The directors present the strategic report for the year ended 26 March 2023.
The principal activity of the group is the retailing of convenience foods, confectionery, news, tobacco, soft drinks and alcohol.
The group currently operates forty one store as of November 2023 with a strong presence in both the convenience sector and travel interchanges which combined are the largest contributor to the groups profits.
The year was one of growth and optimism as the group returned to a profitable EBITDA following on from several years of difficult trade due to the Covid pandemic. Locations situated in passenger interchanges, town centres and shopping centres experienced considerable growth on recent years as customer confidence returned and footfall through these locations increased.
During the year the group successfully managed to dispose of several loss making stores that had become commercial unviable given the lasting impact of Covid on trade in those locations. This has helped bolster the stability of the group and further the store EBITDA projections for the upcoming financial year.
Working closely with our wholesale partner, Bestway Wholesale Limited and its subsidiaries, the group have been able to refurbish and refit several of its convenience stores to the Costcutter brand. The result of which has significantly increased turnover in these locations through an improved range of product available and a recognised brand for our customer base.
In addition to the rebranding of stores, the group has also spent capital in order to refurbish existing sites and investment in its food to go offer, which has helped to establish a sustainable business model for the long term.
During the year the group incurred significant increase in expense due to energy running costs. The management, wherever possible have adopted sustainable measures to allow the business to absorb these increased costs. The group acknowledges the cost-of-living increase on so many of our customers and as such have implemented a strategy of offering price marked product showing value to the customer. This has helped drive volume in turnover, whilst providing a competitive price to our customers during this difficult financial time.
The group has returned to a profit at an EBITDA level and the group expects to continue to be profitable with further growth expected for the year ending March 2024 and beyond. Store EBITDA forecasted for the year ending March 2024 is £2m.
Given the current year performance, the investment made within the group and forecasted prepared by the management, directors believe the group has a very positive future.
The thanks of the directors are expressed to store colleagues, office staff and all key stakeholders in supporting the company through the challenging times of recent years and continued support in returning the group to a profitable position.
2023 2022
Sales £36m £35m
Gross Profit £7.3m £6.7m
Gross Profit % 20.6% 18.9%
The group monitors its financial position through several key performance indicators ('KPIs'). The principal KPIs for the year are as shown above.
The increase in sales due the reducing impact of the Coronavirus pandemic with increased footfall through transport hubs and town/shopping centres stores as customer confidence returns.
The increase gross profit margin is due to a shift in sales mix with a larger proportion of turnover coming through the transport sites which typically sell product with a higher gross profit
The directors monitor other KPI’s on a store-by-store basis, looking at performance on a weekly basis through a review of top line category performance year on year and against budget. Store Managers are then targeted on improving performance through active selling to drive footfall and sales growth.
The directors actively review stock levels across stores and monitor individual line performance to ensure there is sufficient stock to service the demands of customers but not to the detriment of the cash performance of the business.
Cash is a key performance metric, with weekly cashflow forecasts produced and carefully monitored.
Financial/operational risks | Explanation | Mitigation |
Competition The group operates in a highly competitive retail market, and may not be able to operate profitably in the long term from each site.
| The retail industry is highly competitive, particularly with respect to price, product selection and quality, store location, inventory and customer service.
The group competes with a diverse group of retailers of varying sizes. These competitors include single site retailers, supermarkets,convenience stores and traditional newsagents.
Trading performance for individual stores may suffer from long term decline or the opening of new competitors near to our sites. | The group works extremely hard and remains alert to local trading conditions to ensure that it responds rapidly and appropriately to the types of competition encountered locally by each of our outlets.
The group actively monitors each store's performance and seeks to sell underperforming stores whilst they still have an economic value.
The group regularly assesses its product mix, pricing and promotional offers to attract new customers, whilst retaining its existing customer base.
|
Cash flow The group’s cash flows from operations may be negatively affected if it is not successful in managing stock levels or levels of stock shrinkage. | To be profitable the group must maintain sufficient stock levels to meet its customers’ demands without allowing those levels to increase to an extent such that the costs impact on the financial results. | The group monitors stock levels through its EPOS systems and continues to deploy good practices based on the directors' knowledge of the industry.
The group, like other retailers experiences stock shrinkage and adopts measures that monitor and control the problem. Some level of stock loss is an unavoidable cost of doing business. |
National Living Wage In order to reduce the cost of benefits to the exchequer the chancellor increased the minimum wage in April 2024. | The group will need to recoup the additional cost of this government measure. | The cost of implementation will be mitigated by a combination of a reduction in staffing hours and stricter budgetary control in all expenditure. |
Cash flow management Cash flow management of the group is important as it competes in a highly competitive market.
Profit and cash management are vital to service the group’s financial commitments.
| The group must monitor cash regularly to ensure sufficient cash is available to service debt requirements and be able to respond to the changing face of the retail landscape. | The group manages the cash performance through production of weekly cash flow forecasts and reviewing against previous forecasts. A long-term strategic cash model is maintained to assess the future demands of cash and regular senior management meetings are held to explore options to bring in or reduce cash expenditure. The directors maintain good and close relations with its bankers, shareholders and Bestway, its wholesale partner. |
On behalf of the board
The directors present their annual report and financial statements for the year ended 26 March 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
The auditor, BHP LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of James Convenience Retail Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 26 March 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with management, and from our commercial knowledge and experience of the retail convenience store sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environments and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation; and
enquiring of management as to actual and potential litigation and claims.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the 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.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £21,091 (2022 - £502,532 loss).
James Convenience Retail Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .
The group consists of James Convenience Retail Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company James Convenience Retail 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 26 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 26 March 2023 the group's balance sheet showed shareholders' funds of deficit £573,000 (2022: £272,000). The directors are mindful that at 26 March 2023 the group had net currents liabilities of £1,076,000 (2022: net current liabilities of £1,070,000).
The year was one of growth and optimism as the group returned to a profitable EBITDA following on from several years of difficult trade due to the Covid pandemic. Locations situated in passenger interchanges, town centres and shopping centres experienced considerable growth on recent years as customer confidence returned and footfall through these locations increased.
During the year the group successfully managed to dispose of several loss making stores that had become commercial unviable given the lasting impact of Covid on trade in those locations. This has helped bolster the stability of the group and further the store EBITDA projections for the upcoming financial year.
Working closely with our wholesale partner, Bestway Wholesale Limited and its subsidiaries, the group have been able to refurbish and refit several of its convenience stores to the Costcutter brand. The result of which has significantly increased turnover in these locations through an improved range of product available and a recognised brand for our customer base.
In addition to the rebranding of stores, the group has also spent capital in order to refurbish existing sites and investment in its food to go offer, which has helped to establish a sustainable business model for the long term.
The board have prepared detailed profit and cashflow for the years ending March 2024 and March 2025 which shows the group continuing to generate an EBITDA profit. The forecasts are based on the director’s experience of trading during the last 9 months and anticipated costs increases such as National Minimum Wage.
The forecasts show that the group is expected to operate within existing borrowing facilities. On the basis of the forecasts the directors are satisfied that the group is able to meet its liabilities as they fall due for the foreseeable future and such as the financial statements have been prepared on a going concern basis.
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.
Other Operating income
The group has various other income streams which are complementary to operating convenience store such as commissions, rental income and news delivery charges. News delivery charges are shown net of expenses. Such income is recognised in period in which it is earned.
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.
Investments in subsidiaries are shown at cost less provision for impairment. If an impairment loss is identified this is recognised immediately in the profit and loss account and the value of the investment is reduced accordingly.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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.
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.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
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 and loans from fellow group companies, 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.
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.
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.
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.
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. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Impairment of fixed assets
The group assesses the impairment of tangible fixed assets subject to depreciation whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include the following:
significant underperformance relative to historical or projected future operating results;
significant changes in the manner of the use of the acquired assets or the strategy for the overall business;
significant negative industry or economic trends.
Depreciation, amortisation and residual values
The directors have reviewed the asset lives and associated residual values of all fixed asset classes and have concluded that asset lives and residual values are appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projects disposal values.
Impairment of goodwill and intangible assets
Determining whether goodwill or intangible assets are impaired requires an estimation of the value in use of each of the cash-generating units to which goodwill and intangible assets have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. In assessing the carrying value of goodwill the directors have taken into account events up to the date of approving the financial statements.
Investments
The group reviews the carrying value of fixed asset investments for indications of impairment at each period end. If indicators of impairment exist, the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount. This process will usually involve the estimation of future cash flows which are likely to be generated by the asset.
Carrying value of stocks
The directors review the market value of and demand for its stocks on a periodic basis to ensure stock is recorded in the financial statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of stocks. The directors use their knowledge of market conditions, historical experiences and estimates of future events to assess future demand for the group's products and achievable selling prices.
Recoverability of amounts due from group companies
Amounts due from group companies are recognised to the extent that they are judged recoverable. Director reviews are performed to estimate the level of reserves required for irrecoverable debt. Provisions are made specifically where recoverability is uncertain and are charged to the profit and loss account in the period in which the impairment arises. Impairment is applied where events or changes in circumstances indicate that the carrying amounts are not expected to be recoverable.
Deferred tax asset
A deferred tax asset is recognised which is primarily made up of unused tax losses. The amount recognised is based on expected future profits.
Provisions
A provision is recognised when the group has a present legal or constructive obligation as a result of a past event for which it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Whether a present obligation is probable or not requires judgement. The nature and type of risks for these provisions differ and management's judgement is applied regarding the nature and extent of obligations in deciding if an outflow of resources is probable or not. External advice is sought where appropriate.
Leases
The directors determine whether leases entered into by the group are operating leases or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the group on a lease by lease basis based on an evaluation of the terms and conditions of the arrangements, and accordingly whether the lease requires an asset and liability to be recognised in the balance sheet.
Taxation
There are many transactions and calculations for which the ultimate tax determination is uncertain. The group recognises liabilities for anticipated tax liabilities based on estimates of whether additional taxes will be due and after taking professional advice. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together.
The whole of the group's turnover is attributable to its principal activity, and arose within the United Kingdom.
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 3 (2022 - 3).
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 26 March 2023 are as follows:
In the opinion of the directors, the value of these investments as at 26 March 2021 is not less than the aggregate amount in the balance sheet.
The reporting period end of the subsidiary undertakings is co-terminus with the company.
All of the above subsidiaries are included in the group consolidation and all subsidiaries have the same registered office as James Convenience Retail Limited, which is disclosed on the company information page.
Amounts owed by group undertakings are shown as falling due within one year as there is no set repayment date and there is no formal agreement in place. Commercially there are no plans for these amounts to be recalled within the next 12 months.
The bank overdraft, bank loans and other loans are secured by a debenture which creates a fixed and floating charge over the group's assets, property and revenues both present and future. The bank overdraft and loans take first priority over the other loans.
The loans from related parties are unsecured and have no formalised repayment date. Amounts are repaid as and when funds permit, and interest is charged at 3.3%.
Hire purchase liabilities are secured against the assets to which they relate.
The bank overdraft, bank loans and other loans are secured by a debenture which creates a fixed and floating charge over the group's assets, property and revenues both present and future. The bank overdraft and loans take first priority over the other loans.
Bank loans are repayable at £38,000 per quarter until March 2025 with the balance of £788,000 to be settled in June 2025. The bank loans attract interest at 2.8% plus LIBOR. Other loans are due to Bestway following the administration of Conviviality Retail plc.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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 company is party to an omnibus guarantee that guarantees the bank borrowings of fellow group borrowings, and the bank borrowings of James and Graven Holdings Limited and the bank borrowings of James Retail Soham Limited, all entity under common control. As at 31 March 2023 the bank borrowings covered by this guarantee totalled £3,002,965 (2022: £5,679,826)
During the year the group entered into the following transactions with related parties:
Transactions between the group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The directors consider the key management personnel of the group to be the Chairman, Chief Executive Officer and Chief Financial Officer. Directors remuneration is disclosed in note 8. The remuneration of the individuals considered to be key management personnel of the group, including the directors, totalled £380,685 (2022: £472,648). The directors annually review the remuneration of key management personnel and are satisfied that their remuneration paid is in line with market rates.
The company has unsecured loans from companies ultimately controlled by the directors. During the year the company made capital repayments of £149,905 (2022: £183,217). Interest of £17,545 (2022: £23,384) was accrued during the year. The amount outstanding due to the related company at the balance sheet date was £621,456 (2022: £753,815).
During the year rent of £141,936 (2022: £107,732) was paid to companies under common control. At the year end £43,333 (2022: £47,602) was owed to companies under common control for unpaid rents.
During the year sales of £8,752 (2022: £83,020) and purchases of £161,443 (2022: £166,561) were made to companies under common control.
During the year £nil (2022: £2,506) was paid to other related parties for services rendered.
At the balance sheet date an amount of £221,986 (2022: £113,104) was due from companies under common control, amounts are unsecured and carry no set repayment date or interest charge.
James Convenience Retail Limited is controlled by Mr J M James by virtue of his shareholding.