‘no retention’ policy. Steel Industry We have been closely monitoring developments at British Steel, There were regrettably two lost time reportable accidents in the particularly since it was placed in the hands of the Official Receiver year. However, the Group continued to outperform the industry in May 2019. We welcome the news that the sale of British Steel average Accident Frequency Rate (AFR), relating to our employees, to Chinese firm Jingye has now been completed and we welcome at 0.22. Charity Billington continues to be a significant advocate and supporter of both local and national charities. In 2017 we established the Billington Charity Foundation in order to focus efforts. Billington has actively supported many charity programs for social innovation, the fight against cancer, education and aiding sports facilities. Throughout 2019 Billington donated to the likes of Brain Tumour Research, Weston Park Cancer Charity, Macmillan, The Grand Appeal and the Alzheimer’s Society. The Company has continued its annual sponsorship of RSPB Old Moor and sponsored a good number of other local sports clubs. Billington continued their efforts through sponsoring the Barnsley College Student Awards and University of Sheffield Engineering Department. the stability that a concluded sale provides to the British steel industry. Minimal disruption was noted throughout the year as the operations were smoothly transitioned from Greybull to the Official Receiver. Anticipated investment upon the completion of the purchase by Jingye is expected to be significant as they process a number of furnace upgrades. These investments are not only expected to safeguard the long-term viability of the company, they will also see them improve their products within a competitive global market. Throughout 2019, ongoing uncertainty about near-term business conditions as well as fairly high UK steel stock levels at the end of the first quarter of 2019 prompted a larger than expected stock decrease in the second quarter. Throughout Q3 and Q4 2019 UK steel stock and consumption levels continued to fall, although as the market begins to stabilise; consumption levels are expected to recover during 2020 which may have a consequential impact on Billington actively supports a diverse range of charitable and social price. Coking Coal, Iron Ore and ‘scrap steel’, the key input costs for steel manufacturing, also remained unpredictable throughout 2019, leading to some fluctuations in price throughout the year for the wide range of steel products that the Group sources from a variety of steel producers worldwide. As stated previously, Billington keeps its steel supply options under constant review and employs a variety of measures to allow the Company to reduce its exposure to unpredictability in steel prices and any variability in supply over the short term. causes its employees are involved with. The Group encourages involvement in initiatives intended to improve the local areas in which our people live. Customers and Suppliers – Ethical Trading The Company recognises the need to maintain a supply chain that adheres to and is aligned with our environmental, social and commercial objectives and policies. Billington is committed to carrying out all dealings with clients, suppliers, sub-contractors and its own staff in a fair, open and honest manner. It is also committed to complying with all legislative and regulatory requirements that are relevant to its business activities. The Company communicates fully and openly with customers regarding costs of work undertaken and will provide accurate and honest guidance and advice to customers to ensure their requirements are met. 8 Prospects and Outlook We are delighted with the results we have achieved in 2019, an exceptional year for the Group. However, 2020 has been dominated by the impact of the Covid-19 pandemic. To date, Billington has been able to remain operational, with the majority of construction sites open and customer projects continuing after some temporary interruptions. The health, safety and wellbeing of all our employees, suppliers and customers has been our primary concern and we have undertaken a full review of our operations and working practices, making changes and implementing new procedures where appropriate, following the latest government guidance on tackling Covid-19. Whilst we remain operational the Covid-19 outbreak has inevitably led to some reductions in volumes across the Group although more prevalently in our easi-edge, hoard-it and Peter Marshall Steel Stairs businesses. To minimise the impact on the Company we have taken the decision to furlough a number of staff in these businesses as well as within Billington Structures. Securing additional suppliers of key outsourced components and services has been a priority, to mitigate, as far as possible, any impact from business interruptions and closures in our supply chain. However, it remains uncertain whether we will remain unhindered by any issues with our supply chain as the pandemic reaches its peak and moves to resolution. The Covid-19 pandemic will inevitably have an impact on our industry and customers, and whilst the ultimate outcome is uncertain, Billington is in a strong position to navigate the difficulties ahead and remain a significant player in the structural steel and safety solutions markets. Mark Smith Chief Executive Officer 20 April 2020 9 Audley Retirement Village, Surrey 10 Financial Review Revenue EBITDA Profit before tax Operating profit margin £104.9m £7.8m £5.9m 5.7% Operating cash inflow Cash and cash equivalents Earnings per share from continuing operations £8.5m £17.9m 39.8p Consolidated income statement Revenue Operating profit Profit before tax Profit after tax Profit for shareholders Operating profit margin Return on capital employed Earnings per share (basic) 2019 £’000 104,911 5,936 5,931 4,796 4,796 5.7% 49.1% 39.8p 2018 £’000 77,266 5,001 4,943 4,049 4,049 6.5% 35.2% 33.6p Revenue increased 35.8 per cent year on year primarily as a Earnings per share improved from 33.6 pence in 2018 to result of Billington Structures increasing its output, particularly 39.8 pence in 2019 representing an increase in the result for in relation to its traditional structural steelwork activities. The shareholders of 18.5 per cent. Group has seen revenue increase 133 per cent during the five year period from 2014 to 2019 as a result of consistent investment, Cash generation was strong during the year, leaving a gross an improving market environment and, successful penetration cash balance of £17,856,000 (2018: £9,311,000) at the year end. into Central European markets. Revenues of £28,896,000 were The average gross cash balance during the year was £10,688,000 generated from European markets in the year (2018: £784,000). (2018: £10,011,000). The strong cash generation, following a positive trading period leaves the Group with a robust cash position Forecasts indicate that the consumption of structural steelwork to enable it to achieve both its short and long term objectives, within the UK marginally declined to 856,000 tonnes in 2019 from while providing financial security in a cyclical industry. 877,000 tonnes in 2018. Projections indicate that consumption will increase by 3.9 per cent to 889,000 tonnes in 2020 and a further 3.6 Staff numbers as at December have increased 5.3 per cent, per cent to 920,000 tonnes in 2021, allowing the Group to continue from the same period last year, to 399 as the Group continues to to look forward with optimism in the medium term, although these increase its activities across all divisions. The increase in turnover forecasts may be revised as the impact of Covid-19 is assessed. relative to the increase in employee numbers is an exceptional achievement and represents a year of hard work across all Operating margins reduced to 5.7 per cent in the year as a result divisions of the Group. Industry wide challenges remain in of a difficult trading environment towards the close of 2019 while attracting sufficient quality resource across all disciplines. approaching the UK general election and the UK’s exit from the European Union. The operating margin achieved within the Safety The Shafton facility provides the Group with opportunity to Solutions entities, at 20.2%, was a fantastic result. Strong levels expand and diversify its operations further optimising the current of utilisation were noted for the majority of 2019, on an increased level of hire stock, following continual investment in the hire fleets resources within the control of the Group. over recent years. 11 London School of Economics, London Earnings per share improved from 33.6 pence in 2018 to 39.8 pence in 2019 representing an increase in the result for shareholders of 18.5 per cent. 12 Financial Review Continued Consolidated balance sheet Non current assets Current assets Current liabilities Non current liabilities Total equity 2019 £’000 16,456 33,548 (21,724) (187) 28,093 2018 £’000 15,711 28,849 (19,609) (1,500) 23,451 Significant investments were made in the year relate to increasing Retention balances, contained within trade and other receivables and renewing the hire fleet at easi-edge and hoard-it, this outstanding at the year end, were £3,364,000 (2018: £1,970,000). It accounted for £1,064,000 of the additions in the period. is anticipated that £3,110,000 will be received within one year and £254,000 in greater than one year. Within non-current assets, property, plant and equipment increased by £209,000, represented by capital additions The total rise of £2,115,000 in current liabilities principally of £1,751,000, depreciation charges of £1,814,000 and net comprised an increase in trade and other payables of £701,000 as disposals of £10,000. During the year an adjustment relating the businesses enjoyed increased activity levels during the year. to the capitalisation of lease obligations in accordance with the Furthermore, the mortgage relating to the purchase of the Shafton provisions of IFRS 16 was made of £282,000. facility in 2015 over a 10 year repayment period is due for renewal The defined benefit pension scheme has performed well in the is disclosed within current liabilities (2018: £250,000). A balance of period against a backdrop of a turbulent equity market. At the year £1,250,000 will be outstanding at the point of renewal. end, a surplus of £2,205,000 along with a corresponding deferred tax liability of £375,000 has resulted in a net recognised surplus of Total equity increased by £4,642,000 in the year to £28,093,000. £1,830,000. The scheme was closed to future accrual in 2011. The financial position of the Group at the end of the year remains after 5 years and therefore the outstanding balance of £1,500,000 robust and provides a platform from which the Group can further The net deferred tax liability at the year end was £176,000 (2018: increase shareholder value. asset £39,000), being a deferred tax asset of £199,000 (2018: £316,000) related to temporary timing differences net of a deferred tax liability of £375,000 (2018: £277,000) related to the defined benefit pension scheme surplus. The increase of £4,699,000 in current assets included a decrease of £3,669,000 in inventories, a decrease of £177,000 in trade and other receivables, and an increase in the cash balance of £8,545,000. 13 Consolidated cash flow statement Result for shareholders Depreciation Capital expenditure Tax paid Tax per income statement (Increase)/decrease in working capital Dividends paid Net property loan movement Others Net cash inflow Cash at beginning of year Cash at end of year 2019 £’000 4,796 1,814 (1,751) (959) 1,135 5,378 2018 £’000 4,049 1,502 (1,962) (843) 894 (882) (1,565) (1,385) (250) 53 8,545 9,311 17,856 (250) 125 1,248 8,063 9,311 Dividends were paid in the year at a cash cost of £1,565,000 The Group remains committed to treating its suppliers and (2018: £1,385,000), representing 13.0 (2017: 11.5) pence per subcontractors fairly and to paying them in line with their agreed share. The ability of the Group to convert profits into cash has payment terms. It is the Group’s policy not to withhold retentions been encouraging and provides the Group with cash balances from members of its valued supply chain. with which to increase working capital associated with increased activity levels if required. Working capital Inventories and work in progress Accounts receivable Accounts payable Working capital at end of year 2019 £’000 8,342 7,350 2018 £’000 12,011 7,527 (19,433) (18,732) (3,741) 806 Cash balances at the year end totalled £17,856,000 and there were property and hire purchase loans outstanding of £1,500,000 The strong year end cash position allows the Group to further invest in replacing and upgrading some of its capital assets. representing a net cash position of £16,356,000 (2018: £7,561,000). 2020 will note a modest increase in capital additions, primarily It is pleasing to note the strong cash position of the Group. within the structural steel divisions of the Group. The additional Consistent and positive trading performances, combined with capital expenditure shall aid both an increase in the range of effective working capital management has allowed the Group cash services the Company can perform as well replacing a number balance to increase year on year and provides the Group with the of aged machines when it is prudent to do so. Investment in the flexibility and ability to capitalise on opportunities as they present latest technologies will ensure Billington can deliver the most themselves. challenging projects, efficiently, for its clients. 14 Financial Review Continued Pension scheme Scheme assets Current assets Surplus Other finance income Contributions to defined benefit scheme 2019 £’000 2018 £’000 8,552 (6,347) 2,205 (6) – 7,797 (6,167) 1,630 (36) – To limit the Group’s exposure to future potential pension liabilities the decision was taken to close the remaining Billington defined Covid-19 As further detailed within the Report of the directors the company benefit pension scheme to future accrual from 1 July 2011. The has conducted comprehensive financial modelling for a range schemes assets have performed well, in a difficult market during of possible scenarios that may occur during the pandemic. The the period leaving the scheme is a strong position as at the company has completed analysis on various scenarios ranging balance sheet date. from minor disruption to cessation of all operations for a period of up to six months. The Board is satisfied it has sufficient cash The scheme’s triennial valuation for period ended 31 March 2017 resources to meet its obligations as they fall due throughout this was completed 8 January 2018. The position of the scheme as at duration. the date of the valuation was an asset position of £8,207,000 and a liability position of £6,944,000 resulting in a surplus of £1,263,000. As a contingency measure the company has successfully secured The next actuarial valuation is due to be completed as at 31 March an additional overdraft facility of £3 million for a period of twelve 2020. Employee Share Option Trust (ESOT) The Group operates an ESOT to allow employees to share in the months. Further to securing additional facilities the Group has reviewed its capital and discretionary expenditure and will only utilise its resources in these areas when it is prudent to do so. future, continued success of the Group, promote productivity and In March the UK Government announced a range of assistance provide further incentives to recruit and retain employees. measures for businesses. The Company will seek to utilise these Options were issued based on seniority and length of service across all parts of the Group. schemes where it is eligible and beneficial to do so. Notwithstanding these positive indications of the financial stability of the Group, there is a risk that the impact of Covid-19 could During the year a Long Term Incentive Plan (LTIP) was introduced be more significant than can be currently anticipated and the across the Group to assist in the remuneration of management Directors have concluded that these circumstances represent a and further align the interests of senior management and material uncertainty which could cast significant doubt on the shareholders. Awards are made subjective to achieving Group’s ability to continue as a going concern. progressive Group performance metrics over a three year period. At the year end there were 424,705 share options outstanding at an resources to enable it to continue to adopt the going concern basis average exercise price of £1.54 per share (2018: 281,104 shares at in preparing the financial statements. These financial statements Nonetheless, the Directors expect that the Group has sufficient £2.63 per share). do not include any adjustment that would arise if the going concern basis of preparation was not considered appropriate. The charge included within the accounts in respect of issued options is £97,000 (2018: £84,000). It is encouraging to note that the position of the scheme as at the year end continues to show signs of improvement. Trevor Taylor Chief Financial Officer 20 April 2020 15 Board Profile and Registered Office Ian Michael Lawson Non Executive Chairman Appointed: 01/10/2018 Nationality: British Mark Smith Chief Executive Officer Appointed: 01/01/2015 Nationality: British Experience: Ian is a fellow of both The Royal Institute of Chartered Surveyors (FRICS) and the Chartered Institute of Building (FCIOB) and has a wide range of skills and experience from working within the construction industry for more than 35 years. Ian’s previous experience includes being a main Board Director of a tier-1 Principal Contractor where he enjoyed a 13-year career and subsequently spent four years as Chief Executive Officer for a prominent Steelwork Contractor. Experience: Joined Billington Holdings Plc as Chief Operating Officer on 2 June 2014. Appointed as Chief Executive on the retirement of Steve Fareham on 1 January 2015, who became a Non Executive Director. An in depth knowledge of construction industry for over 30 years driving for growth and profit in competitive markets. Trevor Michael Taylor Chief Financial Officer Appointed: 31/10/2011 Nationality: British Experience: Trevor is a fellow of the Institute of Chartered Accountants in England & Wales (ICAEW) and joined Billingtons in 2008 as Financial Controller from Allotts Chartered Accountants where he specialised in Construction and Financial Services. John Stuart Gordon Non Executive Director Appointed: 01/04/2007 Nationality: British Experience: John practised as a barrister from 1989 until 1999 when he re-qualified as a solicitor and was a partner in national firms for many years. John now provides legal and strategic advice to individual businesses on a consultancy basis. He was appointed to the board in 2007, and his legal-commercial background makes him a valuable member of the team. Alexander Ospelt Non Executive Director Appointed: 01/01/2013 Nationality: Liechtensteiner Stephen John Wardell Non Executive Director Appointed: 14/01/2019 Nationality: British Experience: Alexander Ospelt has been in independent practice as a lawyer since 1997 and is Member of the Board of Directors of Legacon Trust and Ospelt and Partner Attorneys at Law, Liechtenstein. In addition, he is also a Board Member of a number of other companies including Ospelt Holding Anstalt; Bergbahen Malbun AG; Bank Havilland Ltd; Chairman of the Board of Seed X Liechtenstein Ltd; and Chairman of the Board of ONE Insurance Ltd. Alex was also appointed Honorary Consul of the Kingdom of Belgium in 2017. Experience: Stephen is a member of the Institute of Chartered Accountants in England & Wales (ICAEW), having qualified in 1988. He retired from KPMG in 2018 having been a partner for nearly 20 years, having held a number of management roles in the firm and was most recently a Senior Audit Partner working with FTSE 100 and 250 boards in an audit, advisory and relationship management capacity. Throughout his career, Stephen has specialised in the construction and contracting sectors and was a member of the ICAEW Construction Sector Working Group back in 2014. Darren Paul Kemplay Company Secretary Appointed: 31/12/2017 Nationality: British Experience: A qualified HR professional with over 29 years experience across a range of industries. Joined the Group in February 2001 and has provided support and cover for the Group Secretarial function since 2016 and was formally appointed to the role of Company Secretary at the end of 2017 following the retirement of the previous post holder, Leslie Holloway. Auditors Registrar and Main Transfer Office Grant Thornton UK LLP, Registered Auditor, Chartered Accountants, 2 Broadfield Court, Sheffield, S8 0XF Bankers HSBC Bank Plc, 4th Floor, City Point, 29 King Street, Leeds, LS1 2HL Solicitors Walker Morris LLP, Kings Court, 12 King Street, Leeds, LS1 2HL Link Asset Services, Northern House, Woodsome Park, Fenay Bridge, Huddersfield, HD8 0GA Nominated Advisor and Broker W H Ireland, Royal House, 28 Sovereign Street, Leeds, LS1 4BJ Registered Office Steel House, Barnsley Road, Wombwell, Barnsley, South Yorkshire, S73 8DS Registered in England. Company Number: 02402219 16 Report of the Directors The directors present their report together with the audited financial statements for the year ended 31 December 2019. 1. Results and dividends The consolidated income statement is set out on page 33 and shows the result for the year. Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and by investing A final dividend in respect of 2018 of 13.0 pence per share was paid cash assets safely and profitably. Primarily this is achieved on 5 July 2019. No interim dividends were paid in 2019. No final through a Group treasury function which is charged with ensuring dividend has been proposed in respect of 2019 as the dividend has sufficient liquid funds are available to all companies as and when been suspended to preserve cash resources. they are required. Short term flexibility is achieved by overdraft facilities. 2. Financial risk management objectives and policies The Group uses financial instruments, other than derivatives, comprising borrowings, cash and various other items, such as trade receivables and payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, liquidity risk and credit risk. The directors review and agree policies for managing each of these risks and they are summarised below. The policies have remained unchanged from previous periods. Foreign currency risk To mitigate the Group’s exposure to foreign currency risks non- Sterling cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies. Interest rate risk The Group finances its operations through a mixture of retained profits and bank borrowings on an individual company basis. The Group’s exposure to interest rate fluctuations on its borrowings is managed on a Group basis through the use of floating facilities on individual company accounts. Billington Holdings Plc ordinary 10p shares Ian Lawson Mark Smith Trevor Taylor John Gordon Alexander Ospelt Stephen Wardell 17 Credit risk The Group’s principal credit risk arises from trade receivables. In order to manage credit risk the directors set credit limits for customers based on payment history and third party credit references. In addition, bad debt insurance is maintained to reduce the risk to an acceptable level (see notes 12 & 17 to the consolidated financial statements). 3. Directors During the year Mr P.Hems retired following Mr I.Lawson taking over the position of Non Executive Chairman in the prior year. Furthermore, Mr S.Wardell was appointed as a Non Executive director on 14 January 2019. In accordance with the Articles of Association Dr A. Ospelt and Mr J.S. Gordon retire and offer themselves for re-election. The interests of the directors at the year end in shares of the company were as follows: 31 December 2019 1 January 2019 Shares No. 17,200 11,408 12,408 282,270 6,500 - Options No. – 90,508 70,802 – – – Shares No. – 5,000 6,000 307,270 6,500 – Options No. – 41,853 40,382 – – – 4. Statement of directors’ responsibilities 5. Going concern The directors are responsible for preparing the Strategic Report, 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 prepared consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and have elected to prepare The consolidated financial statements have been prepared on a going concern basis. The directors have taken note of the guidance issued by the Financial Reporting Council on Going Concern Assessments in determining that this is the appropriate basis of preparation of the financial statements and have considered a number of factors. The financial position of the Group, its record trading performance in 2019 and cash flows are detailed in the Financial Review and they demonstrate the robust position of the Group heading into parent company financial statements in accordance with United 2020. Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws), including FRS 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 and profit or loss of the Company and the Group for that period. In preparing these financial statements the directors are required to: • select suitable accounting policies and then apply them consistently; The Group has a gross cash balance of £17.9 million at 31 December 2019 and no significant long-term borrowings or commitments. At the end of March 2020 the Group had a gross cash balance of £13.0 million and during March 2020 the Group have secured a 12 month overdraft facility of £3 million, giving the Group available cash to utilise of £16.0 million. The directors have prepared forecasts covering the period to April 2021 and approved by the Board in March 2020. The forecasts reflect the exceptional nature of the 2019 trading performance and the current political and economic uncertainty and pricing pressures in the structural steel market, excluding the potential • make judgements and accounting estimates that are impact of Covid-19 which is considered below. reasonable and prudent; • state whether applicable International Financial Reporting Standards as adopted by the European Union/UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis The uncertainty as to the future impact on the Group of the recent Covid-19 outbreak has been separately considered as part of the directors’ consideration of the going concern basis of preparation. The directors put in a place many positive preventative measures at an early stage in the outbreak in response to Covid-19 to minimise the potential impact. Thus far, the measures have been unless it is inappropriate to presume that the company will effective. 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 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 Group and the parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors confirm that: • so far as each director is aware, there is no relevant audit In the downside scenario analysis performed, the directors have considered the reasonably plausible impact of the Covid-19 outbreak on the Group’s trading and cash flow forecasts. In preparing this analysis, a number of scenarios were modelled ranging from a 30% drop in revenue by June 2020 followed by a gradual recovery from September through to December, to a total country-wide lockdown and subsequent closure of all sites for up to six months. In each scenario, mitigating actions within the control of management, including reductions in areas of discretionary spend, have been modelled, but no fixed cost reductions have been assumed. It is difficult to predict the overall outcome and impact of Covid-19 at this stage and the duration of disruption could conceivably be longer than anticipated. However, even under the scenario of the closure of all sites for a significant information of which the company’s auditor is unaware and; period, the company has sufficient liquidity and resources to • the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any continue to meet liabilities as they fall due, without any additional funding from either financial institutions or the government, which relevant audit information and to establish that the auditor is is considered separately below. aware of that information. 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. The UK Government has announced a number of funding initiatives throughout March 2020 to support businesses. The main scheme that the Group is eligible for is the Coronavirus Job Retention Scheme. The Scheme grants support from HMRC to cover up to 80% of salary costs of anyone not working due to Coronavirus but whose job has been retained, up to a maximum 18 of £2,500 per month for an initial period up to 31 May 2020, but it will be extended if necessary. If there was a significant reduction in operations or if any or all of the sites were required to close, the scheme would provide a significant amount of support and short- term cost reduction without impacting the long-term strategy of the Group. Notwithstanding these positive indications of the financial stability of the Group, there is a risk that the impact of Covid-19 could be more significant than can be currently anticipated and the Directors have concluded that these circumstances represent a material uncertainty which could cast significant doubt on the Group’s ability to continue as a going concern. Nonetheless, the Directors expect that the Group has sufficient resources to enable it to continue to adopt the going concern basis in preparing the financial statements. These financial statements do not include any adjustment that would arise if the going concern basis of preparation was not considered appropriate. 6. Stakeholder engagement Billington’s stakeholders are an integral part of the business, they consist of: customers, suppliers, employees, shareholders, advisors and the local communities within which the Group operates. Details of how the directors have engaged with these stakeholders are included within the Governance Report. 7. Auditor Grant Thornton UK LLP have expressed their willingness to continue in office. In accordance with Section 489 (4) of the Companies Act 2006 a resolution to reappoint Grant Thornton UK LLP will be proposed at the Annual General Meeting. This report was approved by the Board and signed on its behalf. Darren Kemplay Company Secretary Billington Holdings Plc Company Number – 02402219 20 April 2020 19 Shepherdess Walk, London 20 Strategic Report for the year ended 31 December 2019 The directors present their report together with the audited financial statements for the year ended 31 December 2019. 1. Business review The business model of the Group is to operate as a designer, On a Group basis the business review and future prospects for manufacturer and installer of structural steelwork through its the business are contained within the Operational Review and subsidiaries Billington Structures Limited and Peter Marshall Financial Review (see pages 5 to 15), including an analysis using Steel Stairs Limited, and as a supplier of safety solutions and key financial and non-financial performance indicators. barrier systems to the construction industry, through its subsidiary easi-edge Limited as well as providing site hoarding systems through hoard-it Limited. The parent Company acts as a holding company providing management services to its subsidiaries. 2. Key non-financial performance indicators Production efficiency Hire stock utilisation Accidents (own employees) – reportable Employee numbers Apprentice intake Staff turnover (excluding restructuring) 2019 114% 87% 2 399 8 12% 2018 110% 90% 2 379 8 14% 21 Paradise Circus, Birmingham 3. Principal risks and uncertainties Contract risk The principal risk for each of the subsidiaries is contract risk, either agreeing inappropriate contract terms at the beginning of the contract process or failing to deliver contractual obligations. In order to mitigate these risks, significant senior management effort is invested in the agreement of contractual terms and the monitoring of performance against budget. Health and safety Health and safety within the Billington Group is of paramount importance. The protection of both our employees and those who may be affected by our business remains a key concern and priority. The ethos throughout the Group is to ensure the welfare of all employees is at the forefront of every decision and not only to meet legal requirements but to go far beyond. Economic environment The economic environment in which the Group trades continues to be challenging with both macro and micro economic pressures. These risks are largely outside of the control of the Group, however the directors monitor the economic environment closely and this informs decision making within the Group. Credit risk Current economic conditions have impacted on the Group’s ability to maintain full credit protection on all customers. This will remain an important issue for the foreseeable future that will be constantly monitored to ensure the Group is not exposed to an unacceptable level of risk. Failure to manage the above principal risks, as far as the Group is able, could lead to significant impact to profitability and to the reputation of the Group. Foreign currency Foreign currency cash flows present the Group with uncertainty relating to the timing and quantum of cash flow receipts. Where contract receipts are denominated in a foreign currency the risk associated with conversion into Sterling are mitigated through the utilisation of appropriate, effective hedging instruments. Brexit 2019 saw a great amount of economic and political uncertainty as a result of the continuation of efforts in attempting to agree a ‘deal’ with the European Union (EU). Whilst performing activities within the EU throughout 2019 uncertainties as to the timing and implications of leaving the EU presented a number of challenges to the Company. Periodic reviews into the Company’s overseas commercial operations as well as the sourcing of input materials were, and, continue to be conducted until the outcome of negotiations is concluded. Uncertainty throughout 2019 and into 2020 and their associated impact on the UK economy and in particular the construction industry is being closely monitored and regularly reviewed. Covid-19 The worldwide outbreak of Covid-19 in early 2020 has created significant uncertainty throughout the globe. It has had a significant impact upon the UK and it is difficult to predict the overall outcome and impact of Covid-19. The directors are closely monitoring and reviewing the latest situation on a daily basis and are taking all necessary steps and actions to reduce the risk and impact on the Group. 4. Section 172 (1) statement The directors of the Company consider that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, having regard to Section 172 (a)-(f) of the Companies Act 2006. 5. Disabled persons The Group’s policy is to give sympathetic consideration, in both recruitment and training, to the problems of the disabled, and to assist them in developing their knowledge and skills to undertake greater responsibilities wherever possible. 6. Employee involvement It is Group policy to disseminate relevant information about Group affairs amongst employees. The Group operates an Employee Share Ownership Plan (see note 10). This report was approved by the Board and signed on its behalf. Darren Kemplay Company Secretary Billington Holdings Plc Company Number – 02402219 20 April 2020 The directors have a reasonable expectation that the parent company and the Group have adequate resources to continue in operational existence for the foreseeable future. 22 Sustainable and Responsible Business Billington believes that operating in a sustainable and responsible manner is key to the growth and success of the Group. The Company has a number of policies in place that underpin its day-to-day operations, ensuring the safeguarding of both the environment and its stakeholders. This highlights Billington’s fundamental commitment to delivering responsible business growth and development. Health and Safety Overview Billington operates within an industry whereby if risks are not programme of sustainability objectives is reviewed annually as a appropriately identified, monitored and mitigated could present means of demonstrating continuous improvement. risks to its employees and wider stakeholders. The Chief Executive Officer is ultimately responsible for the implementation and enforcement of the Company’s policies and procedures. To ensure the successful implementation of the Company’s environmental policies, Billington educates and informs its The Health and Safety risks are mitigated through the constant employees of the environmental impact of their work activities, and encourages staff to seek methods to reduce these impacts. It review of the Company’s procedures by an appropriately resourced also provides employees with the necessary resources to deliver and trained Health and Safety department who operate on a Group the Company’s environmental objectives. level and are able to cross pollinate good practices across all Group entities. The Group Health and Safety manager acts as Vice Additionally, the Group works in partnership with sub-contractors Chairman for the British Constructional Steelwork Associations to identify and develop procedures to reduce the environmental (BCSA) Health and Safety Committee to enable the company to impact of its onsite project work to a practicable minimum and maintain and improve its knowledge of industry observations, ensure optimum efficiency of onsite operations. trends and best practice. The Company adheres to BS EN ISO 45001 and is audited annually reviewing these policies to ensure the programme is adapted and through the Steel Construction Certification Scheme (SCCS) to improved. This will ultimately save the Company money, improve ensure compliance. brand reputation and reduce Billington’s environmental footprint. The Board is responsible for continuously monitoring and The Heath and Safety of the Groups employees, subcontractors and its wider stakeholders is of paramount importance and is at the heart of every decision when considering activities that could have an impact on individuals. Environment Social Overview Billington’s stakeholders are an integral part of the business, they consist of: customers, suppliers, employees, shareholders, advisors and the local communities within which the Group operates. Overview Due to the industry in which Billington operates, the Company recognises that its business activities can impact the wider Employees Employee engagement, development and satisfaction is key environment, and therefore, has an obligation to reduce the to building a successful business. Billington invests in the direct negative impact of these activities. In order to manage the development of its staff, adopting a number of policies aimed at environmental risk, the Company has adopted policies that comply recruiting and rewarding employees, including operating effective with the ISO BS EN 14001 - Environmental Management System. training and award-winning apprenticeship schemes. The policies implemented by Billington manage the Company’s Billington keeps an open line of communication with employees environmental impact by reducing pollution, improving energy through regular briefings and the production of company literature efficiency and reusing and recycling waste (where possible), in including a bi-annual newsletter. Board members frequently order to achieve its long-term environmental goals. attend management briefings with Group companies to ensure active engagement at all levels. The Company also maintains the Gold Standard awarded by the British Constructional Steel Association (“BCSA”) for meeting the The Company implements an Employee Share Option Trust (ESOT) requirements of the Steel Construction Sustainability Charter. The to allow employees to share in the future and continued success of the Group. 23 Employee health and welfare is of utmost importance and a and Risk Committee continues to review these procedures and range of schemes and initiatives have been implemented and their effectiveness in order to positively enhance the working communicated to employees to assist in the promotion of an active environment. and healthy lifestyle. Mental health and the recognition of a need to ensure employees are adequately supported has resulted in a range of initiatives being implemented during the year to further Health and Safety Health and safety issues are monitored and reviewed on a monthly promote employee welfare. The Company was recognised for its basis by senior management and the Board. promotion of employee welfare in the “Be Well at Work” awards in the local region. The Group has a well-developed management system for the internal and external control of health and safety which is These policies help to foster employee communication and managed by the Group Health & Safety Manager. This includes the development, and help to deliver long-term Company growth. use of risk management systems for the identification, mitigation Customer and Suppliers – Ethical Trading The Company recognises the need to maintain a supply chain Billington’s onsite teams have received numerous awards and that adheres to and is aligned with our environmental, social and recognition for their dedication to health and safety practices and commercial objectives and policies. the Company aims to continue this success. and reporting of health and safety management information. Billington is committed to carrying out all dealings with clients, suppliers, sub-contractors and its own staff in a fair, open Charity The Company is actively involved in supporting local and national and honest manner. It is also committed to complying with all charities, and has established the Billington Holdings Charity legislative and regulatory requirements that are relevant to its Foundation through which it directs all charitable donations. It business activities. The Company communicates fully and openly with customers regarding costs of work undertaken and will provide accurate and honest guidance and advice to customers to ensure their requirements are met. The Company strives to develop positive relationships with hosts charitable events for employees and donates funds to its local communities, sports teams and other worthwhile causes. Training Billington recognises the importance of training and development in maintaining and growing the success of the business, especially considering the skills shortage within the industry. suppliers to ensure both parties understand each other’s problems and requirements. It will not use current or potential contracts to The Group has a long history of providing apprenticeship programmes throughout the business, and these form a key coerce suppliers into unsustainable offers. The Company treats its staff fairly in all aspects of their employment, valuing their contribution to the achievement of Company objectives and providing them with opportunities for training and development. element of the overall recruitment and development strategy for Billington. As part of this strategy, the Company was instrumental in developing the BCSA CRAFT Certificate that covers training for a range of steelwork operations. The Group also supports local colleges and universities, providing young people with knowledge of, and giving them an insight into, The Company is proud of its long standing and committed partner the industry. relationships with its supply chain and in turn seeks to treat them fairly with timely payment for works and the implementation of a ‘no retention’ policy. Equal opportunities Billington is an equal opportunity employer, it adheres to the Equality Act 2010, and believes that all individuals should be treated fairly and equally. The Group strives to create a supportive and welcoming environment where diversity is valued and employees have the ability to progress and prosper without prejudice or discrimination. Whistleblowing The Group is committed to the highest standards of openness, honesty and accountability, and has a strong whistleblowing policy in place that allows all employees to confidently raise any concerns they have internally, without fear of reprisal. The Audit Additionally, the Company provides various training opportunities to existing employees, enabling them to grow, develop and reach their full potential. Modern Slavery Modern slavery is a growing concern in the UK and, therefore, Billington considers its responsibilities regarding this with the upmost importance. It complies with the Modern Slavery Act 2015 and recognises its duties in relation to the Company’s employees and supply chain. The Group implements a number of processes and procedures within the business and reviews these practices on an ongoing basis. 24 Sustainable and Responsible Business Continued Governance Ethical principles Overview Good corporate governance is one of the Company’s core values Overview The Group values its reputation for ethical behaviour and has a set and, as an AIM listed entity, it is something that the Group takes of values that are at the core of its business philosophy. very seriously, ensuring that the Board implements the Quoted Companies Alliance Corporate Governance Code for Small To conduct business ethically, maintaining the Company’s and Mid-Sized Quoted Companies throughout the Company’s integrity operations. Bribery and corruption policy Billington has a strict, zero tolerance Bribery and Corruption The Company will communicate fully and openly in its dealings with employees, clients, suppliers and the community, ensuring Billington meets its obligations to the best of its ability. The Policy, which complies with the Bribery Act 2010, to ensure the Group will conduct its business operations in an honest, fair and integrity and transparency of the Group is maintained. All Group transparent manner. The Company will strive to meet the highest employees are informed of the Company’s Bribery and Corruption industry standards across all Group companies and ensure Policy and the Board is responsible for ensuring that all sectors of all employees are in the position to successfully deliver these the business comply with these obligations. requirements. Appropriate internal and external training is given to employees To value the welfare of its employees and ensure they have a who may be exposed to situations whereby bribery, corruption and safe, healthy and productive working environment collusion could occur to ensure they are able to identify, act and report instances as they arise. Billington values its employees and understands they are key to delivering the sustained growth and development of the Company. The Group ensures every employee has the opportunity to fulfil their potential in a supportive and inclusive environment. To be regarded as a good neighbour and operate in a sustainable manner The Group is highly regarded in the industry and aims to maintain this positive reputation. It engages openly and effectively with stakeholders and communities, and adopts the highest standards of environmental and suitability guidelines to minimise its impact within the areas it operates. 25 Supporting CALM Charity 26 Governance Report The Board is authorised to manage the business of the Company on behalf of the shareholders and in accordance with the Communication with shareholders The Company encourages two-way communication with both its Company’s Articles of Association. This is achieved by delegating institutional and private investors and attempts to respond quickly responsibilities to the Board Committees and designating to all queries received verbally or in writing. authority to manage the business to the Chief Executive Officer. The Board is responsible for overseeing the management of the communication with institutional shareholders and with analysts business and for ensuring high standards of corporate governance covering the Group’s activities, its performance and strategy. are maintained throughout the Group. The Board is currently comprised of two Executive Directors, three Non Executive The Executive Directors formally meet with institutional The Executive Directors undertake a programme of regular Directors and a Non Executive Chairman. shareholders at least twice a year, after the half year and full year results are released. In addition, site visit’s for current and The Board is accountable for the long-term success of the Group. prospective shareholders are conducted throughout the year when The Directors meet on a regular basis and the Executive Directors requested to allow the operations and capabilities of the Group to are in continual discussion with the operational management to demonstrated and observed. ensure that the business objectives of the Group are achieved. Non Executive Directors have a particular responsibility to ensure The Board has sought to use the AGM to communicate with private that the strategies proposed by the Executive Directors are fully investors and encourages their participation. The notice of the challenged and supported. To enable the Board to fulfil its duties, all Directors receive appropriate information and are allowed sufficient time to discharge their responsibilities effectively. Briefing papers are distributed by the Company Secretary in advance of Board Meetings and the members of the Group Board attend the monthly meetings of subsidiary companies. The Company’s Non AGM, detailing all proposed resolutions, is notified to shareholders at least 20 working days before the meeting. Culture and ethics Billington is committed to carrying out all dealings with clients, suppliers, sub-contractors and employees in a fair, open and honest manner. It is also committed to complying with all legislative and regulatory requirements that impinge on its Executive Directors are considered by the Board to be independent business activities. of the management, and bring a breadth of experience which is welcomed by the Executive Directors. Dealing code The Company follows the guidelines and procedures outlined in the Quoted Companies Alliance Code for Directors’ Dealings, as applicable to AIM companies, and all Directors and relevant employees comply with this. The Board provides strong leadership and ensures that the Company’s ethical values are delivered through the business by regularly engaging with Directors and members of senior management, and consistently reviewing and updating policies. 27 Blundell Street, Liverpool How Billington is governed Each Board member has a direct responsibility to Billington, its employees and its investors, and aims to ensure the success of the Group. Board Each Board member has a direct responsibility to Billington, its employees and its investors, and aims to ensure the success of the Group. The Board comprises a Non Executive Chairman, two Executive Directors and three Non Executive Directors. The Board members have different backgrounds and bring a varied range of skills and experience to the Company. Between them, members have in depth knowledge of engineering, operations, finance, investment and Billington itself, ensuring there is strong balance of expertise at Board level. Board meeting attendance Mark Smith – 11/11 Trevor Taylor – 11/11 John Gordon – 11/11 Alexander Ospelt – 7/11 Ian Lawson – 10/11 Stephen Wardell – 11/11 (appointed 14 January 2019) Audit Committee Chaired by Stephen Wardell Remuneration Committee Chaired by Ian Lawson The Audit Committee comprises the Non Executive Directors and meets no less than twice each year. It is normal practice to invite the Chief Financial Officer and the Chief Executive Officer to attend those meetings when considered appropriate. The Audit Committee is responsible for the financial reporting of the Company and the Group, as well as detailed findings arising from external audit reviews. The Committee reports to the Board on the Group’s full and half year results, having examined the accounting policies on which they are based and ensured compliance with relevant accounting standards. In addition, it reviews the scope of the external audit, the effectiveness, independence and objectivity of the auditors, taking into account relevant regulatory and professional requirements. The Remuneration Committee comprises the Non Executive Directors and meets bi-annually, plus additional meetings when required. Its primary responsibility is to review salary levels, discretionary variable remuneration and the terms and conditions of service of the Executive Directors and other members of senior management where their financial remuneration package is above predetermined fiscal limits. The Remuneration Committee also reviews the compensation decisions made in respect of all other senior executives. The Committee is also responsible for reviewing and determining, along with the Executive Directors, the overall Remuneration Policy applied to the Group and its subsidiaries. This includes the quantum of variable remuneration and the method of delivery, taking into account relevant regulatory and corporate governance developments. The Remuneration Committee is authorised to seek any information it requires in order to perform its duties and obtain external legal or other professional advice that it considers necessary from time to time. 28 Independent Auditor’s Report Independent Auditor’s Report to the members of Billington Holdings Plc. Opinion Our opinion on the financial statements is unmodified We have audited the financial statements of Billington Holdings Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the The impact of uncertainties arising from the UK exiting the European Union on our audit Our audit of the financial statements requires us to obtain an year ended 31 December 2019, which comprise the consolidated understanding of all relevant uncertainties, including those arising income statement, the consolidated statement of comprehensive as a consequence of the effects of Brexit. All audits assess and income, the consolidated balance sheet, the consolidated challenge the reasonableness of estimates made by the directors statement of changes in equity, the consolidated cash flow and the related disclosures and the appropriateness of the going statement, the parent company statement of financial position, concern basis of preparation of the financial statements. All of the parent company statement of changes in equity, and notes these depend on assessments of the future economic environment to the financial statements, including a summary of significant and the group’s future prospects and performance. accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements Brexit is one of the most significant economic events for the is applicable law and International Financial Reporting Standards UK, and at the date of this report its effects are subject to (IFRSs) as adopted by the European Union. The financial reporting unprecedented levels of uncertainty, with the full range of possible framework that has been applied in the preparation of the parent outcomes and their impacts unknown. We applied a standardised company financial statements is applicable law and United firm-wide approach in response to these uncertainties when Kingdom Accounting Standards, including Financial Reporting assessing the group’s future prospects and performance. Standard 102 ‘The Financial Reporting Standard applicable in the However, no audit should be expected to predict the unknowable UK and Republic of Ireland’ (United Kingdom Generally Accepted factors or all possible future implications for a group associated Accounting Practice). with a course of action such as Brexit. In our opinion: • the financial statements give a true and fair view of the state Material uncertainty related to going concern We draw attention to the disclosure on page 39 of the financial of the group’s and of the parent company’s affairs as at 31 statements, which details the factors that the directors have December 2019 and of the group’s profit for the year then considered in making their going concern assessment. The ended; uncertainty as to the future impact of the recent Covid-19 outbreak • the group financial statements have been properly prepared has been included as part of the directors’ consideration, and they in accordance with IFRSs as adopted by the European Union; have considered the reasonably plausible impact of the outbreak • the parent company financial statements have been properly on the group’s trading and cash flow forecasts. prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and While the directors consider the group to be a going concern, the • the financial statements have been prepared in accordance uncertainty around the magnitude of the impact of the outbreak 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 group and the indicates the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern. Our opinion is not modified in respect of this matter. Overview of our audit approach parent company in accordance with the ethical requirements • Overall materiality: £301,000, which represents 5% of the that are relevant to our audit of the financial statements in the group’s profit before taxation; UK, including the FRC’s Ethical Standard as applied to listed • Key audit matters were identified as revenue and profit entities, and we have fulfilled our other ethical responsibilities in recognition in relation to construction contracts; and accordance with these requirements. We believe that the audit • We have performed full scope audit procedures on the evidence we have obtained is sufficient and appropriate to provide financial statements of Billington Holdings Plc and on the a basis for our opinion. financial information of all non-dormant subsidiaries. 29 Key audit matters Key audit matters are those matters that, in our professional audit of the financial statements as a whole, and in forming our judgement, were of most significance in our audit of the financial opinion thereon, and we do not provide a separate opinion on statements of the current period and include the most significant these matters. In addition to the matter described in the material assessed risks of material misstatement (whether or not due to uncertainty related to going concern section, we have determined fraud) that we identified. These matters included those that had the matters described below to be the key audit matters to be the greatest effect on: the overall audit strategy; the allocation of communicated in our report. resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our Key Audit Matter – Group How the matter was addressed in the audit – Group Revenue and profit recognition in relation to construction contracts Under International Standard on Auditing (ISA 240) ‘The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements’, there is a rebuttable presumed risk that revenue may be misstated due to the improper recognition of revenue. In respect of contractual arrangements with customers there is a risk that revenue is misstated as each contract’s outcome and stage of completion requires management judgement. There is a risk that the profit recognised in the year may not be appropriate. Profit is recognised on contracts when a particular percentage of the revenue associated with a contract has been received. Management review all contracts at specific stages of completion at the year end to identify whether any additional profit could be reliably estimated and recognised. In addition, management review all contracts at the year end to identify loss making contracts, for which the full loss is recognised as soon as it is foreseen. The assessment of the outcome of the contract and the calculation of the amount of any loss requires management judgement. We therefore identified revenue and profit recognition as a significant risk, which was one of the most significant assessed risks of material misstatement. Our audit work included, but was not restricted to: • • • • • • • • Assessing whether the revenue and profit recognition accounting policies are in accordance with International Financial Reporting Standard (IFRS) 15 ‘Revenue from Contracts with Customers’; Selecting a sample of contracts and assessing whether revenue has been recognised in accordance with the group’s accounting policies; Selecting a sample of contracts and agreeing to original signed documentation, contract variations and valuation certificates prepared by either the group’s internal quantity surveyors or those appointed by the customer and agreed with the group’s internal quantity surveyors; Identifying contracts at specific stages of completion to assess whether profit could be reliably estimated and whether profit has been appropriately recognised; Identifying contracts where losses could be expected to be incurred to assess whether any loss has been appropriately recognised; Assessing the ability of management to predict the outcome of ongoing projects by comparing the expected outcome of a sample of projects that were ongoing at the prior year end to the final position on the contract, or updated expectation if the project was incomplete; Challenging management regarding their assumptions in assessing the progress and expected outcome of a sample of projects; and Agreeing a sample of revenue transactions to application for payments and valuation certificates. The group’s accounting policy on revenue and profit recognition, including the key sources of estimation uncertainty, are shown in the Principal accounting policies section and related disclosures are included in note 2. Key observations Based on our audit work, we did not identify any material misstatement in revenue and profit recognition. Revenue was recognised in accordance with the group’s accounting policy and IFRS 15 ‘Revenue from Contracts with Customers.’ Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work. 30 Independent Auditor’s Report Continued Materiality was determined as follows: Materiality measure Group Parent Financial statements as a whole Performance materiality used to drive the extent of our testing Specific materiality £301,000 which is 5% of profit before taxation. This benchmark is considered the most appropriate because profit before tax is a key performance indicator for the group. Materiality for the current year is higher than the level that we determined for the year ended 31 December 2018 to reflect the year on year increase in profit before tax. £141,000 which represents 0.5% of the company’s total assets. This benchmark is considered the most appropriate given the activities of the parent company, primarily being that of a holding company and its major activities relate to fixed assets included in the financial statements. Materiality for the current year is higher than the level that we determined for the year ended 31 December 2018 to reflect the year on year increase in total assets. 75% of financial statement materiality. 75% of financial statement materiality. We determined a lower level of specific materiality for certain areas such as directors’ remuneration and related party transactions. We determined a lower level of specific materiality for certain areas such as directors’ remuneration and related party transactions. Communication of misstatements to the audit committee £15,100 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. £7,100 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. Overview of the scope of our audit Our audit approach was a risk-based approach founded on a • we performed a full-scope audit of the financial statements thorough understanding of the group’s business, its environment of the parent company, and of the financial information of and risk profile and in particular included: the subsidiary undertakings representing all of the group’s operations. The operations that were subject to full-scope • documentation of the processes and controls covering all of audit procedures made up 100 per cent of consolidated the significant risks; revenues and 100 per cent of total profit before tax. This • evaluation by the group audit team of identified components to assess the significance of that component and to approach was consistent with the prior year. In the light of the knowledge and understanding of the group and the parent determine the planned audit response based on a measure of company and its environment obtained in the course of the materiality; audit, we have not identified material misstatements in the strategic report or the directors’ report. 31 Other information The directors are responsible for the other information. The other information comprises the information included in the annual Responsibilities of directors for the financial statements As explained more fully in the directors’ responsibilities report, other than the financial statements and our auditor’s report statement set out on page 18, the directors are responsible for thereon. Our opinion on the financial statements does not cover the preparation of the financial statements and for being satisfied the other information and, except to the extent otherwise explicitly that they give a true and fair view, and for such internal control as stated in our report, we do not express any form of assurance the directors determine is necessary to enable the preparation of conclusion thereon. financial statements that are free from material misstatement, whether due to fraud or error. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, In preparing the financial statements, the directors are consider whether the other information is materially inconsistent responsible for assessing the group’s and the parent company’s with the financial statements or our knowledge obtained in ability to continue as a going concern, disclosing, as applicable, the audit or otherwise appears to be materially misstated. If matters related to going concern and using the going concern we identify such material inconsistencies or apparent material basis of accounting unless the directors either intend to liquidate misstatements, we are required to determine whether there the group or the parent company or to cease operations, or have is a material misstatement in the financial statements or a no realistic alternative but to do so. material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the Auditor’s 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 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 directors’ report for the financial year for which the financial financial statements. statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting prepared in accordance with applicable legal requirements. Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Matters on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 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. Donna Steel Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Sheffield 20 April 2020 32 Consolidated income statement for the year ended 31 December 2019 Revenue, excluding movements in work in progress (Decrease) / increase in work in progress Revenue Raw materials and consumables Other external charges Staff costs Depreciation Other operating charges Group operating profit Share of post tax profit in joint ventures Total operating profit Net finance expense Profit before tax Tax Profit for the year Note 2019 2018 £’000 £’000 £’000 £’000 2 3 2 23 4 2 5 108,357 (3,446) 104,911 76,462 804 77,266 73,995 3,621 16,700 1,814 2,845 49,826 3,296 15,258 1,502 2,383 (98,975) (72,265) 5,936 – 5,936 (5) 5,931 (1,135) 4,796 5,001 – 5,001 (58) 4,943 (894) 4,049 Profit for the year attributable to equity holders of the parent company 4,796 4,049 Earnings per share (basic and diluted) 7 39.8p 33.6p All results arose from continuing operations. The statement of accounting policies and notes 1 to 24 form part of these Group financial statements. 33 Consolidated statement of comprehensive income for the year ended 31 December 2019 Profit for the year Other comprehensive income Items that will not be reclassified subsequently to profit or loss Remeasurement of net defined benefit surplus Movement on deferred tax relating to pension liability Current tax relating to pension liability Items that will be reclassified subsequently to profit or loss Cash flow hedging Current year gains / (losses) Note 2019 £’000 2018 £’000 4,796 4,049 21 16 5 7 581 (98) - 483 831 831 (532) 97 (7) (442) (831) (831) Other comprehensive income, net of tax 1,314 (1,273) Total comprehensive income for the year attributable to equity holders of the parent company 6,110 2,776 The statement of accounting policies and notes 1 to 24 form part of these Group financial statements. Shafton Steel Services 34 Consolidated balance sheet as at 31 December 2019 Assets Non current assets Property, plant and equipment Pension asset Investments in joint ventures Deferred tax asset Total non current assets Current assets Inventories and work in progress Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Current portion of long term borrowings Trade and other payables Lease liabilities Current tax payable Total current liabilities Non current liabilities Long term borrowings Lease liabilities Deferred tax liabilities Total non current liabilities Total liabilities Net assets Equity Share capital Share premium Capital redemption reserve Other components of equity Accumulated profits Total equity Note 2019 2018 £’000 £’000 £’000 £’000 8 21 9, 23 16 11 12 15 13 20 14 20 16 18 14,042 1,630 - 39 15,711 28,849 44,560 14,251 2,205 - - 16,456 33,548 50,004 12,011 7,527 9,311 250 18,732 - 627 21,724 19,609 1,500 - - 8,342 7,350 17,856 1,500 19,433 105 686 - 11 176 187 21,911 28,093 1,293 1,864 132 (820) 25,624 28,093 1,500 21,109 23,451 1,293 1,864 132 (1,675) 21,837 23,451 The Group financial statements were approved and authorised for issue by the Board of Directors on 20 April 2020. Ian Lawson Non executive Chairman Trevor Taylor Chief Financial Officer The statement of accounting policies and notes 1 to 24 form part of these Group financial statements. 35 Consolidated statement of changes in equity for the year ended 31 December 2019 At 1 January 2018 Transactions with owners Dividends (note 6) Credit relating to equity-settled share based payments ESOP movement in year Transactions with owners Profit for the financial year Other comprehensive income Actuarial gain recognised in the pension scheme Income tax relating to components of other comprehensive income Financial instruments Total comprehensive income for the year Share Capital £’000 Share premium account £’000 Capital redemption reserve £’000 Other components of equity £’000 Accumulated profits £’000 Total equity £’000 1,293 1,864 132 (844) 19,531 21,976 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (831) (831) (1,385) (1,385) 84 – 84 – (1,301) 4,049 (1,301) 4,049 (532) 90 – 3,607 (532) 90 (831) 2,776 At 31 December 2018 1,293 1,864 132 (1,675) 21,837 23,451 At 1 January 2019 Transactions with owners Dividends (note 6) Credit relating to equity-settled share based payments ESOP movement in year Transactions with owners Profit for the financial year Other comprehensive income Actuarial gain recognised in the pension scheme Income tax relating to components of other comprehensive income Financial instruments Total comprehensive income for the year Share Capital £’000 Share premium account £’000 Capital redemption reserve £’000 Other components of equity £’000 Accumulated profits £’000 Total equity £’000 1,293 1,864 132 (1,675) 21,837 23,451 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 24 24 – – – 831 831 (1,565) (1,565) 97 (24) 97 – (1,492) (1,468) 4,796 4,796 581 (98) – 5,279 25,624 581 (98) 831 6,110 28,093 At 31 December 2019 1,293 1,864 132 (820) The Group accumulated profits reserve includes a surplus of £1,830,000 (2018 – £1,353,000) relating to the net pension surplus (note 21). The statement of accounting policies and notes 1 to 24 form part of these Group financial statements. 36 Consolidated cash flow statement for the year ended 31 December 2019 Cash flows from operating activities Group profit after tax Taxation paid Interest received Depreciation on property, plant and equipment Share based payment charge Profit on sale of property, plant and equipment Taxation charge recognised in income statement Net finance expense Decrease / (increase) in inventories and work in progress Decrease / (increase) in trade and other receivables Increase in trade and other payables Net cash flow from operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Net cash flow from investing activities Cash flows from financing activities Interest paid Repayment of bank and other loans Capital element of leasing payments Dividends paid Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period The statement of accounting policies and notes 1 to 24 form part of these Group financial statements. Note 8 2019 £’000 4,796 (959) 43 1,814 97 (331) 1,135 5 2018 £’000 4,049 (843) 23 1,502 84 (274) 894 58 3,669 (999) 177 (1,827) 1,532 11,978 1,944 4,611 (1,751) (1,962) 341 283 (1,410) (1,679) (42) (250) (166) (45) (250) (4) 6 (1,565) (1,385) (2,023) (1,684) 8,545 9,311 24 17,856 1,248 8,063 9,311 37 First Way, Wembley 38 Principal accounting policies These consolidated financial statements have been prepared under the historical cost convention and in accordance with the accounting policies set out below which comply with IFRS in issue as adopted by the European Union and are effective at 31 December 2019. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements. Going Concern The consolidated financial statements have been prepared on outbreak on the Group’s trading and cash flow forecasts. In a going concern basis. The directors have taken note of the preparing this analysis, a number of scenarios were modelled guidance issued by the Financial Reporting Council on Going ranging from a 30% drop in revenue by June 2020 followed by Concern Assessments in determining that this is the appropriate a gradual recovery from September through to December, to basis of preparation of the financial statements and have a total country-wide lockdown and subsequent closure of all considered a number of factors. sites for up to six months. In each scenario, mitigating actions within the control of management, including reductions in areas The financial position of the Group, its record trading performance of discretionary spend, have been modelled, but no fixed cost in 2019 and cash flows are detailed in the Financial Review and reductions have been assumed. It is difficult to predict the overall they demonstrate the robust position of the Group heading into outcome and impact of Covid-19 at this stage and the duration of 2020. disruption could conceivably be longer than anticipated. However, even under the scenario of the closure of all sites for a significant The Group has a gross cash balance of £17.9 million at 31 period, the company has sufficient liquidity and resources to December 2019 and no significant long-term borrowings or continue to meet liabilities as they fall due, without any additional commitments. At the end of March 2020 the Group had a gross funding from either financial institutions or the government, which cash balance of £13.0 million and during March 2020 the Group is considered separately below. have secured a 12 month overdraft facility of £3 million, giving the Group available cash to utilise of £16.0 million. The UK Government has announced a number of funding initiatives throughout March 2020 to support businesses. The The directors have prepared forecasts covering the period to April main scheme that the Group is eligible for is the Coronavirus 2021 and approved by the Board in March 2020. The forecasts reflect the exceptional nature of the 2019 trading performance Job Retention Scheme. The Scheme grants support from HMRC to cover up to 80% of salary costs of anyone not working due to and the current political and economic uncertainty and pricing Coronavirus but whose job has been retained, up to a maximum pressures in the structural steel market, excluding the potential of £2,500 per month for an initial period up to 31 May 2020, but it impact of Covid-19 which is considered below. will be extended if necessary. If there was a significant reduction in operations or if any or all of the sites were required to close, the The uncertainty as to the future impact on the Group of the recent scheme would provide a significant amount of support and short- Covid-19 outbreak has been separately considered as part of the term cost reduction without impacting the long-term strategy of directors’ consideration of the going concern basis of preparation. the Group. The directors put in a place many positive preventative measures at an early stage in the outbreak in response to Covid-19 to Notwithstanding these positive indications of the financial stability minimise the potential impact. Thus far, the measures have been of the Group, there is a risk that the impact of Covidd-19 could effective and the Group has not observed any material impact in be more significant than can be currently anticipated and the operations due to Covid-19. Directors have concluded that these circumstances represent a material uncertainty which could cast significant doubt on the In the downside scenario analysis performed, the directors have Group’s ability to continue as a going concern. considered the reasonably plausible impact of the Covid-19 39 Nonetheless, the Directors expect that the Group has sufficient Instead of performing an impairment review on the right-of-use resources to enable it to continue to adopt the going concern basis assets at the date of initial application, the Group has relied in preparing the financial statements. These financial statements on its historic assessment as to whether leases were onerous do not include any adjustment that would arise if the going immediately before the date of initial application of IFRS 16 and concern basis of preparation was not considered appropriate. has benefited from the use of hindsight for determining lease (a) Changes in accounting policies New and revised standards that are effective for annual periods beginning on or after 1 January 2019 IFRS 16 ‘Leases’ IFRS 16 Leases replaces IAS 17 Leases along with three Interpretations (IFRIC 4 Determining whether an Arrangement contains a Lease, SIC 15 Operating Leases-Incentives and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease). The standard is mandatory for reporting periods beginning on or after 1 January 2019. Under the new standard, an asset (the right-of-use asset) and a financial liability are recognised. The only exceptions are short term and low value leases. Billington Holdings Plc has applied the modified retrospective approach to the transition to IFRS 16, recognising the cumulative effect at the date of initial application (1 January 2019) as an adjustment to the opening balance of retained earnings for the term when considering options to extend and terminate leases. The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease. On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 2.5%. The below is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at 1 January 2019. Other pronouncements Other accounting pronouncements which have become effective from 1 January 2019 and have therefore been adopted do not have a significant impact on the Group’s financial results or position (b) Basis of consolidation current period. The adjustment amounted to £nil. Prior periods The Group financial statements consolidate those of the Parent have not been restated. On transition, for leases previously company and all of its subsidiary undertakings. Subsidiaries accounted as operating leases with a lease term of less than 12 are entities over which the Group has the power to control the months and for leases of low-value assets, the Group has applied financial and operating policies so as to obtain benefits from its the optional exemptions in the standard to not recognise right-of- activities. The Group obtains and exercises control through voting use assets but to account for the lease expense on a straight-line rights. basis over the remaining lease term. Income, expenditure, unrealised gains and intra-group balances The Group has elected not to include initial direct costs in the arising from transactions within the Group are eliminated. measurement of the right-of-use asset for operating leases Unrealised losses are also eliminated unless the transaction in existence at the date of initial application of IFRS 16. The provides evidence of an impairment of the assets transferred. Group also elected to measure the right-of-use assets at an Amounts in the financial statements of subsidiaries have been amount equal to the lease liability adjusted for any prepaid or adjusted where necessary to ensure consistency with the accrued lease payments that existed at the date of transition. accounting policies adopted by the Group. Property, plant and equipment Lease liability Carrying amount at 31 December 2018 £’000 Remeasurement £’000 IFRS 16 carrying amount at 1 January 2019 £’000 14,042 – 282 (282) 14,324 (282) The following is a reconciliation of total operating lease commitments at 31 December 2018 (as disclosed in the financial statements to 31 December 2018) to the lease liabilities recognised at 1 January 2019: Total operating lease commitments disclosed at 31 December 2018 Assets not recognised as low value or short term Discounted using incremental borrowing rate Total lease liabilities recognised under IFRS 16 at 1 January 2019 361 (72) (7) 282 40 Principal Accounting Policies Continued Acquisitions of subsidiaries are dealt with by the acquisition To depict the progress by which the Group transfers control of method. The acquisition method involves the recognition at fair the construction to the customer, and to establish when and to value of all identifiable assets and liabilities, including contingent what extent revenue can be recognised, the Group measures liabilities of the subsidiary, at the acquisition date, regardless of its progress towards complete satisfaction of the performance whether or not they were recorded in the financial statements obligation by use of qualified quantity surveyors and progress of the subsidiary prior to acquisition. On initial recognition, certificates received from customers. This output method provides the assets and liabilities of the subsidiary are included in the the most faithful depiction of the transfer of goods to each consolidated balance sheet at their fair values, which are also customer. used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after The construction of structural steel frames normally takes 6–12 separating out identifiable intangible assets. Goodwill represents months from commencement of design through to completion of the excess of the fair value of the consideration transferred to the installation. As the period of time between customer payment and vendor over the fair value of the Group’s share of the identifiable performance will always be one year or less, the Group applies the net assets of the acquired subsidiary at the date of acquisition. practical expedient in IFRS 15.63 and does not adjust the promised (c) Revenue amount of consideration for the effects of financing. In obtaining these contracts, the Group incurs a number of Revenue arises mainly from contracts for the design, fabrication incremental costs, such as commissions paid to sales staff. As the and erection of structural steelwork. To determine whether to amortisation period of these costs, if capitalised, would be less recognise revenue, the Group follows a 5-step process: than one year, the Group makes use of the practical expedient in IFRS 15.94 and expenses them as they incur. 1. 2. Identifying the contract with a customer Identifying the performance obligations 3. Determining the transaction price Safety solutions Revenue from the sale or hire of safety solutions for a fixed fee is 4. Allocating the transaction price to the performance recognised when or as the Group transfers control of the assets to obligations the customer. Invoices for goods or services transferred are due 5. Recognising revenue when/as performance obligation(s) are upon receipt by the customer. satisfied. The Group often enters into transactions involving a range of the point in time the installation is complete and hand-over is signed For stand-alone sales of safety solutions, control transfers at the Group’s products and services, for example for the design and by the customer. construction of a steel frame, along with secondary steelwork packages and edge protection. In all cases, the total transaction In the case of asset rentals relating to the use of the Group’s safety price for a contract is allocated amongst the various performance solutions products, revenue is charged to customers on a time obligations based on their relative stand-alone selling prices. accrual basis. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring Other sales In all other cases, revenue represents the fair value of the promised goods or services to its customers. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports consideration received or receivable for goods supplied in the period, excluding VAT and other discounts. Revenue is recognised when or as the Group transfers control of the assets to the customer, which is when the customer takes undisputed delivery these amounts within trade and other payables in the statement of of the goods. financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group The Group does not recognise the revenue and profit attributable recognises either work in progress or a receivable in its statement to claims and disputed amounts on contracts until the recovery of of financial position, depending on whether something other than these amounts is considered probable and when the outcome can the passage of time is required before the consideration is due. be estimated reliably. Construction of structural steelwork The Group enters into contracts for the design, fabrication and erection of structural steel frames in exchange for a fixed fee and recognises the related revenue over time. Due to the high degree of interdependence between the various elements of these projects, they are accounted for as a single performance obligation. 41 (d) Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement. Depreciation is calculated to write off the cost of property, plant and equipment (other than freehold land) less estimated residual (f) Taxation value by equal annual instalments over their expected useful lives. The expected useful lives and material residual value estimates are updated as required, but at least annually. Current tax is the tax currently payable based on taxable profit for the year. The rates applicable are: Freehold and long leasehold property Plant, equipment and vehicles 2% to 4% 5% to 40% Investment property is carried at fair value determined annually by the directors by reference to current market rents and investment property yields for comparable properties. No depreciation is provided. Changes in fair value are recognised in retained earnings. Impairment testing of property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash- generating unit level. Individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. (e) Inventories and work in progress Inventories and work in progress are valued at the lower of cost, including applicable overheads, and net realisable value. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Contract work in progress is included in revenue. If the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or receivable in its statement of financial position, depending on whether something other than the passage of time is required before consideration is due. Provision is made for probable losses on all contracts based on the loss which is currently estimated to arise over the duration of any contract, irrespective of the amount of work carried out at the balance sheet date. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (i.e. actuarial gains and losses) in which case the related deferred tax is also recognised in other comprehensive income. (g) Retirement benefits Defined Contribution pension schemes The pension costs charged against operating profits represent the amount of the contributions payable to the schemes in respect of the accounting period. Defined Benefit pension schemes Scheme assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality corporate bond rates that have terms to maturity approximating to the terms of the related liability. Past service cost is recognised as an expense on a straight-line basis over the average period until the benefits become vested. To the extent that benefits are already vested the Group recognises past service cost immediately. Actuarial gains and losses are recognised immediately in other comprehensive income. The gross surplus or deficit is presented on the face of the statement of financial position. The related deferred tax is shown with other deferred tax balances. A surplus is recognised only to the extent that it is recoverable by the Group. 42 Principal Accounting Policies Continued The current service cost, past service cost and costs from Lease payments included in the measurement of the lease liability settlements and curtailments are charged against other operating are made up of fixed payments (including in substance fixed), charges. Interest on the scheme liabilities and the expected return variable payments based on an index or rate, amounts expected to on scheme assets are included in other finance income/costs. be payable under a residual value guarantee and payments arising Short-term employee benefits, including holiday entitlement, are from options reasonably certain to be exercised. included in current pension and other employee obligations at the undiscounted amount that the Group expects to pay as a result of Subsequent to initial measurement, the liability will be reduced the unused entitlement. (h) Leased assets for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. As described in Note (a), the Group has applied IFRS 16 using When the lease liability is remeasured, the corresponding the modified retrospective approach and therefore comparative adjustment is reflected in the right-of-use asset, or profit and loss information has not been restated. This means comparative if the right-of-use asset is already reduced to zero. information is still reported under IAS 17 and IFRIC 4. Accounting policy applicable from 1 January 2019 For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether: The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been separately disclosed. • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by Accounting policy applicable before 1 January 2019 The economic ownership of a leased asset is transferred to the being identified at the time the asset is made available to the lessee if the lessee bears substantially all the risks and rewards Group related to the ownership of the leased asset. The related asset is • the Group has the right to obtain substantially all of the recognised at the time of inception of the lease at the fair value economic benefits from use of the identified asset throughout of the leased asset or, if lower, the present value of the minimum the period of use, considering its rights within the defined lease payments plus incidental payments, if any, to be borne by scope of the contract the lessee. A corresponding amount is recognised as a finance • the Group has the right to direct the use of the identified leasing liability. asset throughout the period of use. The Group assess whether it has the right to direct ‘how and for what purpose’ All other leases are regarded as operating leases and the the asset is used throughout the period of use. Recognition and derecognition At lease commencement date, the Group recognises a right-of- use asset and a lease liability on the balance sheet. The right- of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. payments made under them are charged to profit or loss on a straight line basis over the period of the lease term. Lease incentives are spread over the term of the lease. (i) Employee Share Ownership Trust (ESOT) The Group’s Employee Share Ownership Trust (“ESOT”) is a separately administered trust. The assets of the ESOT comprise shares in the company and cash. The assets, liabilities, income and costs of the ESOT have been included in the consolidated financial statements as the Group exercises control over the ESOT in accordance with the terms of the trust deed. The shares in the Company are included at cost to the ESOT and deducted from equity and dividend income is excluded in arriving at profit before tax and deducted from the aggregate of dividends paid and proposed. When calculating earnings per share these shares are treated as if they were cancelled. The charge relating to share options is determined using the Black-Scholes model to ascertain the fair value of the granted options. Details of the charge through the Consolidated Income Statement can be seen in notes 3 and 10 of the Group financial statements. 43 (j) Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and Subsequent measurement of financial assets Financial assets at amortised cost liabilities in foreign currencies are translated at the rates of Financial assets are measured at amortised cost if the assets exchange ruling at the balance sheet date. All foreign exchange meet the following conditions (and are not designated as FVTPL): differences are dealt with through the income statement, unless subject to hedging arrangements. (k) Joint ventures • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows • the contractual terms of the financial assets give rise to cash Joint ventures are entities over which the Group holds a flows that are solely payments of principal and interest on the contractual share of joint control. The Group financial statements principal amount outstanding. incorporate joint ventures under the equity method of accounting, supplemented by additional disclosures. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where The Group’s share of the profits, losses, finance income, finance the effect of discounting is immaterial. The Group’s cash and cost and taxation of joint ventures are included in the Group cash equivalents, trade and most other receivables fall into this income statement. The Group balance sheet includes the category of financial instruments. investment in joint ventures at the Group’s share of net assets. (l) Financial instruments Impairment of financial assets IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected Recognition and derecognition Financial assets and financial liabilities are recognised when credit loss (ECL) model’. This replaces IAS 39’s ‘incurred loss model’. Instruments within the scope of the new requirements the Group becomes a party to the contractual provisions of the included loans and other debt-type financial assets measured financial instrument. at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments Financial assets are derecognised when the contractual rights and some financial guarantee contracts (for the issuer) that are to the cash flows from the financial asset expire, or when the not measured at fair value through profit or loss. financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is Recognition of credit losses is no longer dependent on the Group extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. • • • amortised cost In applying this forward-looking approach, a distinction is made fair value through profit or loss (FVTPL) between: fair value through other comprehensive income (FVOCI). In the periods presented the Group does not have any financial assets categorised as FVTPL or FVOCI. The classification is determined by both: • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and • financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). • • the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset. ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for finance income or other financial items, except for impairment of the second category. trade receivables which is presented within other expenses. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. 44 Principal Accounting Policies Continued Trade and other receivables and contract assets All derivative financial instruments used for hedge accounting are The Group makes use of a simplified approach in accounting for recognised initially at fair value and reported subsequently at fair trade and other receivables as well as contract assets and records value in the statement of financial position. the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering To the extent that the hedge is effective, changes in the fair the potential for default at any point during the life of the value of derivatives designated as hedging instruments in cash financial instrument. In calculating, the Group uses its historical flow hedges are recognised in other comprehensive income experience, external indicators and forward-looking information to and included within the cash flow hedge reserve in equity. calculate the expected credit losses using a provision matrix. Any ineffectiveness in the hedge relationship is recognised immediately in profit or loss. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have At the time the hedged item affects profit or loss, any gain or been grouped based on the days past due. Refer to note 17 for a loss previously recognised in other comprehensive income is detailed analysis of how the impairment requirements of IFRS 9 reclassified from equity to profit or loss and presented as a are applied. reclassification adjustment within other comprehensive income. However, if a non-financial asset or liability is recognised as a Classification and measurement of financial liabilities As the accounting for financial liabilities remains largely the same result of the hedged transaction, the gains and losses previously recognised in other comprehensive income are included in the under IFRS 9 compared to IAS 39, the Group’s financial liabilities initial measurement of the hedged item. were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below. If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other comprehensive income The Group’s financial liabilities include borrowings, trade and is transferred immediately to profit or loss. If the hedging other payables and derivative financial instruments. relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued, and the related gain or loss is held in Financial liabilities are initially measured at fair value, and, the equity reserve until the forecast transaction occurs. where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. (m) Cash and cash equivalents Subsequently, financial liabilities are measured at amortised Cash and cash equivalents comprise cash on hand and demand cost using the effective interest method except for derivatives deposits. and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). (n) Dividends Dividend distributions payable to equity shareholders are included in “trade and other payables” when the dividends are approved in All interest-related charges and, if applicable, changes in an general meeting prior to the balance sheet date and are debited instrument’s fair value that are reported in profit or loss are direct to equity within accumulated profits. included within finance costs or finance income. Derivative financial instruments and hedge accounting Derivative financial instruments are accounted for at fair value through profit and loss (FVTPL) except for derivatives designated (o) Equity Equity comprises the following: as hedging instruments in cash flow hedge relationships, which “Called up share capital” represents the nominal value of equity require a specific accounting treatment. To qualify for hedge shares. accounting, the hedging relationship must meet all of the following requirements: “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of • there is an economic relationship between the hedged item expenses of the share issue. and the hedging instrument • the effect of credit risk does not dominate the value changes “Capital redemption reserve” represents the purchase cost of that result from that economic relationship shares repurchased by the Group in 1998. • the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that “Other components of equity” represents the purchase cost of the the entity actually hedges and the quantity of the hedging shares held within the Employee Share Ownership Trust (ESOT) instrument that the entity actually uses to hedge that quantity and the cash flow hedge reserve (see note 18). of hedged item. 45 “Accumulated profits” represents retained profit, and gains and losses due to the revaluation of certain property, plant and equipment prior to the implementation of IFRS. (p) Segmental reporting significant non-taxable income and expenses and specific limits In identifying its operating segments, management follows the to the use of any unused tax loss or credit. If a positive forecast Group’s service lines, which represent the main products and of taxable income indicates the probable use of a deferred tax services provided by the Group. The disclosure is based on the asset, especially when it can be utilised without a time limit, information that is presented to the chief operating decision that deferred tax asset is recognised in full to the extent that it maker, which is considered to be the executive board of Billington is probable taxable profits will be available. The recognition of Holdings plc. There have been no changes from prior periods in deferred tax assets that are subject to certain legal or economic the measurement methods used to determine segment profit or limits or uncertainties is assessed individually by management loss. based on the specific facts and circumstances. (q) Standards and interpretations Estimation uncertainty When preparing the financial statements management undertakes At the date of authorisation of these financial statements, several a number of judgements, estimates and assumptions about new, but not yet effective, Standards, amendments to existing recognition and measurement of assets, liabilities, income and Standards, and Interpretations have been published by the IASB. expenses. The actual results may differ from the judgements, None of these Standards, amendments or Interpretations have estimates and assumptions made by management, and will been adopted early by the Group. seldom equal the estimated results. Information about significant judgements, estimates and assumptions that have the most Management anticipates that all relevant pronouncements will significant effect on recognition and measurement of assets, be adopted for the first period beginning on or after the effective liabilities, income and expenses are discussed below. date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group’s financial statements. (r) Significant management judgements and estimates in applying accounting policies The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements. Critical estimation uncertainties are described below. Construction contract revenue The stage of completion of any construction contract is assessed by management by taking into consideration all information available at the reporting date. In this process management makes significant judgements about performance obligations satisfied, costs to complete and the overall contract value. In identifying the performance obligations satisfied, management rely on the knowledge and experience of the Group’s quantity surveyors. Further information on the Group’s accounting policy for construction contracts is provided in policy c. Recognition of pension scheme surplus Management consider that where the pension scheme is in surplus it is appropriate to recognise this as an asset in the Group balance sheet. The scheme rules indicate that any surplus will be returned to the sponsoring company upon cessation. Useful lives of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. At 31 December management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analysed in note 8. Inventories Inventories are measured at the lower of cost and net realisable value. In estimating net realisable values, management takes into account the most reliable evidence of market value available at the times the estimates are made. Defined benefit obligation Management estimates the defined benefit obligation annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of its defined benefit obligation of £6,347,000 (2018: £6,167,000) is based on standard rates of inflation and appropriate mortality tables. It also takes into account the Group’s specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation. An estimation has been made for the impact of the equalisation of GMP following the outcome of the Lloyds Banking Group Pension Trustees Limited vs Lloyds Bank plc (and others) court case. While further information as to the impact remains unavailable, management have included a provision further to the specialist advice received. The impact is not material to these financial Deferred tax asset The assessment of the probability of future taxable income against statements. which deferred tax assets can be utilised is based on the Group’s The defined benefit pension scheme was closed to future accrual latest approved budget forecast, which is adjusted for in 2011. 46 Principal Accounting Policies Continued (s) Capital management policies and procedures Billington Holdings’ capital management objectives are to ensure the Group’s ability to continue as a going concern and provide an adequate return to shareholders. The Group and subsidiary companies’ Boards meet regularly to review performance and discuss future opportunities and threats with an aim to maximising return and minimising risk. The Group monitors capital as the carrying amount of equity less cash and cash equivalents as set out on the face of the balance sheet. There are no covenants in place over the capital ratio to be maintained. 47 TK Maxx, Watford 48 Notes forming part of the Group financial statements for the year ended 31 December 2019 1. Segmental information The Group trading operations of Billington Holdings plc are in of easi-edge Limited and hoard-it Limited. The Group activities, Structural Steelwork and Safety Solutions, and all are continuing. comprising services and assets provided to Group companies and The Structural Steelwork segment includes the activities of a small element of external property rentals and management Billington Structures Limited and Peter Marshall Steel Stairs charges, are shown in Other. All assets of the Group reside in the Limited, and the Safety Solutions segment includes the activities UK. 31 December 2019 Revenue From external customers Increase in work in progress Segment revenues Raw materials and consumables Other external charges Staff costs Depreciation Other operating charges Segment operating profit 31 December 2018 Revenue From external customers Increase in work in progress Segment revenues Raw materials and consumables Other external charges Staff costs Depreciation Other operating charges Segment operating profit Structural steelwork Safety solutions Other Total 100,233 (3,446) 96,787 (71,846) (2,460) (13,523) (579) (4,064) 4,315 69,360 804 70,164 (47,910) (2,187) (12,338) (737) (3,361) 3,631 8,124 – 8,124 (2,149) (1,161) (1,624) (908) (643) 1,639 7,102 – 7,102 (1,916) (1,109) (1,485) (659) (565) 1,368 – – – – – (1,553) (327) 1,862 (18) – – – – – (1,435) (106) 1,543 2 108,357 (3,446) 104,911 (73,995) (3,621) (16,700) (1,814) (2,845) 5,936 76,462 804 77,266 (49,826) (3,296) (15,258) (1,502) (2,383) 5,001 2. Revenue and profit before tax Revenue and profit before tax are attributable to the Group’s The one contractor with revenue of greater than 10% in 2019 and continuing operations. One customer included within the 2018 relate to the same customer. Revenue from contracts with structural steel sector accounted for greater than 10% of the customers and from operating lease income is recognised over Group’s revenue. This contractor accounted for 49% (2018: one time and revenue from other sources is recognised at a point in contractor greater than 10% with 11%) of Group revenue. time. 49 Analysis of revenue (excluding movement in work in progress): Structural steelwork Safety solutions Contracts with customers Other sources of revenue Operating lease income Other sources of revenue 31 December 2019 United Kingdom Europe Rest of the World 31 December 2018 United Kingdom Europe Rest of the World Total 79,461 28,896 – 69,556 28,896 – 98,452 1,781 5,404 2,720 – – – – – – 1,781 5,404 2,720 108,357 65,943 2,633 4,776 2,326 75,678 784 – – – – – – – 784 – 66,727 2,633 4,776 2,326 76,462 Information about contract balances Contract liabilities Contract assets Contract receivables There was no revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period. There was no revenue recognised in the reporting period from performance obligations satisfied or partially satisfied in previous periods. 2019 £’000 (2,869) 7,678 4,053 2018 £’000 (5,205) 11,124 4,690 Information about performance obligations and significant judgements Contracts with customers are typically for the construction of structural steelworks. These contracts typically conclude within twelve months of commencement, with obligations to make good generally lasting until a building is handed over by the main contractor. Revenue is recognised over time upon completion of performance obligations, evidence of the satisfaction of which is provided by certifications or cash payments received directly from the client. Judgement is exercised by management in the provision of contract liabilities to ensure that profit is not recognised on a contract until it is reasonably certain. Profit before tax is stated after An analysis of fees paid to the Group’s auditor Fees payable to the parent company’s auditor for the audit of the company’s annual accounts Fees payable to the company’s auditor for other services: the audit of the company’s subsidiaries tax compliance tax advisory other services Depreciation Profit on disposal of property, plant and equipment Operating lease charges: short term hire of plant and machinery operating leases – other operating leases – property 2019 £’000 2018 £’000 41 40 4 38 6 1,814 331 44 - - 36 31 4 24 17 1,502 274 32 215 81 50 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 3. Staff costs Staff costs during the year including directors Wages and salaries Social security Pension costs Share-based payments 2019 £’000 14,639 1,464 500 97 2018 £’000 13,254 1,478 442 84 16,700 15,258 The average number of employees of the Group during the year was 399 (2018: 379). Key management are only considered to be the directors of Billington Holdings Plc and all are remunerated through this Company. Remuneration in respect of key management was as follows: Remuneration in respect of key management Executive M. Smith T.M. Taylor Non Executive P.K. Hems I. Lawson J.S. Gordon S.J. Wardell S.G.T Fareham A. Ospelt Employer’s NI Key management personnel compensation Short-term employee benefits Long-term employee benefits Salary and fees £’000 Other emoluments £’000 Pension £’000 212 161 - 60 36 35 - 13 71 55 - 2 1 - - – 9 7 - – – – - – Total 2019 £’000 292 223 - 62 37 35 - 13 Total 2018 £’000 266 222 52 15 37 - 49 12 517 129 16 662 653 82 744 728 16 744 79 732 709 23 732 Other emoluments received consist of the provision for private medical care, bonuses and motor car allowances. During the year it was agreed to award Mr M. Smith 68,966 and 4,689 share options and Mr T.M. Taylor 51,724 and 3,696 share options related to a long term incentive plan and unapproved share option scheme respectively, exercisable at nil value between the third and tenth anniversary of their grant. During the year two directors (2018: no directors) exercised share options with total exercise price of £82,500. During the year no directors (2018: no directors) participated in defined benefit pension schemes and two directors (2018: two directors) participated in a defined contribution pension scheme. 51 4. Net finance expense Payable on bank loans and overdrafts Interest expense for leasing arrangements Receivable on bank balances Other finance income – pension scheme (see note 21) Net finance expense 5. Tax on profit on ordinary activities The tax charge represents Corporation tax at 19% (2018 – 19%) Adjustment in respect of prior years Total current tax Deferred tax charge – (note 16) Adjustment in respect of prior years – (note 16) Total tax charge for the year Tax relating to other comprehensive income: Corporation tax at 19% (2018 – 19%) Current tax charge relating to pension liability 2019 £’000 (36) (6) 43 (6) (5) 2018 £’000 (45) – 23 (36) (58) 2019 £’000 1,018 - 1,018 114 3 1,135 2019 £’000 2018 £’000 1,065 (64) 1,001 (107) - 894 2018 £’000 – 7 The tax assessed for the year is at the standard rate of corporation tax in the United Kingdom of 19% (2018: 19%). The differences are explained as follows: Differences to standard rate of corporation tax Profit on ordinary activities before tax 2019 £’000 5,931 2018 £’000 4,943 Profit multiplied by the standard rate of corporation tax in the United Kingdom of 19% (2018: 19%) 1,127 939 Effects of: expenses not deductible for tax purposes fixed asset differences adjustments to tax charge in respect of prior years rate differences deferred tax not recognised other adjustments Total tax charge for year 21 36 3 (13) - (39) 1 ,135 36 (64) (16) 4 (5) 894 52 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 6. Dividends 7. Earnings per share A final dividend was paid in July 2019 in respect of 2018 of 13.0 Earnings per share is calculated by dividing the profit for the pence per ordinary share (£1,565,000). year of £4,796,000 (2018: profit - £4,049,000) by 12,052,554 (2018: 12,044,508) fully paid ordinary shares, being the weighted average No final dividend has been proposed in respect of 2019 as the number of ordinary shares in issue during the year, excluding dividend has been suspended to preserve cash resources. those held in the ESOT. There is no impact on a full dilution of the earnings per share calculation as there are no potentially dilutive ordinary shares. 8. Property, plant and equipment Freehold property £’000 Long leasehold property £’000 Investment property £’000 Plant, equipment and vehicles £’000 Cost At 1 January 2018 Additions Reclassification Disposals At 1 January 2019 Adjustment on transition to IFRS 16 Additions Reclassification Disposals At 31 December 2019 Depreciation At 1 January 2018 Charge for year Disposals At 1 January 2019 Charge for year Disposals At 31 December 2019 Net book value at 31 December 2019 Net book value at 31 December 2018 7,796 64 600 – 8,460 – 17 (63) - 1,000 – – – 1,000 125 – – – 8,414 1,125 680 86 – 766 88 – 854 7,560 7,694 – – – – 79 – 79 1,046 1,000 600 – (600) – – – – – – – – – – – – – – – – Total £’000 26,795 1,962 – (977) 17,399 1,898 – (977) 18,320 27,780 157 1,734 63 (3,455) 16,819 12,524 1,416 (968) 12,972 1,647 (3,445) 11,174 5,645 5,348 282 1,751 – (3,455) 26,358 13,204 1,502 (968) 13,738 1,814 (3,445) 12,107 14,251 14,042 Freehold property includes £3,994,000 in respect of land which is not subject to depreciation. Long leasehold property represents land which is not subject to depreciation. The Group has a contractual commitment to acquire plant of £349,000 payable in 2020. There were no other material contractual commitments to acquire property, plant and equipment at 31 December 2019 (2018: nil). All the Group’s freehold properties have been charged to the bank to secure bank facilities. 53 9. Investments All Group companies have only ordinary shares in issue and are registered in England and Wales unless otherwise stated. The subsidiary undertakings and joint ventures are as follows: Continuing Billington Structures Limited easi-edge Limited Peter Marshall Steel Stairs Limited hoard-it Limited Billington Fleet Management Limited Shafton Steel Limited Shafton Steel Services Limited Tubecon Limited Amco Corporation Limited Joint ventures BS2 (2011) Limited Proportion of shares held by Activity Group Company % % Structural steel Safety solutions Structural steel Site hoarding solutions Vehicle leasing solutions Dormant Dormant Dormant Dormant 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Structural steel 50 – 10. Share based payments The Employee Share Ownership Trust (“the Trust/ESOT”) was Dividends have been waived by the Trust. established by Deed dated 14 December 2015 between Billington Holdings plc (“the Company”) and Ocorian Trustees (Jersey) During the year ended 31 December 2019, the Group had Limited (“the Trustee”) (previously Bedell Trustees Limited). It is three share-based payment arrangements. Under each of the an employee benefit trust established for the benefit of the bona arrangements the options are granted with a fixed exercise price, fide employees of the Company and other Group companies (“the are exercisable three years after the date of grant and expire Beneficiaries”). The Trust is a discretionary trust whose assets at ten years after the date of grant. Employees are not entitled present are shares in the Company and cash, although there are to dividends until the shares are exercised. Employees are wide investment powers in the hands of the Trustee, who has full required to remain in employment with the Group, or have left power to distribute the assets as it deems fit to the Beneficiaries. in accordance with the ‘good leaver’ provisions until exercise, The Trust was established to allow for the participation of any employees the Company issues shares held in trust by the Inland Revenue approved or unapproved share schemes to Billington Holdings ESOT. otherwise the awards lapse. On exercise of the options by the employees of the Group. Administration costs amounted to £1,000 during the year (2018: for those employees who are key to the operations of the Company. In addition, one of the schemes provides additional remuneration £14,000). Vesting of the options for this scheme is also conditional on meeting agreed growth targets (non-market performance As of 31 December 2019, the Trust held 869,827 (2018: 893,719) conditions). ordinary shares of 10p each in the capital of the company (6.72% of the allotted share capital (2018: 6.91%)). The market value of the shares in the ESOT Trusts at 31 December 2019 was £3,151,557 (2018: £2,413,041). 54 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued Brought forward at 1 January Granted Exercised Lapsed Outstanding at 31 December Number of shares Weighted average exercise price 2019 No. 281,104 198,463 (50,000) (4,862) 424,705 2018 No. 270,203 12,401 – (1,500) 281,104 2019 £ 2.63 – 1.65 0.62 1.54 2018 £ 2.75 – – 3.03 2.63 The Company is unable to directly measure the fair value of employee services received. Instead the fair value of the share options granted during the year is determined using the Black-Scholes model. The model is internationally recognised as being appropriate to value employee share schemes similar to this scheme. The following inputs were used: Date of grant Share price at date of grant Weighted average exercise price Expected volatility Expected dividends Risk free rate Expected option life 18 January 2016 19 August 2019 303p 263p 25.0% Nil 1.5% 290p Nil n/a Nil n/a 3 years 3 years The underlying volatility was determined by reference to historical data of the Company’s shares over a period of time since its flotation. No special features inherent to the options granted were incorporated into measurement of fair value. The total charge for the year was £97,000 (2018: £84,000). 11. Inventories and work in progress Raw materials Work in progress 2019 £’000 664 7,678 8,342 2018 £’000 887 11,124 12,011 Raw materials and consumables recognised as an expense in the Income Statement for the year ended 31 December 2019 totalled £73,910,000 (2018: £49,826,000). The provision against the value of inventories at the balance sheet date was £65,000 (2018: £100,000). No reversal of previous write-downs was recognised as a reduction of expense in 2019 or 2018. None of the inventories are pledged as securities for liabilities. 55 12. Trade and other receivables Amounts due from structural steel customers: Trade receivables Retentions due within one year Retentions due after one year Total Other receivables Prepayments and accrued income 2019 £’000 2,904 3,110 254 6,268 85 997 2018 £’000 4,780 1,560 410 6,750 212 565 7,350 7,527 All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be impaired and a loss allowance for lifetime credit losses of £501,000 (2018: £519,000) has been recorded accordingly. The amount charged to the consolidated income statement for the year in relation to expected credit losses was £227,000 (2018: £53,000). Movement in the expected lifetime credit losses for trade receivables Balance at 1 January Impairment loss Receivables written off during the year Balance at 31 December 13. Trade and other payables Trade payables Financial Instruments (note 17) Social security and other taxes Other payables Accruals 2019 £’000 519 2 (20) 501 2018 £’000 538 98 (117) 519 2019 £’000 2018 £’000 15,248 14,921 – 2,097 108 1,980 831 734 143 2,103 19,433 18,732 56 2019 revenues relating to structural steel activities are at a record level. This we believe highlights the efforts made by all involved in transitioning Billington to become a leader in its field and ensuring that it is at the forefront of technical innovation. 57 The Glass Works, Barnsley 58 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 14. Long term borrowings Property loans (note 15) 15. Property loans Loans at commercial rates Due within one year Repayable within five years 2019 £’000 1,500 1,500 2018 £’000 1,750 1,750 2019 £’000 1,500 – 1,500 2018 £’000 250 1,500 1,750 The bank loan is secured by way of first legal mortgage over certain freehold properties of the Group. The loan is for a three year term and interest is payable at 1.75% over bank base rate. 16. Deferred tax (liability)/asset Deferred tax provided in the financial statements is set out below and is calculated using a tax rate of 17% (2018: 17%). 2019 £’000 2018 £’000 316 (117) 199 (167) 366 199 206 110 316 (32) 348 316 (375) (277) (176) 39 Deferred tax asset recognised in income statement At 1 January Charged in the year At 31 December Accelerated capital allowances Other temporary differences Deferred tax liability recognised in other comprehensive income Pension surplus Total deferred tax (liability)/asset 59 The recoverability of the deferred tax asset is dependent on future taxable profits. Group companies are budgeted to make profits in the next few years which supports the recognition of these assets. There are no unrecognised deferred tax assets. Movements on the deferred tax asset relating to the pension asset (see statement of comprehensive income) are recognised directly in equity. All other deferred tax movements are recognised in the income statement. The Government announced in March 2012 a reduction in the rate of corporation tax to 24% with effect from 1 April 2012, with further reductions of 1% each year to 20% by 1 April 2016. At the Summer Budget 2015, the Government announced legislation setting the Corporation Tax main rate at 19% for the years starting 1 April 2017, 2018 and 2019 and 17% for the year starting 1 April 2020. 17. Financial assets and liabilities Categories of financial assets and financial liabilities The accounting policies for each category of financial assets and financial liabilities, and a description of each, can be found in the accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows: 31 December 2019 Current financial assets Trade and other receivables Cash and cash equivalents Liabilities Trade and other payables Lease liabilities Current borrowings 31 December 2018 Current financial assets Trade and other receivables Cash and cash equivalents Liabilities Trade and other payables Derivative financial instruments Non-current borrowings Current borrowings Amortised cost £’000 FVTPL £’000 Derivatives used for hedging (FV) £’000 6,353 17,856 24,209 15,356 116 1,500 16,972 – – – – – – – – – – – – – – Amortised cost £’000 FVTPL £’000 Derivatives used for hedging (FV) £’000 6,962 9,311 16,273 15,064 – 1,500 250 16,814 – – – – – – – – – – – 831 – 831 Total £’000 6,353 17,856 24,209 15,356 116 1,500 16,972 Total £’000 6,962 9,311 16,273 15,064 831 1,500 250 17,645 60 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued Derivative financial instruments The Group’s derivative financial instruments are measured at fair value and are summarised below: Foreign currency flexi-forward contracts - cash flow hedge Derivative financial liabilities 2019 £’000 – – 2018 £’000 (831) (831) The Group uses certain derivative financial instruments to mitigate foreign exchange rate exposure arising from forecast sales in Euros. The Group’s policy is to hedge 100% of all contracted future sales in Euros. During the current period all flexi forward contracts have matured. All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value in the statement of financial position. Hedge effectiveness is determined at inception of the hedge relationship and at every reporting period end through the assessment of the hedged items and hedging instruments to determine whether there is still an economic relationship between the two. To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging instruments in cash flow hedges are recognised in other comprehensive income and included within the cash flow hedge reserve in equity. Any ineffectiveness in the hedge relationship is recognised immediately in profit or loss. The critical terms of the foreign currency flexi-forward contracts entered into exactly match the terms of the hedged items. As such the economic relationship and hedge effectiveness are based on the qualitative factors and the use of a hypothetical derivative where appropriate. At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and presented as a reclassification adjustment within other comprehensive income. Hedge ineffectiveness may arise where the critical terms of the forecast transaction no longer meet those of the hedging instrument, for example if there was a change in the timing of the forecast sales transactions from what was initially estimated or if the volume of currency in the hedged items was below expectations leading to over-hedging. If a forecast transaction is no longer expected to occur, any net related gain or loss recognised in other comprehensive income is transferred immediately to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued, and the related gain or loss is held in the equity reserve until the forecast transaction occurs. The hedged items and the hedging instruments are denominated in the same currency and as a result the hedging ratio is always one to one. During 2019 a gain of £831,000 (2018: loss of £831,000) was recognised in other comprehensive income. All foreign currency flexi-forward contracts held at the previous balance sheet date were taken out during the period and have been designated as hedging instruments in cash flow hedges under IFRS 9. At the 31 December 2018 reporting date all hedging relationships continue to meet the criteria for hedge relationships and as such are regarded as continuing hedging relationships. A gain of £14,000 (2018: £nil) was recorded for hedge ineffectiveness during the period. The effect of hedge accounting on the Group’s financial position and performance is as follows, including the outline timing and profile of the hedging instruments: Carrying amount: EUR flexi-forward contracts Notional amount: EUR flexi-forward contracts Hedge ratio Maturity date Average forward rate: EUR flexi-forward contracts Change in the fair value of the currency forward: EUR flexi-forward contracts 2019 £ 2018 £ – (831,000) n/a n/a n/a 32,000,000 1:1 March to December 2019 n/a 1.1419 831,000 (831,000) Change in the fair value of the hedged item used to determine hedge effectiveness: EUR contracted sales 831,000 (831,000) Amounts in the cash flow hedge reserve: EUR flexi-forward contracts – (831,000) 61 The hedge relationships relate to the foreign exchange risk arising from contracted sales and the resulting receivable. Reclassification to profit and loss occurs at the time of the associated sale being recognised and then further movements to profit and loss to match the retranslation of the associated receivable. The above movements relating to the hedging instrument and hedged item exclude those elements reclassified by the reporting date. No amounts were reclassified during the financial period. The potential sources of ineffectiveness include (a) differences between the timing of the cash flows of the hedged item and hedging instrument (b) changes in credit risk of the hedging instrument (c) potential over-hedging should volumes of highly probable sales fall below hedged amounts. Due to the use of flexible forward contracts, the small differences in timing are not considered to give rise to any significant ineffectiveness. No ineffectiveness has arisen from credit risk and a gain of £14,000 arose as a result of over-hedging. Foreign currency sensitivity Most of the Group’s transactions are carried out in GBP. Exposures to currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily denominated in Euros. To mitigate the Group’s exposure to foreign currency risk, non-GBP cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies. Generally, the Group’s risk management procedures distinguish short-term foreign currency cash flows (due within six months) from longer-term cash flows (due after six months). Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other same-currency transactions. Hedge accounting disclosures are included above. Financial instruments risk Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. The main types of risks are foreign currency risk, market risk, credit risk and liquidity risk. The Group’s risk management is coordinated at its headquarters, in close cooperation with the board of directors, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below. The Group enters into derivatives, principally for hedging foreign exchange risk. Associated disclosures relating to hedge accounting are included above. Market risk analysis The Group is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from both its operating and investing activities. At the balance sheet date, there were no contracted non-GBP sales. Therefore, there was no exposure to currency risk or sensitivity of profit and equity in regard to the exchange rate. Interest rate sensitivity The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing where commercially viable. At 31 December 2019, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. The exposure to interest rates for the Group’s money market funds is considered immaterial. The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1% (2018: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. 31 December 2019 31 December 2018 Profit for the year Equity +1% (15) (17) -1% +1% -1% 15 17 – – – – Credit risk analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The group is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables. Credit risk management The credit risk is managed on a group basis based on the Group’s credit risk management policies and procedure. The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits, and are only with major reputable financial institutions. 62 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued The Group continuously monitors the credit quality of customers In measuring the expected credit losses, the trade receivables based on a credit rating scorecard. Where available, credit have been assessed on a collective basis as they possess shared insurance is obtained on all customers across the Group. External credit risk characteristics. They have been grouped based on the credit ratings and/or reports on customers are also obtained days past due and also according to the geographical location of and used. The Group’s policy is to deal only with credit worthy customers. counterparties. Where credit insurance is not obtainable for a specific customer, trade is only permissible following director The expected loss rates are based on the payment profile for sales approval. Exposure is monitored on an ongoing basis. The credit over the past 48 months before 31 December 2019 and 1 January terms range between 30 and 90 days. The credit terms for respectively as well as the corresponding historical credit losses customers as negotiated with customers are subject to an internal during that period. The historical rates are adjusted to reflect approval process which considers the credit rating scorecard. The current and forwarding looking macroeconomic factors affecting ongoing credit risk is managed through regular review of ageing the customer’s ability to settle the amount outstanding. The Group analysis, together with credit limits per customer. has identified gross domestic product (GDP) and unemployment Security rates of the countries in which the customers are domiciled to be the most relevant factors and according adjusts historical Trade receivables consist of a large number of customers in loss rates for expected changes in these factors. However given various industries, predominantly although not exclusively the short period exposed to credit risk, the impact of these construction, and geographical areas. The Group does not hold any macroeconomic factors has not been considered significant within security on the trade receivables balance. the reporting period. In addition, the group does not hold collateral relating to other Trade receivables are written off (ie derecognised) when there is financial assets (eg derivative assets, cash and cash equivalents no reasonable expectation of recovery. Failure to make payments held with banks). Trade receivables within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement amongst others are considered indicators of no reasonable expectation of recovery. The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these On the above basis the expected credit loss for trade receivables as items do not have a significant financing component. at 31 December 2019 was determined as follows: Expected credit rate loss Gross carrying amount Lifetime expected credit loss Trade receivables days past due Current More than 30 days More than 60 days More than 90 days 7% 2,048 139 21% 970 201 37% 137 51 44% 251 110 Total – 3,406 501 The closing balance of the of the trade receivables loss allowance as at 31 December 2019 reconciles with the trade receivables loss allowance opening balance as follows: Opening loss allowance as at 1 January 2019 Loss allowance recognised during the year Receivables written off during the year Loss allowance as at 31 December 2019 63 £‘000 519 31 (49) 501 Liquidity risk As at 31 December 2019 the Group’s financial liabilities have contractual maturities which are summarised below: 31 December 2019 Trade payables Other payables Lease liabilities Property loans Current within 6 months £’000 Current 6 to 12 months £’000 Between 1 and 3 years £’000 15,248 108 78 125 15,559 – – 27 1,375 1,402 – – 11 – 11 This compares to the maturity of financial liabilities for the Group in the previous reporting period which was as follows: 31 December 2018 Trade payables Other payables Property loans Current within 6 months £’000 Current 6 to 12 months £’000 Between 1 and 3 years £’000 14,921 974 125 16,020 – – 125 125 – – 1,500 1,500 Liquidity risk is the risk that the Group might be unable to meet borrowing facilities in order to determine headroom or any its obligations. The Group manages its liquidity needs through shortfalls. Management believe that levels of cash reserves and the close control, monitoring and forecasting of cash inflows and available headroom are sufficient to meet the Group’s needs over cash outflows. Net cash requirements are compared to available its forecast period. 18. Equity Called up share capital Authorised Ordinary shares of 10p each Allotted and fully paid Ordinary shares of 10p each “A” ordinary shares of 10p each 2019 2018 No. of shares £’000 No. of shares £’000 27,500,000 2,750 27,500,000 2,750 12,860,959 1,286 12,860,959 1,286 73,368 7 73,368 7 12,934,327 1,293 12,934,327 1,293 During the year no “A” ordinary shares were converted into ordinary shares (2018 - none). Both classes of share rank pari passu in all respects. Details of company share options outstanding at 31 December 2019 and treasury shares held by the ESOT are given in note 10. 64 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued The details of other components of equity are as follows: Other components of equity At 1 January 2018 Cash flow hedges: current year losses At 31 December 2018 At 1 January 2019 ESOP movement in year Cash flow hedges: current year gains At 31 December 2019 ESOT £’000 (844) – (844) (844) 24 – (820) Cash flow hedges £’000 – (831) (831) (831) – 831 – 19. Ultimate controlling related party At the year end, the directors considered that the Company had no ultimate controlling party. 20. Leases The balance sheet shows the following amounts relating to leases: Right of use assets included within property, plant and equipment Property Cars Lease liabilities Current Non current Total £’000 (844) (831) (1,675) (1,675) 24 831 (820) 2018 £’000 – – – 2018 £’000 – – – 2019 £’000 46 68 114 2019 £’000 105 11 116 There were no additions to right of use assets during the year other than on transition to IFRS 16. The Group leases one property and various cars. The property lease is due to expire within one year and all car leases are due to expire with two years and are expected to be replaced by the Group by purchase of assets rather than leasing. The Group is not exposed to any significant future cash outflows that are not reflected in the measurement of the lease liabilities. The lease agreements do not impose any covenants. The statement of profit or loss shows the following amounts relating to leases: Depreciation of right of use assets Property Cars Interest expense Expense relating to short term leases The total cash outflow for leases for the period was £216,000. 65 2019 £’000 2018 £’000 80 89 6 44 – – – – 21. Retirement benefits The Group operates funded pension schemes for certain employees and directors. The total contributions to all pensions by the Group for the year was £500,000 (2018: £441,000). Defined contribution schemes accounted for £500,000 (2018: £441,000) of this amount with £nil (2018: £nil) relating to a defined benefit scheme, where the benefits are based on final pensionable pay. The defined benefit scheme is legally separated from the Group and is managed by a board of trustees. The board of trustees of the scheme is required by its articles of association to act in the best interest of the fund and is responsible for setting the investment policies. The Group is represented on the board of trustees by employer nominated and appointed trustees. The pension costs relating to the defined benefit scheme are assessed in accordance with the advice of an independent qualified actuary using the projected unit credit method of valuation. The latest actuarial valuation of the Group’s pension scheme was carried out as at 31 March 2017 (approved 8 January 2018). In accordance with the terms of the recovery plan dated 8 January 2018 the Group expects to contribute £nil to the defined benefit pension scheme in the year ending 31 December 2019. The next scheme funding actuarial valuation is due as at 31 March 2020. Any recovery plan, should this be required, and schedule of contributions will be reviewed at this date. The scheme was closed to future accrual at 1 July 2011 and any remaining surplus upon satisfaction of all scheme liabilities is returnable to the Group. The scheme exposes the Group to actuarial risk such as interest rate risk, investment risk, longevity risk and inflation risk: Value of scheme assets Interest rate risk The present value of the defined benefit liabilities is calculated using a discount rate determined by reference to market yields of high quality corporate bonds. The estimated term of the bonds is consistent with the estimated term of the defined benefit obligation. A decrease in market yield on high quality corporate bonds will increase the value of the scheme’s liabilities, although it is expected that this would be offset partially by an increase in the fair value of certain of the plan assets. Investment risk The plan assets at 31 December 2019 are held predominantly in equity and debt instruments. The fair value of the equity assets is exposed to the risks of movements in UK and Overseas equity markets. Longevity risk The Group is required to provide benefits for life for the members of the scheme. The liabilities of the scheme are sensitive to unexpected changes in future mortality. Inflation risk Elements of the pensions in payment under the scheme are linked to inflation. An increase in the inflation rate would increase the value placed on the liability. A portion of the plan assets are inflation-linked debt securities which will mitigate some of the effects of inflation. Equities UK Overseas Bonds UK Government UK Corporate Equity-linked Bonds Cash Other Total market value of assets Present value of scheme liabilities Surplus in the scheme Related deferred tax liability Net pension asset Value at 31 December 2019 £’000 2018 £’000 2017 £’000 – – – 365 – 459 3,338 1,998 2,058 – – – 2,482 3,077 3,487 31 2,701 8,552 33 2,324 7,797 60 2,451 8,515 (6,347) (6,167) (6,317) 2,205 (375) 1,830 1,630 (277) 1,353 2,198 (374) 1,824 66 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued A reconciliation of the defined benefit obligation and plan assets to the amounts presented in the balance sheet for each of the reporting periods is presented below: Defined benefit obligation Fair value of plan assets Analysis of the amount charged to other finance income: Interest income Interest on pension scheme liabilities Past service cost (including curtailments) Administration cost Total income recognised in profit or loss Past service cost relates to the provision made to cover the equalisation of GMP. Analysis of amount recognised in statement of comprehensive income: Return on plan assets (excluding amounts included in net interest) Actuarial (gains) / losses from changes in financial assumptions Actuarial gains from changes in demographic assumptions Actuarial losses from experience differing from that assumed Total income recognised in other comprehensive income Movements in the fair value of plan assets At 1 January Interest income Return on plan assets (excluding amounts included in net interest) Contributions Benefits paid Administration costs At 31 December Movements in the defined benefit obligation At 1 January Past service cost Interest cost Remeasurement - actuarial (gains) / losses from changes in financial assumptions Remeasurement - actuarial losses from changes in demographic assumptions Remeasurement - experience differing from that assumed Benefits paid At 31 December 67 2019 £’000 2018 £’000 (6,347) (6,167) 8,552 2,205 205 (161) – (50) (6) 979 (526) 128 – 581 2019 £’000 7,797 205 979 – (379) (50) 8,552 7,797 1,630 202 (149) (61) (28) (36) (695) 253 38 (128) (532) 2018 £’000 8,515 202 (695) – (197) (28) 7,797 2019 £’000 2018 £’000 (6,167) (6,317) – (161) (526) 128 – 379 (61) (149) 253 38 (128) 197 (6,347) (6,167) The assumptions adopted for the scheme valuation were developed by Group management with the advice of an independent actuary. These assumptions are based on current actuarial benchmarks, management’s historical experience and by reference to market yields on corporate bonds. The significant actuarial assumptions used for the valuation are as follows: Actuarial assumptions Rate of increase in pensionable salaries Rate of increase in pensions in payment Discount rate Inflation assumption 2019 % 2018 % 2017 % 2.5 2.7 1.9 2.7 3.2 3.1 2.7 3.2 3.2 3.1 2.4 3.2 The mortality assumption adopted for the purposes of the calculations as at 31 December 2019 is as follows: • • Base table: S2PxA tables, year of birth Future mortality improvements: CMI 2018 mortality projection model at 1.5% per annum. Average life expectancies – Billington Scheme Male retiring at reporting date at age 62 (in years) Male retiring at reporting date +20 years at age 62 (in years) Female retiring at reporting date at age 62 (in years) Female retiring at reporting date +20 years at age 62 (in years) 2019 2018 24.4 26.2 26.4 28.3 24.9 26.7 26.9 28.8 Members are assumed to retire at the earliest age at which they can take their full pension unreduced. No allowance is included for members continuing their benefits at retirement. The significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, the rate of inflation and the average life expectancy. The calculation of the net defined benefit surplus is sensitive to these assumptions. Changes in the significant actuarial assumptions 0.5% increase to discount rate 0.5% increase in inflation and related assumptions 1 year increase in life expectancy 2019 £’000 (444) 317 190 2018 £’000 (432) 308 185 The above shows the impact on the defined benefit obligation if the assumptions were changed as shown (assuming all other assumptions remain constant). This sensitivity analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the assumptions would occur in isolation of one another as some of the assumptions may be correlated. 68 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 22. Related party transactions No transactions took place with any companies with which the Group has common directors during the year. There were no outstanding balances with any such related parties at either the opening or closing balance sheet dates. 23. Joint ventures The Group’s investment in joint ventures relates to an equal shareholding of £1 held in BS2 (2011) Limited which was incorporated on 23 February 2011. The principal activity of BS2 (2011) Limited is that of design engineering, fabrication and construction of structural steelwork and commenced trading on 1 November 2011. The joint venture has been accounted for in the Group accounts using the equity accounting method. The Group’s share of transactions and balances with BS2 (2011) Limited as at 31 December 2019 were as follows: The Group’s share of transactions and balances with BS2 (2011) Limited Share of revenue Share of profit before taxation Share of profit after taxation Share of current assets Share of liabilities due within one year 24. Reconciliation of net cash flow to movement in net cash At 1 January 2018 Cash flow At 31 December 2018 Cash flow At 31 December 2019 Cash and cash equivalents £’000 Property loans £’000 8,063 1,248 9,311 8,545 17,856 (2,004) 254 (1,750) 250 (1,500) £’000 – – – 3 3 Net cash £’000 6,059 1,502 7,561 8,795 16,356 69 Balmoral Tanks, Norfolk The defined benefit pension scheme performed well in the period despite a backdrop of continued volatility in the equity market. 70 71 Circle Square, Manchester 72 Parent company statement of financial position as at 31 December 2019 Note 2019 2018 £’000 £’000 £’000 £’000 Fixed assets Tangible assets Investments Current assets Debtors falling due within one year Cash at bank and in hand 8 9 11 1,136 17,854 18,990 Creditors: amounts falling due within one year 12 (15,671) Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Called up share capital Share premium Capital redemption reserve Other reserve Retained earnings Shareholders’ funds 13 15 16 16 16 16 8,542 570 9,112 3,319 12,431 – 12,431 1,293 1,864 132 (820) 9,962 12,431 1,286 9,310 10,596 (4,364) 8,628 570 9,198 6,232 15,430 (1,500) 13,930 1,293 1,864 132 (844) 11,485 13,930 The parent company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The loss after taxation and receipt of dividends of the company for the year was £6,000 (2018: profit of £2,948,000). The parent company financial statements were approved and authorised for issue by the Board of Directors on 20 April 2020. Ian Lawson Non executive Chairman Trevor Taylor Chief Financial Officer The notes 1 to 21 form part of these parent company financial statements. 73 Parent company statement of changes in equity for the year ended 31 December 2019 Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Other reserve - ESOT £’000 Accumulated profits £’000 At 1 January 2018 Profit for the financial year Credit relating to equity-settled share-based payments Dividends At 31 December 2018 1,293 1,864 132 (844) – – – – – – – – – – – – 1,293 1,864 132 (844) 9,875 2,948 47 (1,385) 11,485 Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Other reserve - ESOT £’000 Accumulated profits £’000 At 1 January 2019 ESOT movement in year Loss for the financial year Credit relating to equity-settled share-based payments Dividends At 31 December 2019 1,293 1,864 132 – – – – – – – – – – – – (844 24 – – – 1,293 1,864 132 (820) 11,485 (24) (6) 72 (1,565) 9,992 The notes 1 to 21 form part of these parent company financial statements. Total equity £’000 12,320 2,948 47 (1,385) 13,930 Total equity £’000 13,930 – (6) 72 (1,565) 12,431 Edinburgh Airport 74 Notes forming part of the parent company financial statements for the year ended 31 December 2019 1. Company information 4. Accounting Policies Billington Holdings Plc is a company domiciled in England and Wales, registration number 02402219. The registered office is Basis of preparation of financial statements The financial statements have been prepared on the historical cost Barnsley Road, Barnsley, S73 8DS. basis. The presentation currency is Sterling (£). The company is a holding company providing management services to its subsidiaries. 2. Compliance with Accounting Standards These financial statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 - ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (‘FRS 102’), and with the Companies Act 2006. The individual accounts of Billington Holdings Plc have also adopted the following disclosure exemptions: • the requirement to present a statement of cash flows and related notes. • • key management personnel certain financial instruments 3. Significant judgements and estimates Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgements and estimates have been made include: Impairment of assets Management determine whether there are indications of Going concern The consolidated financial statements have been prepared on a going concern basis. The directors have taken note of the guidance issued by the Financial Reporting Council on Going Concern Assessments in determining that this is the appropriate basis of preparation of the financial statements and have considered a number of factors. The financial position of the Group, its record trading performance in 2019 and cash flows are detailed in the Financial Review and they demonstrate the robust position of the Group heading into 2020. The Group has a gross cash balance of £17.9 million at 31 December 2019 and no significant long-term borrowings or commitments. At the end of March 2020 the Group had a gross cash balance of £13.0 million and during March 2020 the Group have secured a 12 month overdraft facility of £3 million, giving the Group available cash to utilise of £16.0 million. The directors have prepared forecasts covering the period to April 2021 and approved by the Board in March 2020. The forecasts reflect the exceptional nature of the 2019 trading performance and the current political and economic uncertainty and pricing pressures in the structural steel market, excluding the potential impact of Covid-19 which is considered below. The uncertainty as to the future impact on the Group of the recent Covid-19 outbreak has been separately considered as part of the directors’ consideration of the going concern basis of preparation. The directors put in a place many positive preventative measures impairment of the Company’s tangible assets. Factors taken into at an early stage in the outbreak in response to Covid-19 to consideration in reaching such a decision include the economic minimise the potential impact. Thus far, the measures have been viability and expected future financial performance of the asset. effective. Estimation uncertainty When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. In the downside scenario analysis performed, the directors have considered the reasonably plausible impact of the Covid-19 outbreak on the Group’s trading and cash flow forecasts. In preparing this analysis, a number of scenarios were modelled ranging from a 30% drop in revenue by June 2020 followed by a gradual recovery from September through to December, to a total country-wide lockdown and subsequent closure of all sites for up to six months. In each scenario, mitigating actions 75 within the control of management, including reductions in areas of discretionary spend, have been modelled, but no fixed cost reductions have been assumed. It is difficult to predict the overall outcome and impact of Covid-19 at this stage and the duration of disruption could conceivably be longer than anticipated. However, even under the scenario of the closure of all sites for a significant period, the company has sufficient liquidity and resources to continue to meet liabilities as they fall due, without any additional funding from either financial institutions or the government, which is considered separately below. The UK Government has announced a number of funding initiatives throughout March 2020 to support businesses. The main scheme that the Group is eligible for is the Coronavirus Job Retention Scheme. The Scheme grants support from HMRC to cover up to 80% of salary costs of anyone not working due to Coronavirus but whose job has been retained, up to a maximum of £2,500 per month for an initial period up to 31 May 2020, but it will be extended if necessary. If there was a significant reduction in operations or if any or all of the sites were required to close, the scheme would provide a significant amount of support and short- term cost reduction without impacting the long-term strategy of the Group. Notwithstanding these positive indications of the financial stability of the Group, there is a risk that the impact of Covid-19 could be more significant than can be currently anticipated and the Directors have concluded that these circumstances represent a material uncertainty which could cast significant doubt on the Group’s ability to continue as a going concern. (b) Current and deferred tax The tax expense for the year comprises current and deferred tax. Tax is recognised in retained earnings. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Deferred balances are recognised on all timing differences that have originated but not reversed by the statement of financial position date, except that: • the recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and • any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met. Deferred tax balances are not recognised in respect of permanent differences. (c) Retirement benefits Defined Contribution Pension Schemes The pension costs charged against operating profits represent the amount of the contributions payable to the schemes in respect of the accounting period. (d) Investments Nonetheless, the Directors expect that the Group has sufficient resources to enable it to continue to adopt the going concern basis Within the parent company, investments in subsidiary in preparing the financial statements. These financial statements undertakings are stated at cost less provision for permanent do not include any adjustment that would arise if the going diminution in value. concern basis of preparation was not considered appropriate. (e) Debtors (a) Property, plant and equipment Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment. Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any Depreciation is calculated to write off the cost of fixed assets less impairment. estimated residual value by equal annual instalments over their expected useful lives. Land is not depreciated. The rates applicable (f) Creditors are: Buildings Plant and equipment 2% 5% to 33.3% Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method. The Wave, Coventry 76 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued (g) Financial instruments (h) Leased assets The company uses financial instruments, other than derivatives, All leases are operating leases and the annual rentals are charged comprising borrowings, cash resources and various items such as wholly to retained earnings. trade debtors, trade creditors etc. that arise from its operations. The main purpose of these financial instruments is to raise finance for the company’s operations. Income and expenditure arising on financial instruments is recognised on the accruals basis, and credited or charged to retained earnings in the financial period to which it relates. 5. Profit/(loss) Profit/(loss) before taxation is stated after: Depreciation Fees payable to the company’s auditor for the audit of the company’s annual accounts Fees payable to the company’s auditor for other services: tax compliance other services Operating lease rentals Reconciliation to profit/(loss): Loss after tax Dividends received 2019 £’000 110 36 4 44 51 2019 £’000 (6) – (6) 2018 £’000 96 36 4 41 49 2018 £’000 (52) 3,000 2,948 77 Pinewood Studios, Slough 6. Directors and employees Staff costs during the year including directors Wages and salaries Social security Pension costs Share-based payments The average number of employees of the company during the year was 19 (2018: 17). Remuneration in respect of directors Aggregate emoluments Company pension contributions to a defined contribution scheme 2019 £’000 1,267 170 44 72 2018 £’000 1,190 142 51 47 1,553 1,430 2019 £’000 646 16 2018 £’000 630 23 During the year no directors (2018: no directors) participated in defined benefit pension schemes and two directors (2018: two directors) participated in a defined contribution pension scheme. During the year two directors (2018: no directors) exercised share options. The amounts set out above include remuneration in respect of the highest paid director as follows: Remuneration in respect of the highest paid director Aggregate emoluments Company pension contributions to a defined contribution scheme 2019 £’000 283 9 2018 £’000 260 6 78 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 7. Dividends A final dividend was proposed in respect of 2018 of 13.0 pence per ordinary share (£1,681,463). No final dividend has been proposed in respect of 2019 as the dividend has been suspended to preserve cash resources. 8. Property, plant and equipment Cost At 1 January 2019 Additions Reclassification At 31 December 2019 Depreciation At 1 January 2019 Charge for year At 31 December 2019 Net book value at 31 December 2019 Net book value at 31 December 2018 Land & buildings £’000 Plant & equipment £’000 9,245 17 (63) 9,199 628 88 716 8,483 8,617 59 7 63 129 48 22 70 59 11 Total £’000 9,304 24 – 9,328 676 110 786 8,542 8,628 Included within land and buildings above is land with a value of £3,947,000 inclusive of leasehold land of £1,000,000. The company has charged the freehold properties to secure bank facilities across the Group. 9. Investments Cost At 1 January 2019 Movement in year At 31 December 2019 Shares in subsidiary undertakings £’000 570 – 570 All companies have only ordinary shares in issue and are registered in England and Wales unless otherwise stated. The principal trading subsidiary undertakings are disclosed in note 9 of the Group consolidated financial statements. 79 7. Share based payments The company operates a share based payment scheme for certain employees. These share options are granted based on seniority and length of service with share options granted in the Company. There are two Trusts in existence being an Inland Revenue approved share option scheme and an unapproved share option scheme. The options are granted with a fixed exercise price, are exercisable three years after the date of grant and expire ten years after the date of grant. Employees are not entitled to dividends until the shares are exercised. Employees are required to remain in employment with the Company until exercise, otherwise the awards lapse. On exercise of the options by the employees the Company issues shares held in the relevant trust in operation. In addition, one of the schemes provides additional remuneration for those employees who are key to the operations of the Company. Vesting of the options for this scheme is also conditional on meeting agreed growth targets (non-market performance conditions). Brought forward at 1 January Granted Exercised Lapsed Outstanding at 31 December Exercisable at the end of the year No. of shares Weighted average exercise price (£) 2019 102,264 136,954 (50,000) (3,862) 185,356 36,001 2018 89,863 12,401 – – 102,264 – 2019 1.92 – 1.65 – 0.59 3.03 2018 1.92 – – – 1.92 The Company is unable to directly measure the fair value of employee services received. Instead the fair value of the share options granted during the year is determined using the Black-Scholes model. The model is internationally recognised as being appropriate to value employee share schemes similar to this scheme. Under FRS102, the Group recognises an expense in the relevant company’s financial statements. The expense is apportioned over the vesting period based upon the number of options which are expected to vest and the fair value of those options at the date of grant. The total charge apportioned to Billington Holdings plc and recognised as expense in the year was £72,000 (2018: £47,000). 11. Debtors Amounts falling due within one year Amounts owed by Group undertakings Other debtors Prepayments and accrued income Deferred tax asset 2019 £’000 1,052 61 15 8 2018 £’000 1,204 48 25 9 1,136 1,286 Amounts owed by group undertakings are payable on demand. Interest payable on these loans is charged at a market rate. No provisions are deemed to be required against the outstanding amounts. 80 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 12. Creditors: amounts falling due within one year Amounts falling due within one year Bank loans Trade creditors Amounts owing to Group undertakings Social security and other taxes Accruals and deferred income Current taxation 2019 £’000 1,500 184 2018 £’000 250 429 13,345 3,064 80 522 40 60 545 16 15,671 4,364 Amounts owed to group undertakings are payable on demand. Interest payable on these loans is charged at a market rate. 13. Creditors: amounts falling due after more than one year Amounts falling due after more than one year Bank loans and mortgages Bank loans are repayable as follows: Within one year Between one to two years The bank loans are secured by way of first legal mortgage over certain freehold properties of the Group. 2019 £’000 – 1,500 – 1,500 2018 £’000 1,500 250 1,500 1,750 81 Shafton Steel Services 14. Deferred tax asset Deferred tax provided in the financial statements is set out below and is calculated using a tax rate of 17% (2018: 17%). Accelerated capital allowances Other short term timing differences Accelerated capital allowances 2019 £’000 2018 £’000 4 4 8 7 2 9 The recoverability of the deferred tax asset is dependent on future Group taxable profits which the directors consider likely as a result of recently prepared financial forecasts. 15. Called up share capital Equity Authorised Ordinary shares of 10p each Allotted and fully paid Ordinary shares of 10p each “A” ordinary shares of 10p each 2019 2018 No. of shares £’000 No. of shares £’000 27,500,000 2,750 27,500,000 2,750 12,860,959 1,286 12,860,959 73,368 7 73,368 12,934,327 1,293 12,934,327 1,286 7 1,293 Both classes of share rank pari passu in all respects. Details of company share options outstanding at 31 December 2019 and treasury shares held by the ESOT are given in note 10 of the Group financial statements. 16. Reserves Share premium - represents the premiums received on issue of share capital. Capital redemption reserve - represents the accumulated balance resulting from the Company’s purchase of own shares. Other reserve - represents the accumulated balance of share capital held by the Employee Share Ownership Trust. Retained earnings - includes all current and prior period retained profits and losses. 17. Ultimate controlling related party At the year end, the directors considered that the Company had no ultimate controlling party. 82 Notes forming part of the Group financial statements for the year ended 31 December 2019 Continued 18. Leasing commitments Future operating lease payments Within one year Between one and five years 19. Retirement benefits 2019 2018 Land & buildings £’000 Other £’000 Land & buildings £’000 Other £’000 – – - 14 5 19 – – - 50 18 68 The company operates funded pension schemes for certain employees and directors. The total contributions to all pensions by the company for the year was £44,000 (2018: £49,000). Defined contribution schemes accounted for £44,000 (2018: £49,000) of this amount with £nil (2018: £nil) relating to defined benefit schemes, where the benefits are based on final pensionable pay. 20. Related party transactions No transactions took place with any companies with which the Group has common directors during the year. There were no outstanding balances with any such related parties at either the opening or closing balance sheet dates. In accordance with FRS102 Billington Holdings plc is exempt from disclosing related party transactions with its wholly owned subsidiaries. 21. Contingent liabilities The company is part of the Group cross guarantee to the principal bankers. At the year end there were no outstanding liabilities. 83 Audley Retirement Village, Surrey The Company will continue to work towards improving efficiencies and maintaining and strengthening its client relationships 84 Billington Holdings Plc Steel House, Barnsley Road, Wombwell, Barnsley, South Yorkshire S73 8DS Tel: +44 (0) 1226 340666 | Email: info@billington-holdings.plc.uk | www.billington-holdings.plc.uk
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