The directors present the strategic report for the year ended 31 March 2023.
The group uses a range of performance indicators at branch level to manage the performance of the business. We consider that the key performance indicators relevant to the overall financial performance and strength of the group are sales, gross margin, operating profit and net assets. We comment on these below.
Sales for the year to 31 March 2023 were £95,359,880 (2022 - £106,525,990), a decrease of 10.5%. Gross margin decreased to 40.5% (2022 - 43.3%). Operating profit decreased to £11,155,858 (2022 - £17,911,633), down 37.7% compared to the previous year. Profit before tax decreased to £11,120,754 (2022 - £17,788,447), down 37.9% compared to the previous year.
During the previous year the group benefited from exceptional industry-wide factors that arose as a result of the global pandemic and the subsequent high demand for materials. These exceptional circumstances had largely run their course by the start of the year ending 31 March 2023. The elevated level of home refurbishments carried out during the pandemic had subsided and there were again greater opportunities to travel abroad for holidays, reducing domestic spending. In addition, the increased cost of living pressure from price inflation and significant interest rate rises were weighing on spending on major home improvement projects. Consequently, the sector has returned to more normal levels of market activity.
The group ended the year with net assets of £79,949,134 (2022 - £70,518,144) including cash of £5,087,961 (2022 - £9,087,580), the key elements of this strong net asset position being tangible assets, stocks and debtors.
A significant proportion of the assets of Sherborne Holdings Limited are the trading and investment properties. The property portfolio has performed in line with the local markets, which have remained robust in recent years. Approximately 80% of the portfolio is leased to the main trading subsidiary in the Group, Sydenhams Limited. The remaining 20% of the portfolio is leased to external commercial and residential tenants, with all properties being presently occupied.
Acquisitions
In April 2022, the entire share capital of M’s Building Supplies Limited was acquired by Sydenhams Limited for consideration of £1,926,386. Goodwill of £855,066 was generated by the transaction. The land and property were acquired by Sherborne Holdings for consideration £2,257,223, including professional costs.
In December 2022 Guernsey Building Supplies Limited acquired a larger site to allow expansion of the business in the second half of 2023-24. Consideration of £4,650,000 was paid for this site and the balance is held in capital work in progress at the year-end.
In May 2022 the formerly leased site in Blandford Forum, occupied by Sydenhams Hire Centres, was purchased by Sherborne Holdings for consideration £392,985 including professional fees. This site became a trading property of the Group.
Disposals
In June 2022 the former trading site in Maiden Bradley was sold for consideration £797,285, generating a profit on disposal of £617,535.
In March 2023 an investment property on Gillingham High Street was sold for consideration £570,000 generating a profit on disposal of £216,410.
In addition to the risks relating to financial instruments, detailed in the Directors' Report, the directors consider the following to be the key matters of strategic importance and principal risks and uncertainties faced by the business:
Market conditions: The group supplies building materials and timber frame structures primarily to the 'private sector new-build' and 'repairs and maintenance' sectors. New-build activity has traditionally been more volatile, and is influenced by interest rates, government policy and consumer confidence. Repairs and maintenance expenditure is affected by similar factors, but to a lesser extent.
Competitive pressures: The group faces competition from both national companies and local independently owned competitors. The group monitors the activities of competitors in its area of operation and responds accordingly.
Availability of product: The group is reliant on its suppliers to ensure that product is available. There is a risk that demand for some products may exceed supply and it may take time for suppliers to increase production to meet demand. The group seeks to mitigate this risk by monitoring supply arrangements and obtaining supplies from multiple sources.
Recruitment and retention of key staff: The group recognises the importance of its employees and uses a combination of financial and non-financial incentives in order to attract and retain key staff.
Risk management and internal control: The group's internal controls are centred on comprehensive monthly reporting of financial performance, sales, health and safety and debtors. Stock is counted at least twice each year. Budgets are prepared annually and variances are monitored. Board approval is required for all capital expenditure.
Statement Of Carbon Footprint
Carbon footprint during this period: 2,527 tCO2e
Carbon Intensity Measure
Total size of estate: 744.1 thousand sqft.
Carbon intensity is 3.4 tCO2e per 1000 sqft.
Total turnover for 2023 is: 95,202 thousand £.
Carbon intensity is 0.0265 tCO2e per 1000 £.
Statement Of Carbon Emissions
Statement of carbon emissions compliant with UK legislation set out in the Streamlined Energy and Carbon Reporting (SECR), 21 January 2021 covering energy use and associated greenhouse gas emissions relating to gas, electricity and transport, intensity ratios and energy efficiency actions.
Current reporting year (April 2022 – March 2023)
Total energy use covering electricity, gas, other fuel and transport – 10,731,209 kWh (2022 - 12,025,753 kWh)
Total emissions generated through combustion of gas - 122 tCO2e (2022 - 143 tCO2e)
Total emissions generated through combustion of other fuel - 489 tCO2e (2022 – 589 tCO2e)
Total emissions generated through use of purchased electricity - 698 tCO2e (2022 – 761 tCO2e)
Total emissions generated through business travel – 1,218 tCO2e (2022 – 1,440 tCO2e)
Total gross emissions – 2,527 tCO2e (2022 – 2,932 tCO2e)
Intensity ratio (total gross emissions) - 3.40 kgCO2 per sqft (2022 – 3.98 kgCO2 per sqft)
Intensity ratio (total gross emissions) - 0.0265 kgCO2 per £ turnover (2022 - 0.0275 kgCO2 per £ turnover)
Decreased energy use due to decreased business activity, without any of the shut-down periods due to Covid-19
that were present in previous years.
We are committed to responsible carbon management and will practise energy efficiency throughout our organisation, wherever it’s cost effective. We recognise that climate change is one of the most serious environmental challenges currently threatening the global community and we understand we have a role to play in reducing greenhouse gas emissions.
We have implemented the policies below for the purpose of increasing the businesses energy efficiency in the relevant financial year.
increased use of video conferencing. The estimated carbon saving for this initiative is 207.6 tonnes of CO2 emmissions per year (tCO2e/year).
LED lighting continues to be rolled out across the group.
Increased use of solar panels at suitable sites.
Methodology used in the calculation of disclosures
ESOS methodology (as specified in Complying with the Energy Savings Opportunity Scheme version 6, published by the Environment Agency, 21.01.21) used in conjunction with Government GHG reporting conversion factors.
For carbon only related matters, the SECR methodology as specified in "Environmental reporting guidelines: including Streamlined Energy and Carbon Reporting and greenhouse gas reporting" was used in conjunction with Government GHG reporting conversion factors.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/850130/Env-reporting-guidance_inc_SECR_31March.pdf
SECR Methodology Notes
1. SECR methodology as specified in "Environmental reporting guidelines: including Streamlined Energy and Carbon Reporting and greenhouse gas reporting" used in conjunction with Government GHG reporting conversion factors.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/850130/Env-reporting-guidance_inc_SECR_31March.pdf
2. Intensity ratios calculated using square footage.
- Kg CO2e per square foot of total site area
- Total gross emissions kg CO2e per £ turnover.
3. The calculations have been approved by a PAS51215 compliant body.
4. 2023 turnover = £95,202,479
5. Data estimation accounts for 0.65%.
Overview of how the directors fulfil their duties:
Our Shareholders
The joint shareholders are both full time employees and members of the Board. This allows the other directors to regularly engage with the shareholders in day-to-day business, as well as at the Board meetings.
Our Employees
Being a family business that has been trading for almost 150 years, with many long-serving employees, reflects in the values of the group and the way in which the employees are engaged in the business activities and are fairly treated. The group has a well-developed branch structure with each branch having its own manager / assistant manager who makes many of the key decisions as to how that branch is run, alongside the Board. This allows a level of employee engagement at each branch and fosters a friendly competitive nature between the branches. Where circumstances allow, Board members perform regular branch visits and meetings are held at different sites throughout the year, which allows directors to engage directly with the employees at each site.
Our Customers
Providing a friendly and value-added service to customers is extremely important to the business and we pride ourselves on the relationships that we build with our customers, often over the very long-term. Management and directors, along with sales staff and sales representatives have regular dialogue with customers, responding to feedback and reacting to their needs. Given the clear and open lines of communication within the business mean that decisions can be made quickly to improve the situation for stakeholders, including customers. There are a number of non-financial KPIs that are monitored in relation to the customer accounts and these are reported to management and the Board when appropriate and are used to improve the customer relationships.
Our Suppliers
Maintaining a good relationship with suppliers is crucial to the success of the business and this is managed both through direct contact with the supply chain and through the use of buying groups. Along with regular communication with the key management personnel in which relationships are developed the group also prides itself on the prompt payment to suppliers. Even during the Covid-19 Pandemic, when cashflow was less certain at times, we maintained this policy. Any issues relating to supplier accounts will normally be sorted promptly either with or without Board involvement.
Community and Environment
The Board recognises the importance of running a group that not only generates value for the shareholders and employees but also plays its part to contribute to wider society. Whether this is in making charitable donations of either building materials, time or money to various causes, sponsoring the local sports teams, aiming to be environmentally aware and responsible in our activities, or engaging with local communities that live in the vicinity of our branches.
Culture
Honesty, integrity and ethical standards are at the heart of how the group operates. A prudent approach is taken to doing business and the purpose is not to create short term profits but to grow the business sustainably both organically and by acquiring appropriate businesses as they come up for sale in our geographical areas of operation. This strategy has proven successful in creating long term confidence and value in the business for our stakeholders as well as increasing the service offering that we are able to provide to both existing and new customers.
Health & Safety
The safety and well-being of our employees, customers, suppliers and wider stakeholders is of utmost priority to the group. Health & safety risk assessments are regularly carried out by our external consultant and health & safety managers to understand and minimise the risks surrounding our activities. Health & safety training for all staff and logging of incidents and near-misses is carried out using the SafetyCloud managed system and there is monthly reporting to the Board of any matters requiring attention. The Board reinforces the importance of health & safety awareness and compliance throughout the group and encourages a pro-active approach to its management.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2023.
The results for the year are set out on page 14.
During the year interim equity dividends of £0.30 per ordinary share were paid totalling £806,785 in relation to the year ending 31 March 2023. The directors are proposing no final dividend for the year ended 31 March 2023 is voted.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group maintains professional indemnity insurance covering directors, officers and senior managerial staff.
The group's principal financial instruments comprise of sterling bank balances, bank borrowings, preference shares, trade debtors and trade creditors arising from its trading activities.
The financial risk management objectives and policies of the group aim to minimise the risk of disruption to the business and to maintain the flexibility to react to new business opportunities. Counterparty risk relating to bank balances is managed by banking with financial institutions with strong credit ratings. Most sales are made on credit terms, and hence the group is at risk of customers defaulting on payment. This risk is managed by strict credit management procedures, and the Board review performance on a regular basis.
Liability and cash flow risk is managed by regular review of funding needs and maintaining borrowing facilities to enable the group to take advantage of acquisition and development opportunities as they arise.
The group has no material exposure to interest rate risk, price risk and foreign exchange risk.
Group management keep employees informed of developments in the business and other matters relevant to them as employees and the performance of the group, through regular branch visits, holding board meetings at branches and the use of a staff magazine. The group encourages feedback from employees on operational and management issues relating to the running of the business.
Pensions
The defined benefit section of the Sydenhams Pension Scheme closed to future accrual at 31 March 2006, at which date the scheme had a deficit of £2,279,185. An actuarial update performed at 31 March 2023 demonstrated a surplus of £3,813,369 (2022 - £2,143,842) after associated deferred taxation. The group made contributions of £540,000 (2022 - £540,000) during the year.
The directors have chosen to report on the company's emission and energy consumption within the strategic report.
TC Group were appointed as auditor to the group 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 Sherborne Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the group profit and loss account, 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 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).
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 parent 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 group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their 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 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' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Extent to which the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and its management.
Our approach was as follows:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations;
We considered the legal and regulatory frameworks directly applicable to the financial statements reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations in the UK;
We considered the nature of the industry, the control environment and business performance, including the key drivers for management’s remuneration;
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit;
We considered the procedures and controls that the company has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls. These include but are not limited to: the review of procedures surrounding income streams, cash and banking utilisation, authorisation across the purchase and bank system and segregation of duties across key areas of the business.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included: testing manual journals; reviewing the financial statement disclosures and testing to supporting documentation; performing analytical procedures; and enquiring of management, and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. 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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £9,319,325 (2022 - £7,824,255 profit).
Sherborne Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 45-47 Ashley Road, Boscombe, Bournemouth, Dorset, BH1 4LG.
The group consists of Sherborne Holdings Ltd and all of its subsidiaries. The company's and group's principal activities are disclosed in the Directors' Report.
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.
For the purposes of its individual financial statements, the company is a qualifying entity under the FRS 102 Reduced Disclosure Framework and has taken advantage of the exemption from the following disclosure requirement.
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Sherborne Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 March 2023. 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 group.
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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the directors are satisfied that the group 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.
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.
Turnover is recognised on dispatch of the goods or completion of services. Work in progress is invoiced on dispatch in line with the contract and cumulative project profit margins. Hire income is recognised on a straight line basis over the period of the hire contract.
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.
Freehold land and assets in the course of construction are not depreciated.
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 investments 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.
In 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 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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 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, 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.
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 payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the 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.
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
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 leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease.
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.
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.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The judgements (apart from those involving estimations) that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are described below.
Accounting estimates and assumptions are made concerning the future and, by their nature, will rarely equal the related actual outcome. The key assumptions and other sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
The fixed asset depreciation charge is derived from the estimated useful economic life and residual value of the asset. These are reviewed annually alongside any impairment indicators.
The intangible assets are reviewed for their useful lives and carrying values on an annual basis to ensure these are consistent with expectations of future economic benefits. These reviews include intangible assets arising on business combinations.
Accruals for goods or services not yet invoiced are estimated based on historic activity with the supplier or quotations received ahead of invoicing.
The directors assess the closing debtor balances for recoverability and those not considered probable of recovery are provided for.
Stock is held at the lower of cost and net realisable value which is based on the estimated sales value of the asset at the year end.
The group operates a defined benefit pension scheme. The principle assumptions underlying the carrying value of the defined pension liability are based on advice from an independent actuary and are disclosed in the notes to the financial statements.
Management reviews the judgements and estimates used to determine the fair values attributed to the group's investment properties on an annual basis.
Government grants received are under the Coronavirus Job Retention Scheme.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
The number of directors for whom retirement benefits are accruing under defined benefit schemes amounted to 4 (2022 - 4).
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:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
On the 3rd March 2021 the UK Government announced that the UK Corporation tax rate would increase from 19% to 25% from 1st April 2023.
The 2023 valuations were made by the directors, on an open market value for existing use basis.
If the investment properties had been accounted for under the historic cost accounting rules, the properties would be valued at £3,491,794 (2022: £3,565,967).
Investments in subsidiaries reflect the company's interest in the entire issued ordinary share capital of Sydenhams Limited and Isobar Properties Limited, Sydenhams Limited holds the entire issued ordinary share capital of Sydenhams Timber Engineering Limited, Sydenhams Hire Centres Limited, A Grade Timber Limited, Guernsey Building Supplies Limited, M's Building Supplies Limited, Avon Plywood Limited and Tipadel Limited.
The principle activities of Sydenhams Limited are the sale and distribution of timber and building materials. Those of Sydenhams Timber Engineering Limited are the design and manufacture of engineered timber products, those of Sydenhams Hire Centres Limited are tool hire, tool sales and repairs, those of Guernsey Building Supplies Limited and M's Building Supplies Limited are the sale and distribution of timber and building materials.
A Grade Timber Limited, Tipadel Limited, and Avon Plywood Limited are dormant companies.
All subsidiaries are incorporated in the United Kingdom and registered in England and Wales other than Guernsey Building Supplies Limited which is incorporated in Guernsey. The registered office of the UK subsidiaries is 45-47 Ashley Road, Boscombe, Bournemouth, Dorset, BH1 4LG.
The registered office of the Guernsey subsidiary is Route de la Garenne, Pitronnerie Road, St Peter Port, Guernsey, GY1 2RA.
Sydenhams Limited, Sydenhams Timber Engineering Limited, Sydenhams Hire Centres Limited and M's Building Supplies Limited are audited. Guernsey Building Supplies Limited has an indefinite audit waiver. Isobar Properties Limited has taken advantage of the audit exemption available to subsidiary companies under section 479A of the Companies Act 2006.
The overdraft is secured by way of a charge over the freehold properties at Shaftesbury Road, Gillingham; Winnall Industrial Estate, Winchester; Manor Way, Frome; Churchfields Industrial Estate, Salisbury; Ashley Road, Boscombe; and Centurion Way, Warminster.
The 5% cumulative preference shares of £1 each confer no voting rights and have no rights to dividends other than a fixed cumulative dividend of 5%. On winding up, they rank ahead of ordinary shares and will be repaid at par. They carry no right to participate in the profits or the capital of the company and are therefore classified as non-equity shares.
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.
The group operates a defined benefit pension scheme.
The defined contribution section closed with effect from 31 March 2012 and was replaced with a group personal pension scheme. Contributions to the group personal pensions scheme during the year are disclosed in note 6.
The defined benefit section closed to future accrual at 31 March 2006. The latest actuarial update at 31 March 2023 showed an increase in the surplus from £2,143,842 to £3,813,369. The scheme's assets are held in independent, trustee-administered funds. The pension asset is shown net of deferred tax.
Assumed life expectations on retirement at age 65:
Mortality - prior to retirement assumes AMN00/AFN00 (2022 - AMN00/AFN00). Mortality post-retirement for deferred pensioners, inured pensions and scheme pensioners assumes 100% S3PMA/105% S3PFA, CMI 2021 model with long-term improvement 1.5% pa (M) and 1.0% pa (F) (2022 - S3PMA/S3PFA, CMI 2020 model with long-term improvement 1.0% pa (M) and 0.75% pa (F)).
The amounts included in the balance sheet arising from obligations in respect of defined benefit plans are as follows:
Reconciliation of present value of plan liabilities: 2023 2022
£ £
At the beginning of the year 18,715,919 21,386,815
Interest cost 494,338 415,502
Actuarial gains (4,193,616) (1,863,001)
Benefits paid (814,192) (1,223,397)
At the end of the year 14,202,449 18,715,919
Reconciliation of present value of plan assets: 2023 2022
£ £
At the beginning of the year 20,859,761 21,409,125
Interest income 559,512 421,349
Actuarial gains/(losses) (3,129,263) (287,316)
Contributions 540,000 540,000
Benefits paid (814,192) (1,223,397)
At the end of the year 18,015,818 20,859,761
Amounts taken to other comprehensive income
The defined benefit obligations arise from plans funded as follows:
Fair value of plan assets at the reporting period end
The fair value reserve reflects cumulative gains and losses in the fair value of investment properties.
The profit and loss account reflects cumulative profits and losses net of distributions to members.
On 25 April 2022 the group acquired 100 percent of the issued capital of M's Building Supplies Limited.
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the distribution of the company's products in new markets and the future operating synergies from the combination.
The company is jointly and severally liable for the VAT liability of the group of which it is a member. At the year end the group liability was £817,096 (2022: £1,247,424).
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 operating leases represent leases to third parties.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
The remuneration of the group's key management personnel, who are the statutory directors of each of the companies of the group, is as follows:
During the year, consistent with their interests in the issued share capital of the company, close members of the families directors' received, in aggregate, preference dividends of £60,235 (2022: £60,235).
All dividends paid as disclosed in note 12 were to the directors and their close family members.
During the year, the directors maintained directors loan accounts with the group. At the start of the year the group owed the directors' £1,300,000. During the year, the directors were fully repaid leaving no outstanding balances at the year end. The balances accrued interest at a rate of 4.3% and interest of £45,617 was charged in respect of this.
Transactions with other related parties
The company has taken advantage of the exemption available under Section 33 of FRS 102 from disclosing transactions with wholly-owned group companies.