The directors present the strategic report for the period ended 30 April 2023.
During the period the group achieved sales of £13.7m, which are consistent with the sales of The Blue Sea Food Company Limited, the main trading subsidiary, for the 12 months to 30 April 2022 (prior to its acquisition by the group).
The group’s gross profit margin was lower than expected at 33.1% as a result of higher raw material costs. The ultimate cause for this was the Ukraine war which saw fuel prices increase, with average price of crab paid increasing by 9.9% per kg. In addition to this the group had increased wages and salaries with a tightening labour market and the National Minimum Wage increase from £8.91 to £9.50 (6.6%) in April 2022 and to £10.42 (9.7%) in April 2023.
As a result of the above, the group's EBITDA was only just under £0.5m.
The group's retained loss for the year is £2.1m, after paying dividends of £197,851 and impairing the investment in the main subsidiary.
The group's principal operational risks include food hygiene, health and safety legislation, employment law and data protection. Food hygiene and health and safety risks includes ensuring the correct procedures are completed when preparing food which is monitored by the food hygiene officer and external audits and inspections. The management of employment law risks includes ensuring that employees are eligible to work in the UK and the correct procedures are followed when employing an employee. The data protection risk includes safe storage of data backup's off-site at a secure location.
The group manages price fluctuations, together with pressures on supply and demand, through tight control of both prices paid to suppliers and the margin charged to customers. The group continues to diversify its supplier and customer bases and to enter into supply contracts with suppliers to provide further resilience against market uncertainties.
Going concern:
As detailed in notes 19 and 30 to the financial statements the group is party to an agreement to purchase and sell a fishing boat, on behalf of a UK based fishing company.
The UK shipbuilding agent managing the contract to build the above-mentioned shipping vessels was placed in liquidation in June 2022 in controversial circumstances. The directors are working with all parties to come to a successful conclusion on the project and to minimise any losses. At the moment the directors are not anticipating any losses to the group but do anticipate that the UK based fishing company will take much longer to repay all funds, possibly as long as ten years. The money applied to this project has put pressure on the ability to stay within agreed bank facilities, especially when sales are subdued due to the cost of living crisis.
The group prepares forecasts based on expected income and expenditure. The directors have based their going concern conclusion upon these forecasts. These forecasts have tried to take account of the following risks and uncertainties:
The bank overdraft will be maintained at the agreed levels and reduced in accordance with the normal seasonal adjustment on 1 May 2024.
The group is currently operating below forecasts, showing that the seasonal reduction in bank overdraft facility will be a challenge. The group operates a seasonal business, where large values of stock are required for the out of season sales. The current forecasts show that without a continued overdraft facility at a reasonable level, these stock purchases will not currently take place. This would lead to a reduction and loss of the out of season market.
In order to raise finance, the group is seeking an equity injection. The promotion of the group for the equity injection is in its very preliminary stages, and although there has been interest as yet there have been no formal offers.
In the last year, the trade of the group and the market mix has been affected by EU and UK sanctions against Russia. Although the group did not trade with Russia, it has altered the market mix. Whilst the group has successfully adjusted to a new market mix, any further expansion of sanctions may have a detrimental effect upon the group's cashflows.
During the year, the group has been adversely affected by variable interest rate rises. The group has loans at variable and fixed interest rates. If the variable interest rates were to further rise above the current forecasted rate or the fixed rate loans were either renegotiated or called in, this would put pressure on cash flows.
The group has seen a large rise in cost of power not through consumption, but through the effect of war in Ukraine and sanctions on Russia. The group has fixed the price of electricity from April 2024 to September 2025 at 60% of this year's cost. This fall in power cost has been reflected in the group's current forecasts. If these prices rose further, then the additional processing cost would impact upon profitability. The current position in the Red Sea is an additional adverse uncertainty.
A satisfactory resolution to the financing of the construction work needed to complete the boats.
We draw your attention to Note 1.5 to the financial statements which details the material uncertainties with respect to going concern.
The business had continued its recovery after Covid-19 however the worldwide reduction in the economy during 2023 has impacted the business, however as the business moves into 2024 we are seeing a recovery from this position with sales exceeding those of the prior year.
The average price of crab paid has seen a reduction and stabilisation as fuel prices have remained more consistent. The factory continues to face challenges with rising costs and in particular with electricity which have almost doubled on the prior year albeit a decrease in the future financial periods is now expected. That on top of the National Minimum Wage increases both at 1 April 2023 and the future 2024 increases will put more strain on the business.
The directors are confident that the future economic outlook looks good, and the management team have worked hard to expand on the business aims of increasing accessibility of crab into the markets having recently won contracts to supply crab meats in UK retail.
The business will continue to support sustainability of crab fishing and are actively involved in the process of setting up a Fisheries Improvement Plan both locally and in the North Sea.
Energy and carbon report
The total amount of Carbon footprint for the business for the year ended 30 April 2023 for all parts of the business including Direct, Indirect and Other Direct Emissions (Scope 3) was 1,209 tonnes CO2e (2022: 2,575t CO2e). The main savings have been made in the businesses decision to stop supplying Live Crab, by airfreight, to Asia.
On behalf of the board
The directors present their annual report and financial statements for the period ended 30 April 2023.
The results for the period are set out on page 10.
Ordinary dividends were paid amounting to £197,851. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The group's principal financial instruments comprise bank balances, trade debtors, loans by the group, trade creditors, a confidential invoice discounting facility and loans to the group by related parties and others. The main purpose of these instruments is to raise funds for the group's operations and to finance its operations.
Due to the nature of the financial instruments used by the group, there is no exposure to price risk. Foreign currency risk is managed by holding bank balances in Euros and US dollars. The group does look at the use of forward contracts in order to minimise exchange risk and will review the use of these on a regular basis.
The directors' approach to managing other risks applicable to the financial instruments concerned is shown below:
In respect of bank balances, the liquidity risk is managed by maintaining sufficient cash reserves to cover planned expenditure in the foreseeable future. Subject to the expected current reduction in overdraft facility, as mentioned in the strategic report.
Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. Liquidity risk is managed by use of a confidential invoice discounting facility.
Trade creditors' liquidity risk is managed by ensuring that sufficient funds are available to meet amounts due.
Loans by the group are unsecured, with interest charged at market rates. The loans are repayable after more than one year.
Loans to the group by related parties and others are unsecured and bear interest at market rates. The loans are repayable after more than one year.
Darnells Audit Limited were appointed as auditor to the group during the period, and are 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 The Blue Sea Food Group Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 30 April 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.
Material uncertainties relating to going concern
We draw attention to note 1.5 to the financial statements, which indicates that the impact of the coronavirus pandemic caused unprecedented restrictions on the customer base of The Blue Sea Food Company Limited, the main trading subsidiary, and has significantly impacted on the group's finances. Debt was taken on to support the trading subsidiary through the pandemic, but the group's turnover and profit are expected to fall in the 12 months to 30 April 2024. In addition, the commitment to help finance the construction of a new fishing vessel and the opening of a new restaurant have put additional financial pressures on the group by increasing debt just as interest rates are rising.
As stated in note 1.5 to the financial statements, these events or conditions, along with the other matters set out in note 19 and note 30 to the financial statements, indicate that material uncertainties exist that may cast significant doubt upon the group’s ability to continue as a going concern. Our opinion is not modified in respect of these matters.
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. Our evaluation of the directors' assessment of the group's ability to continue to adopt the going concern basis of accounting included:
carrying out a detailed review of forecasts prepared by the directors, and carrying out sensitivity analysis by comparison to actual performance to ensure that the assumptions made are reasonable;
having detailed discussions with the directors regarding their proposed strategy to ensure that the group will continue as a going concern;
reviewing correspondence with the bank (including obtaining direct confirmation from the bank) and available correspondence with prospective lenders, to ensure that any indications that the going concern basis may not be appropriate are identified;
reviewing the contract for the construction of the fishing vessel, and evaluating the possible outcomes of the alternative courses of action open to the group.
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 period 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. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentation or through collusion.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
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 identify the laws and regulations applicable to the group through discussions with directors and other management, and from our commercial knowledge and experience of the group and the sector in which it operates;
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 group, including the Companies Act 2006, taxation legislation, data protection, employment, environmental, food hygiene and health and safety regulation;
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.
The primary responsibility for the prevention and detection of fraud rests with those charged with governance of the group and management.
We assessed the susceptibility of the group's financial statements to material misstatement, including 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.
We evaluated the conditions in the context of incentives and/or pressure to commit fraud, considering the opportunity to commit fraud and the potential rationalisation of the fraudulent act.
Based on this understanding, we designed our audit procedures to detect material misstatements in respect of irregularities, including fraud, and to identify non-compliance with the laws and regulations above, as follows:
Enquiry of management and those charged with governance around actual and potential litigation and claims.
Enquiry of management in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
Reviewing compliance with employment, environmental, food hygiene and health and safety legislation.
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.
Investigated the rationale behind significant or unusual transactions.
We corroborated our enquiries through inspection of supporting documentation and records, as well as reviewing correspondence with regulatory bodies where available.
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 £1,429,317.
The notes on pages 16 to 38 form part of these financial statements.
The Blue Sea Food Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 20, Torbay Business Park, Paignton, Devon, TQ4 7HP.
The group consists of The Blue Sea Food Group Limited and all of its subsidiaries.
The company has made a change to its reporting period end from 31 March to 30 April to align its period end with its trading 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 £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company The Blue Sea Food Group Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 30 April 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.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of the following certain material uncertainties which may cause doubt on the group's ability to continue as a going concern:
The bank overdraft will be maintained at the agreed levels and reduced in accordance with the normal seasonal adjustment on 1 May 2024.
The group is currently operating below forecasts, showing that the seasonal reduction in bank overdraft facility will be a challenge. The group operates a seasonal business, where large values of stock are required for the out of season sales. The current forecasts show that without a continued overdraft facility at a reasonable level, these stock purchases will not currently take place. This would lead to a reduction and loss of the out of season market.
In order to raise finance, the group is seeking an equity injection. The promotion of the group for the equity injection is in its very preliminary stages, and although there has been interest as yet there have been no formal offers.
In the last year, the trade of the group and market mix has been affected by EU and UK sanctions against Russia. Although the group did not trade with Russia, it has altered the market mix. Whilst the group has successfully adjusted to a new market mix, any further expansion of sanctions may have a detrimental effect upon the group's cashflows.
In the last year, the group has been adversely affected by variable interest rate rises. The group has loans at variable and fixed interest rates. If the variable interest rates were to further rise above the current forecasted rate or the fixed rate loans were either renegotiated or called in, this would put pressure on cash flows.
The group has seen a large rise in cost of power not through consumption, but through the effect of war in Ukraine and sanctions on Russia. The group has fixed the price of electricity from April 2024 to September 2025 at 60% of this year's cost. This fall in power cost has been reflected in the group's current forecasts. If these prices rose further, then the additional processing cost would impact upon profitability. The current position in the Red Sea is an additional adverse uncertainty.
A satisfactory resolution to the financing of the construction work needed to complete the boats.
The impact of the coronavirus pandemic caused unprecedented restrictions on the group’s customer base, and has significantly impacted on its finances. As a result, debt was taken on to support the group through the pandemic. In addition, the commitment to help finance the acquisition of a boat and the opening of a new restaurant have put additional financial pressures on the group. The monies applied to these projects has put pressure on the group's ability to stay within agreed bank facilities, especially when sales are subdued.
The bank may extend the facility if the fundraising program is making good progress. But by definition, fundraising does take time and there can be no certainties as to the outcome.
As stated in note 30 to the financial statements, the group is party to an agreement to build a fishing vessel in Vietnam. Included within other debtors is an amount due from the end user for the build costs so far. This whole contract has been very tortuous, and negotiations are still ongoing to resolve this situation. The directors have examined various scenarios to extradite the group from the situation, however there is a material uncertainty on how and when the situation can be resolved. One option would be to sell the boat as it now is. The more favoured option is to complete the original project, but the group will be required to commit significant funds upfront and would be reliant upon appropriate finance being made available.
In view of the steps being taken to manage the situation, current trading and the relationship with the group’s bankers and other stakeholders, the directors believe that the going concern basis is appropriate.
The financial statements do not contain any adjustments that may be required if either the bank overdraft is not renewed at an appropriate level, or if the group’s future trading does not meet its forecasts, or stakeholders do not continue to provide financial support to the group.
Turnover represents amounts receivable for the sale of crab seafood and restaurant fees 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.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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.
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.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
The carrying value of stock held is based on a costing model which enables relevant labour and overhead costs to be taken into account in arriving at the value of stock held for sale. It also takes into account different crab meat prices, which fluctuate depending on the time of year. 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 carrying value of stock at 30 April 2023 is £2,080,445.
As mentioned in note 30 to the financial statements, it is intended that the group will become party to an agreement to fund the build of three fishing vessels. Note 30 to the financial statements is based on an estimated future selling price of the vessels in both their current condition, and completed condition. The estimates and associated assumptions are based on historical experience, valuations and other factors that are considered to be relevant. Actual results may differ from these estimates.
The goodwill arising on the acquisition of The Blue Sea Food Company Limited has been impaired as the result of an estimated valuation prepared after the year end. Such valuations, by their nature, use estimation techniques that cannot be certain until that value is achieved. At 30 April 2023 the goodwill arising on the acquisition of The Blue Sea Food Company Limited has been written down by £1,627,168 to £246,075 (see note 4 to the financial statements).
An analysis of the group's turnover is as follows:
Exceptional items:
The impairment of intangible assets represents the write down of the goodwill arising on the acquisition by the group of The Blue Sea Food Company Limited of £1,627,168 and The Crab & Hammer Limited of £88,236 (see note 12 to the financial statements).
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The actual (credit)/charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:
The dividends above were all paid to the directors and their spouses.
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
The fair value of the investment in subsidiaries has been impaired in the light of relatively poor financial performance since acquisition. The valuation used for The Blue Sea Food Company Limited was provided post year end, and is based on an investment proposal created in January 2024.
More information on impairment movements in the period is given in note 12 to the financial statements.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
The fair value of investment in subsidiaries was impaired due to relatively poor financial performace in the period since acquisition. The valuation used in these accounts was provided post year end and based on an investment proposal created in January 2024 for the main trading subsidiary.
Details of the company's subsidiaries at 30 April 2023 are as follows:
The value of trade debtors which are secured under a confidential invoice discounting agreement is £890,005. The cash advanced by the bank under the agreement is included within creditors falling due within one year.
Other debtors falling due after more than one year:
Prior to its acquisition by the group, in 2019 The Blue Sea Food Company Limited entered into a loan agreement with a UK based fishing company and a UK based agent to finance the construction of a fishing boat on behalf of the fishing company.
At 30 April 2023 the loan due from the UK based fishing company included in Other Debtors falling due after more than one year amounted to £1,101,771 as follows:
Amounts advanced to UK based shipbuilding agent to finance construction: £1,618,305
Less: Amount received from UK based fishing company: £516,534
Net debtor at 30 April 2023: £1,101,771
In addition, The Blue Sea Food Company Limited has also advanced £288,168 at 30 April 2023 to a related party in connection with the acquisition of a further boat from the same shipbuilder. A commercial rate of interest is being charged on the loans, hence the loans are not being discounted.
At the current time the directors do not anticipate any losses to the group arising from these transactions - see note 30 to the financial statements, but it is likely that the UK based shipping company will take much longer to repay all funds than originally envisaged, possibly as long as ten years.
Obligations under finance leases and hire contracts are secured on the assets acquired.
Bank loans and overdrafts include £716,973 (2022: £770,395) for amounts owed under a confidential invoice discounting agreement which is secured on the trade debts of the group (see note 19 to the financial statements) and is repayable on demand. Other amounts owed to the bank are secured by way of a fixed and floating charge over the group's assets.
Obligations under finance leases and hire contracts are secured on the assets acquired.
The bank loans and overdraft are secured by fixed and floating charges over the assets of the group and the company. The bank loans have additional security in the form of personal guarantees from the directors.
Interest is charged on bank loans and overdrafts as follows:
Bank overdraft facility of £500,000: 3% per annum above Bank base rate;
Confidential invoice discounting facility of up to £2,000,000: 2.95% above Bank base rate;
CBILS Bank loan of £925,000: 3.99% above Bank base rate;
Medium term bank loan of £217,820: Fixed at 11% per annum;
Other loans comprise loans from related parties of £1,470,231. The loans are unsecured, with repayments on each loan restricted to £50,000 in any 6-month period. Interest is charged at a rate of between 5% and 6% per annum. The amount of these loans falling due after more than 5 years is set out in note 21 to the financial statements.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within the foreseeable future and relates to accelerated capital allowances that are expected to mature within the same period.
The other movement represents the deferred tax liability of The Blue Sea Food Company Limited at the date that company was acquired by the group.
Deferred income is included in the financial statements as follows:
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.
During the period the company issued 13,800 A Ordinary shares of 1p each, 6,400 B Ordinary shares of 1p each and 6,400 C Ordinary shares of 1p each fully paid, for a premium of £2,833,000 which has been credited to a "Merger reserve" - see note to the financial statements.
Ordinary shares:
All of the ordinary shares rank pari passu, and are entitled to vote, receive dividend payments, and are entitled to participate in a distribution arising from a winding up of the company.
Preference shares:
Each share is entitled to a dividend payment or any other distribution at the option of the directors, not permitted to vote, and not entitled to participate in a distribution arising from a winding up of the company.
Other reserves of £2,833,000 represent a "Merger reserve" arising from a fair value adjustment to the consideration on the acquisition of The Blue Sea Food Company Limited on 1 May 2022.
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:
Contracts for the construction of 3 fishing vessels
As mentioned in note 19 to the financial statements, the group has a long-term debtor balance due from an unconnected UK fishing company. This arose from a contract by The Blue Sea Food Company, the main trading subsidiary company, to build a fishing boat with a UK based shipbuilding agent, which has gone into liquidation.
The directors have been negotiating with the shipyard and liquidator to resolve the issues to everyone’s benefit. The negotiations have been long and tortuous, but at the current time the expectation is that the group will become party to a new agreement, as part of which:
The group will guarantee to pay the shipyard the outstanding amounts owed to secure the release of the fishing boat above, as well as 2 other boats under construction at the same shipyard; and
The group will be party to a finance agreement to fund the delivery of all 3 boats.
There are a number of uncertainties to the contracts, and in order to manage the risk only one boat at a time will be completed.
In addition to the costs already incurred, the liability before storage fees and interest relating to the 3 vessels, which is subject to the lien exercised over the hulls by the shipyard, amounts to a further £506,660 for each vessel. With appropriate finance in place to enable the construction of all 3 boats to proceed, the directors believe that the net realisable value of each boat is such that no loss will arise on its completion and sale.
All the parties involved in the contract are currently actively pursuing finance arrangements to complete the vessels. In the event that any party involved withdraws from the agreement for any reason, the group will retain title to the vessels. The group will then seek to sell the vessels to recover the debts owed to it in full.
Non-cash items in investing activities
Plant and machinery of £195,663 acquired during the period under a hire purchase contract has been excluded from the Statement of Cash Flows.
Purchase of subsidiary undertakings
The effect of the acquisition of the subsidiary companies during the period was as follows: