Company registration number 03949982 (England and Wales)
PUNJAB PAPER CONVERTERS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
PUNJAB PAPER CONVERTERS LIMITED
COMPANY INFORMATION
Directors
M Arshad
T Arshid
Company number
03949982
Registered office
Lower Warehouse Site
Lower Eccleshill Road
Darwen
Lancashire
BB3 0RP
Auditor
Xaviers Accountants Limited
Suite 3J
Recycling Lives Centre
1a Essex Street
Preston
PR1 1QE
Accountant
Douglass Grange
Ground floor, Capricorn House
Capricorn Park
Blakewater Road
Blackburn
BB1 5QR
PUNJAB PAPER CONVERTERS LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 26
PUNJAB PAPER CONVERTERS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2022
- 1 -
The directors present the strategic report for the year ended 31 August 2022.
Review of the business
Our principal trading activity is the manufacture and sale of bathroom tissue and kitchen towel for retail consumer markets (mainly the convenience store sector) and the Away from Home (AFH) market which includes hospitality and industrial sectors.
The company continues to promote and develop its own brands Soft Lux, Double Lux, Your Choice, Zappit! and Use It!. There has been increased activity in production for private labels.
Our main aim has been to maintain supply through the pandemic and overcome issues arising from availability, supply times and costs.
We took the decision to invest in a new Futura machine, our Line 3. This will allow more efficient production enabling turnover growth. The investment included inter alia time, materials and professional support to enable us to fully commission the machine to manufacture our products. Additional work continued to improve the manufacturing process for bathroom tissue up to 31 May 2023 when it was deemed that commissioning was completed. If the machine were to be used to manufacture alternative products, additional commissioning costs may be incurred.
Having invested heavily in Line 3 we don't plan significant further investment in the short to medium term.
During the year to 31 August 2022, £822,751 commissioning costs have been capitalised.
Principal risks and uncertainties
The new Line 3 will allow us to better meet any future changes in demand in a more cost efficient manner. The variety of our customer base means that the company is somewhat protected from the extreme variations in individual sectors.
The directors continue to assess the risks faced by the company, especially those that have arisen from recent working capital challenges as a result of the significant investment in Line 3. At the time of signing these accounts the business has successfully refinanced with Praetura Commercial Finance, who have provided on 28 September 2023 both a term loan secured on the property and a £2million invoice discounting facility. This refinance puts the business on a stable financial footing enabling the directors to have confidence in the capacity of the company to meet its debts as they fall due. Post refinance on 28 September 2023 the company's balance sheet and its future cashflows demonstrate a sound financial footing.
Key performance indicators
The directors monitor the performance of the company by reference to turnover, stock holding and profitability. Turnover has risen this year mainly as a result of of paper prices compared to the prior year.
| | |
Number of cases produced per day | | |
| | |
Average sales price per case | | |
Stock held at 31 August 2021 reflected the higher stock levels held in anticipation of commissioning Line 3.
Strategic management
Our aim is to increase the company's market share by adding new pack formats and new products. The new Line 3 will facilitate these key changes, specifically it enables us to manufacture products faster. The company's performance is reviewed on a monthly basis to ensure that the results are as good as they can be. This allows for any changes to be put in place to minimise any negative results.
PUNJAB PAPER CONVERTERS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 2 -
M Arshad
Director
13 October 2023
PUNJAB PAPER CONVERTERS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 AUGUST 2022
- 3 -
The directors present their annual report and financial statements for the year ended 31 August 2022.
Principal activities
The principal activity of the company continued to be that of the manufacture of hygiene paper products from paper conversion.
Results and dividends
The results for the year are set out on page 8.
The earnings before interest, tax and depreciation (EBITDA) for the current year were £114k (2021 - £538k)
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
M Arshad
F Arshid
(Resigned 24 August 2023)
T Arshid
Auditor
Xaviers Accountants Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
M Arshad
Director
13 October 2023
PUNJAB PAPER CONVERTERS LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 AUGUST 2022
- 4 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
PUNJAB PAPER CONVERTERS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF PUNJAB PAPER CONVERTERS LIMITED
- 5 -
Opinion
We have audited the financial statements of Punjab Paper Converters Limited (the 'company') for the year ended 31 August 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 August 2022 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the strategic report and the directors' report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
PUNJAB PAPER CONVERTERS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF PUNJAB PAPER CONVERTERS LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, set out on Page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
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 financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
- Enquiry of management and those charged with governance around actual and potential litigation and claims.
- Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. he risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
PUNJAB PAPER CONVERTERS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF PUNJAB PAPER CONVERTERS LIMITED
- 7 -
This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
Mijos Xavier FCCA
Senior Statutory Auditor
For and on behalf of Xaviers Accountants Limited
13 October 2023
Chartered Certified Accountants
Statutory Auditor
Suite 3J
Recycling Lives Centre
1a Essex Street
Preston
PR1 1QE
PUNJAB PAPER CONVERTERS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2022
- 8 -
2022
2021
Notes
£
£
Turnover
3
10,293,196
7,340,252
Cost of sales
(8,354,470)
(5,099,283)
Gross profit
1,938,726
2,240,969
Administrative expenses
(2,124,639)
(1,844,022)
Other operating income
30,575
33,665
Operating (loss)/profit
4
(155,338)
430,612
Interest receivable and similar income
7
256
17
Interest payable and similar expenses
8
(183,182)
(106,988)
(Loss)/profit before taxation
(338,264)
323,641
Tax on (loss)/profit
9
1,628
(61,508)
(Loss)/profit for the financial year
(336,636)
262,133
Other comprehensive income
Revaluation of tangible fixed assets
2,480,756
Tax relating to other comprehensive income
(620,189)
Total comprehensive income for the year
1,523,931
262,133
The profit and loss account has been prepared on the basis that all operations are continuing operations.
PUNJAB PAPER CONVERTERS LIMITED
BALANCE SHEET
AS AT
31 AUGUST 2022
31 August 2022
- 9 -
2022
2021
Notes
£
£
£
£
Fixed assets
Tangible assets
12
8,681,399
5,519,343
Current assets
Stocks
13
1,137,844
2,611,076
Debtors
14
1,625,102
1,248,790
Cash at bank and in hand
352,424
269,823
3,115,370
4,129,689
Creditors: amounts falling due within one year
15
(5,310,056)
(4,203,644)
Net current liabilities
(2,194,686)
(73,955)
Total assets less current liabilities
6,486,713
5,445,388
Creditors: amounts falling due after more than one year
16
(2,061,614)
(3,162,781)
Provisions for liabilities
Deferred tax liability
19
942,958
324,397
(942,958)
(324,397)
Net assets
3,482,141
1,958,210
Capital and reserves
Called up share capital
21
50,000
50,000
Revaluation reserve
22
1,860,567
Profit and loss reserves
23
1,571,574
1,908,210
Total equity
3,482,141
1,958,210
The financial statements were approved by the board of directors and authorised for issue on 13 October 2023 and are signed on its behalf by:
M Arshad
Director
Company registration number 03949982 (England and Wales)
PUNJAB PAPER CONVERTERS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2022
- 10 -
Share capital
Revaluation reserve
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 September 2020
50,000
1,675,077
1,725,077
Year ended 31 August 2021:
Profit and total comprehensive income
-
-
262,133
262,133
Dividends
10
-
-
(29,000)
(29,000)
Balance at 31 August 2021
50,000
1,908,210
1,958,210
Year ended 31 August 2022:
Loss
-
-
(336,636)
(336,636)
Other comprehensive income:
Revaluation of tangible fixed assets
-
2,480,756
-
2,480,756
Tax relating to other comprehensive income
-
(620,189)
(620,189)
Total comprehensive income
-
1,860,567
(336,636)
1,523,931
Balance at 31 August 2022
50,000
1,860,567
1,571,574
3,482,141
PUNJAB PAPER CONVERTERS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2022
- 11 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
27
1,633,984
1,142,374
Interest paid
(183,182)
(106,988)
Income taxes refunded/(paid)
50,970
(45,388)
Net cash inflow from operating activities
1,501,772
989,998
Investing activities
Purchase of tangible fixed assets
(957,125)
(3,413,071)
Proceeds from disposal of tangible fixed assets
6,000
Interest received
256
17
Net cash used in investing activities
(950,869)
(3,413,054)
Financing activities
Repayment of borrowings
(262,833)
2,699,212
Repayment of bank loans
(67,334)
(14,177)
Payment of finance leases obligations
(111,889)
(111,650)
Dividends paid
(29,000)
Net cash (used in)/generated from financing activities
(442,056)
2,544,385
Net increase in cash and cash equivalents
108,847
121,329
Cash and cash equivalents at beginning of year
243,577
122,248
Cash and cash equivalents at end of year
352,424
243,577
Relating to:
Cash at bank and in hand
352,424
269,823
Bank overdrafts included in creditors payable within one year
(26,246)
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
- 12 -
1
Accounting policies
Company information
Punjab Paper Converters Limited is a private company limited by shares incorporated in England and Wales. The registered office is Lower Warehouse Site, Lower Eccleshill Road, Darwen, Lancashire, BB3 0RP.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, [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.
1.2
Going concern
Atruet 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. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements. Specific details relating to going concern are disclosed in note 29.
1.3
Turnover
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.
1.4
Intangible fixed assets - goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 20 years.
1.5
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or professional revaluation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Land and buildings Freehold
2% on cost
Plant and machinery
5% reducing balance
Fixtures, fittings & equipment
15% reducing balance
Computer equipment
15% reducing balance
Motor vehicles
25% reducing balance
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
1
Accounting policies
(Continued)
- 13 -
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Commissioning costs are capitalised within plant and machinery but not depreciated until commissioning is complete.
1.6
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.8
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.9
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
1
Accounting policies
(Continued)
- 14 -
Impairment of financial assets
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.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
1
Accounting policies
(Continued)
- 15 -
1.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
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.
1.12
Employee benefits
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.
1.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.14
Leases
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 leases asset are consumed.
1.15
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
1
Accounting policies
(Continued)
- 16 -
1.16
Foreign exchange
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.
2
Judgements and key sources of estimation uncertainty
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, including the recognition of costs to commission equipment which should be capitalised and depreciated on completion to match the expected useful life of the asset concerned. 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.
3
Turnover
2022
2021
£
£
Turnover analysed by class of business
Manufacture and supply of quality hygiene paper products
10,293,196
7,340,252
2022
2021
£
£
Turnover analysed by geographical market
United Kingdom
10,144,575
7,310,476
Europe
148,621
29,776
10,293,196
7,340,252
4
Operating (loss)/profit
2022
2021
Operating (loss)/profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(4,740)
(15,301)
Government grants
(30,575)
(33,665)
Fees payable to the company's auditor for the audit of the company's financial statements
10,500
6,500
Depreciation of owned tangible fixed assets
228,386
55,807
Depreciation of tangible fixed assets held under finance leases
41,439
51,878
Operating lease charges
122,256
77,895
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 17 -
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Production, sales and marketing
45
49
Administration
5
5
Total
50
54
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
976,741
1,041,412
Social security costs
79,841
76,304
Pension costs
19,595
19,013
1,076,177
1,136,729
6
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
57,245
55,390
Company pension contributions to defined contribution schemes
1,157
1,085
58,402
56,475
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2021 - 3).
7
Interest receivable and similar income
2022
2021
£
£
Interest income
Interest on bank deposits
35
17
Other interest income
221
Total income
256
17
2022
2021
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
35
17
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 18 -
8
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
34,363
26,502
Interest on invoice finance arrangements
32,542
16,802
Other interest on financial liabilities
93,248
41,735
160,153
85,039
Other finance costs:
Interest on finance leases and hire purchase contracts
22,774
21,748
Other interest
255
201
183,182
106,988
9
Taxation
2022
2021
£
£
Current tax
Adjustments in respect of prior periods
(50,970)
Deferred tax
Origination and reversal of timing differences
45,464
268,917
Changes in tax rates
77,465
Tax losses carried forward
(124,557)
(156,439)
Total deferred tax
(1,628)
112,478
Total tax (credit)/charge
(1,628)
61,508
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
9
Taxation
(Continued)
- 19 -
The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
2022
2021
£
£
(Loss)/profit before taxation
(338,264)
323,641
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
(64,270)
61,492
Tax effect of expenses that are not deductible in determining taxable profit
38
Tax effect of income not taxable in determining taxable profit
(2,033)
(2,033)
Adjustments in respect of prior years
(8,109)
(108)
Effect of change in corporation tax rate
77,464
Permanent capital allowances in excess of depreciation
(7,659)
(1,223)
Depreciation on assets not qualifying for tax allowances
2,979
3,342
Taxation (credit)/charge for the year
(1,628)
61,508
In addition to the amount (credited)/charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
2022
2021
£
£
Deferred tax arising on:
Revaluation of property
620,189
-
10
Dividends
2022
2021
£
£
Interim paid
29,000
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 20 -
11
Intangible fixed assets
Goodwill
£
Cost
At 1 September 2021 and 31 August 2022
31,980
Amortisation and impairment
At 1 September 2021 and 31 August 2022
31,980
Carrying amount
At 31 August 2022
At 31 August 2021
12
Tangible fixed assets
Land and buildings Freehold
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost or valuation
At 1 September 2021
940,827
5,459,748
30,893
32,321
65,308
6,529,097
Additions
954,887
1,612
626
957,125
Disposals
(6,000)
(6,000)
Revaluation
2,259,173
2,259,173
At 31 August 2022
3,200,000
6,408,635
32,505
32,947
65,308
9,739,395
Depreciation and impairment
At 1 September 2021
205,902
735,182
26,524
9,748
32,398
1,009,754
Depreciation charged in the year
15,681
241,650
881
3,386
8,227
269,825
Revaluation
(221,583)
(221,583)
At 31 August 2022
976,832
27,405
13,134
40,625
1,057,996
Carrying amount
At 31 August 2022
3,200,000
5,431,803
5,100
19,813
24,683
8,681,399
At 31 August 2021
734,925
4,724,566
4,369
22,573
32,910
5,519,343
Plant and machinery additions includes £822,751 of capitalised commissioning costs (including capitalised interest). Commissioning of the machinery was not complete at the balance sheet date. No depreciation has been charged in the year on the capitalised commissioning costs.
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
12
Tangible fixed assets
(Continued)
- 21 -
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
2022
2021
£
£
Plant and machinery
631,040
777,845
Motor vehicles
24,683
32,910
655,723
810,755
During the year £29,282 (2021 - £0) of interest costs directly attributable to the financing of machinery being commissioned were capitalised. The total capitalised interest at 31 August 2022 was £29,282 (2021 - £0).
Land and buildings with a carrying amount of £3,200,000 were revalued at 1 July 2022 by Eddisons, independent valuers not connected with the company, on the basis of market value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.
The revaluation surplus is disclosed in note 22.
Land and buildings are carried at valuation. If land and buildings were measured using the cost model, the carrying amounts would have been approximately £716,107 (2021 - £593,913), being cost £940,827 (2021 - £940,827) and depreciation £224,720 (2021 - £205,902).
13
Stocks
2022
2021
£
£
Raw materials and consumables
745,221
1,740,534
Finished goods and goods for resale
392,623
870,542
1,137,844
2,611,076
14
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
1,605,461
1,173,529
Corporation tax recoverable
50,970
Prepayments and accrued income
19,641
24,291
1,625,102
1,248,790
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 22 -
15
Creditors: amounts falling due within one year
2022
2021
Notes
£
£
Bank loans and overdrafts
17
510,222
124,913
Obligations under finance leases
18
124,716
111,889
Other borrowings
17
923,237
697,708
Trade creditors
2,650,492
2,151,457
Taxation and social security
131,667
284,664
Other creditors
909,637
753,085
Accruals and deferred income
60,085
79,928
5,310,056
4,203,644
16
Creditors: amounts falling due after more than one year
2022
2021
Notes
£
£
Bank loans and overdrafts
17
175,000
653,889
Obligations under finance leases
18
44,400
169,116
Other borrowings
17
1,821,414
2,309,776
Other creditors
20,800
30,000
2,061,614
3,162,781
17
Loans and overdrafts
2022
2021
£
£
Bank loans
685,222
752,556
Bank overdrafts
26,246
Other loans
2,744,651
3,007,484
3,429,873
3,786,286
Payable within one year
1,433,459
822,621
Payable after one year
1,996,414
2,963,665
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
17
Loans and overdrafts
(Continued)
- 23 -
The bank loans and overdrafts provided by the company's bankers, National Westminster Bank plc, are secured by a specific equitable charge over all freehold and leasehold properties and all property and assets present and future including goodwill, bookdebts and the benefits of any licences.
Other loans, provided to the company by Futura/North West Loans/FW Capital Limited/ Whiteoak, are secured as follows
Futura over the asset (Line3)
North West Loans /FW Capital Limited by a debenture
Whiteoak unsecured CBILS loan
The company uses invoice financing, provided by Aldermore Invoice Finance, in respect of it's eligible debts. The facility is secured by a fixed and floating charge over the company's assets.
Obligations under finance leases are secured on the assets concerned.
18
Finance lease obligations
2022
2021
Future minimum lease payments due under finance leases:
£
£
Within one year
124,716
111,889
In two to five years
44,400
169,116
169,116
281,005
The fair value of the company's lease obligations is approximately equal to their carrying amount.
19
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2022
2021
Balances:
£
£
Accelerated capital allowances
692,500
480,836
Tax losses
(369,731)
(156,439)
Revaluations
620,189
-
942,958
324,397
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
19
Deferred taxation
(Continued)
- 24 -
2022
Movements in the year:
£
Liability at 1 September 2021
324,397
Credit to profit or loss
(1,628)
Charge to equity
620,189
Liability at 31 August 2022
942,958
The deferred tax liability set out above is expected to reverse within the next 12 months as follows:
- in respect of accelerated capital allowances £11,645
20
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
19,595
19,013
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
21
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
50,000
50,000
50,000
50,000
22
Revaluation reserve
2022
2021
£
£
At the beginning of the year
Revaluation surplus arising in the year
2,480,756
Deferred tax on revaluation of tangible assets
(620,189)
-
At the end of the year
1,860,567
-
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 25 -
23
Profit and loss reserves
2022
2021
£
£
At the beginning of the year
1,908,210
1,675,077
(Loss)/profit for the year
(336,636)
262,133
Dividends declared and paid in the year
-
(29,000)
At the end of the year
1,571,574
1,908,210
24
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2022
2021
£
£
Within one year
74,268
92,686
Between two and five years
107,104
144,757
181,372
237,443
25
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
2022
2021
Amounts due to related parties
£
£
Key management personnel
14,532
188,338
Other related parties
166,667
-
Other related parties are loans from two family members of the directors. The loans are unsecured and interest free. There is no formal repayment plan for either of the loans. Both loans have been fully repaid in the following financial year.
26
Directors' transactions
Dividends totalling £0 (2021 - £29,000) were paid in the year in respect of shares held by the company's directors.
PUNJAB PAPER CONVERTERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
- 26 -
27
Cash generated from operations
2022
2021
£
£
(Loss)/profit for the year after tax
(336,636)
262,133
Adjustments for:
Taxation (credited)/charged
(1,628)
61,508
Finance costs
183,182
106,988
Investment income
(256)
(17)
Depreciation and impairment of tangible fixed assets
269,825
107,685
Movements in working capital:
Decrease/(increase) in stocks
1,473,232
(719,425)
Increase in debtors
(427,282)
(217,819)
Increase in creditors
473,547
1,541,321
Cash generated from operations
1,633,984
1,142,374
28
Analysis of changes in net debt
1 September 2021
Cash flows
31 August 2022
£
£
£
Cash at bank and in hand
269,823
82,601
352,424
Bank overdrafts
(26,246)
26,246
243,577
108,847
352,424
Borrowings excluding overdrafts
(3,760,040)
330,167
(3,429,873)
Obligations under finance leases
(281,005)
111,889
(169,116)
(3,797,468)
550,903
(3,246,565)
29
Going concern
The costs incurred to commission Line 3 caused a significant drain on cash resources. This impacted supplier payments, which made the directors consider the need to refinance in order to be able to continue to trade as a going concern.
The business developed comprehensive forecasts with sensitivities and based upon this it sought a refinance. On 28 September 2023, following detailed negotiations and the implementation of rigorous financial controls, the company refinanced with Praetura Commercial Finance who have provided a term loan secured on the property together with a £2million Invoice Discounting facility,
Since refinance, all supplier payments are up to date with formal agreements in place with key suppliers. Detailed forward projections have been prudently prepared and sensitivity tested. Management have comfort in having overcome all issues that existed in the period up to 28 September 2023.
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