The directors present the strategic report for the year ended 30 June 2020.
D A Benham Engineering Limited is an established Tier 1 supplier to aerospace and defence OEM contractors and is committed to providing a flexible and responsive service to our customers. D A Benham uses leading-edge technology including five axis prismatic and mill turn equipment technology to manufacture a broad range of complex precision-engineered components and sub-assemblies.
Businesses are now facing one of their largest challenges in responding to the Coronavirus pandemic and it is expected 2021, because of Covid 19, will be a challenging year and the group will focus on safeguarding staff, profitability and maintaining customer relationships. Nevertheless the group has a strong balance sheet with net assets of £6,960,888 (2019: £6,370,232) and the directors are confident the company will remain profitable and in a strong position during 2021.
Brexit will also undoubtedly have an impact on businesses within the UK, but this remains unknown. The availability of skilled labour remains one of the main factors which can have an impact on the business. Through the on-going recruitment of apprentices we are endeavouring to grow our own skills.
As a result of Brexit we continue to anticipate the cost of our purchases to increase, which may have an impact on our profitability, specifically where the supply of parts is governed by contract.
Principle risk:
The group operates principally in the areospace and defence sector and budgets are subject to variations in the current economic climate. The group has a strong team and reputation within the sector and is well placed to win contracts. Increased competition may have an impact on margins achievable. This is considered to be the principal risk and uncertainty for the group.
Financial Instruments:
The group's principle financial instrument is cash. The group has various other financial assets and liabilities such as trade debtors and creditors arising directly from its operations.
Liquidity risk:
The group maintains cash reserves at amounts sufficient to ensure that funds are available for operation.
Interest rate risk:
The group is exposed to interest rate risk on its bank deposits.
Credit risk:
The group's principle financial assets are cash and trade debtors and the credit risk associated with these are minimal. Customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Price risk:
The directors consider that the company faces the usual risk of any other company operating in a competitive, commercial environment.
Sales for the period showed a decrease from the previous financial period, decreasing to £9,667,852 which represents an decrease of 7.0%.
Our relationships continue to develop and mature with our strategic partners within the defence and aerospace defence sectors. Sales to the civil aerospace sector sustained 45% of turnover and sales to the aerospace defence sector represented 42% of sales. The remaining 13% of sales being predominately to the defence sector.
Our order book remains robust with future opportunities identified.
Financial key performance indicators represent the challenges facing the business, specifically customer cost down expectations, increasing costs and the extent of new business within the business.
2020 2019 2018
Turnover 9,667,852 10,398,782 9,147,813
Gross Profit 2,766,845 3,105,386 2,248,262
Operating Profit 1,250,092 1,302,216 490,369
Our challenge is to remove cost from the business and ensure our commercial offering facilitates improved profitability.
The business continues to maintain a strong financial position at the end of the period. The on-going investment in the facility, plant and our people is continuing to provide exciting opportunities for the business.
The diversity in our customer base together with meeting our customers’ expectations continues to require a high level of commitment from both the management team and employees.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2020.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The financial statements have been prepared using merger accounting and therefore the combine d results include full results of D A Benham Engineering Limited and Newturn CNC Machining Limited for the year ended 30 June 2020 and the results of Benham Holdings Limited from the date it commenced activities. The prior information represents D A Benham Engineering Limited and Newturn CNC Machining Limited for the year ended 30 June 2019.
Ordinary dividends were paid amounting to £397,462. The directors do not recommend payment of a further dividend.
Azets Audit Services were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Benham Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2020 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard , and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue .
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report and the directors' r eport .
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s profit for the year was £430,777 (2019 - £0 profit).
Benham Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Precision House, Chapel Lane, Rushington, Southampton, Hampshire, United Kingdom, SO40 9AH.
The group consists of Benham Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ : Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income ;
Section 33 ‘Related Party Disclosures’ : Compensation for key management personnel .
The consolidated financial statements incorporate those of Benham Holdings Limited and all of its subsidiaries (ie entities that the g roup controls through its power to govern the financial and operating policies so as to obtain economic benefits .
Subsidiaries acquired during the year under a group reorganisation have been consolidated using merger accounting. These financial statements therefore include the full year for the subsidiary concerned as well as full comparative information.
All financial statements are made up to 30 June 2020 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The directors have considered the impact of Covid 19 and although there has been a decrease in trading, the company have taken appropriate measures to mitigate the impact of this. They consider that the company is well placed to cope with any challenges and t hus t he directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business , and is shown net of VAT and other sales related taxes . The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods) , the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity in vest ments are measured at fair value through profit or loss , except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably , which are recognised at cost less impairment until a reliable measure of fair value becomes available.
I n the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest m ethod unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future paymen ts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease d asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The main areas of accounting estimate are:
Slow moving stock provisions - As orders are made to customer specification, any excess stock is retained but regarded as redundant with no value assigned.
Work in progress - Recognition of revenue and profit is based on judgments in respect of the ultimate profitability of the product. Such judgments are arrived at through the use of estimation in relation to costs and value of work performed to date to bring product to completion.
Depreciation - Recognition of revenue and profit is based on judgments in respect of the ultimate profitability of the product. Such judgments are arrived at through the use of estimation in relation to costs and value of work performed to date to bring product to completion.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Hire purchase liabilities, included within other creditors, are secured on the assets to which they relate.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
On 24th July 2019, 100 ordinary shares with aggregate value of £100 were allocated for cash at £1 each.
During the year the company issued 100 shares in a share for share exchange as part of the acquisition of its subsidiary company. Each share was issued with a value of £1.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The COVID-19 pandemic has developed rapidly in 2020, which led to a significant lockdown of the economy except for some essential services. Whilst the directors are unable to quantify the impact that COVID-19 will have on the business, the company continues to have substantial cash reserves, a profitable outlook and a strong equity position.
Thus the directors are confident that the business will remain profitable during 2021 and revenue and profitability will increase once the initial impact of the pandemic decreases and the world economies reopen. Management continues to consider the potential implications of the COVID-19 pandemic, and at this stage it has not had a material impact on any of the balances reported in the company’s financial statements.
As explained in the strategic report the company has taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for our people (such as social distancing) and securing the supply of materials that are essential to our production process and utilising the government assistance measures.
We will continue to follow the government policies and advice and, in parallel, we will do our utmost to continue our operations in the best and safest way possible without jeopardising the health of our people. We also refer to note 1.2.
During the year the company was charged rent of £29,600 (2019: £29,600) by Benham Engineering Limited (1994) which is a related party. At the year end there was a balance of £8,880 (2019: £8,880) due to Benham Engineering Limited (1994) in relation to this rent charge.
During the year the company made repayments of £75,633 (2019: £56,725) to Benham Engineering Limited (1994) in relation to a loan from Benham Engineering Limited (1994). The loan balance outstanding at the year end was £211,141 (2019: £263,394) with interest of £23,380 (2019: £26,119) charged to the company.
During the year the group was charged rent of £14,500 (2019: £14,500) by the directors. At the year end there was a balance of £nil (2019: £3,625) due to this director in relation to the rent charge. An additional £1,884 (2019: £493) was recharged to the group by this director for group invoices paid privately. At the year end there was a balance of £1,884 (2019: £nil) due to this director in relation to the recharges.
The ultimate controlling party is considered to be Mr P C Benham, due to his majority shareholding in the parent company.