Company registration number 06558609 (England and Wales)
PROOF DRINKS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
PROOF DRINKS LIMITED
COMPANY INFORMATION
Directors
J McDermott
P Ferguson
B Fallon
(Appointed 13 August 2022)
Company number
06558609
Registered office
41 Great Portland Street
London
W1W 7LA
Auditor
Hardwick & Morris LLP
41 Great Portland Street
London
W1W 7LA
PROOF DRINKS LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 23
PROOF DRINKS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 1 -
The directors present the strategic report for the year ended 31 March 2023.
Review of the business
The Directors present the strategic report for the year ended 31 March 2023.
Proof Drinks Ltd is principally engaged in the distribution of third party drinks brands in the UK. Turnover in the current year has had small levels of growth, but due to a change in product mix and additional investment into advertising and promotional support, the gross profit margins have reduced. An increase in administrative expenses, largely due to the strategic decision to invest in staff and the relocation of the office has led to a lower profit in the year.
The business continues to grow and develop with the addition of new brands to the portfolio planned. The new brands selected are all established within the UK market with scope for further growth and are chosen to complement the existing portfolio of brands. Brand growth is driven through strategic marketing and events and by the sales team driving new routes to market.
Investment in staff across the business, starting with the sales and marketing teams and followed with the support functions has enabled the business to grow rapidly over the last 4 years. Further investment is planned in 2024 to continue to further grow the business and the brands distributed.
The company monitors performance against budget and forecast along with other KPI’s such as monthly sales by sales channel and brand and cashflow. These are reviewed monthly, and any anomalies are reviewed by the Board of Directors.
Principal risks and uncertainties
Proof Drinks Ltd principle risks are brand portfolio risks, interest rate risks and price risks. The risks are managed as follows:
Brand portfolio risks
Proof Drinks seeks to maintain a diverse portfolio of established brands across a number of different products ranges. This diversity ensures that as different drinks products gain in popularity, they are positioned to deliver to their customers. Investment into the sales, marketing and support functions along with IT infrastructure, ensures that they are able to deliver a high level of service to their customers.
Credit risks
The principal credit risk comes from trade debtors. Trade debtors are funded through invoice financing facilities and the company has a trade insurance policy in place to mitigate the risk.
Foreign exchange risks
Proof Drinks has some foreign exchange exposure due to purchases made from overseas stock suppliers. To mitigate this risk, the company monitors exchange rates regularly and seeks to optimise payment and transaction rates.
PROOF DRINKS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 2 -
P Ferguson
Director
20 February 2024
PROOF DRINKS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 3 -
The directors present their annual report and financial statements for the year ended 31 March 2023.
Principal activities
The principal activity of the company continued to be that of drinks distribution, sales and marketing.
Results and dividends
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
J McDermott
P Ferguson
B Fallon
(Appointed 13 August 2022)
Auditor
In accordance with the company's articles, a resolution proposing that Hardwick & Morris LLP be reappointed as auditor of the company will be put at a General Meeting.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Medium-sized companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
On behalf of the board
P Ferguson
Director
20 February 2024
PROOF DRINKS LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MARCH 2023
- 4 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
PROOF DRINKS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF PROOF DRINKS LIMITED
- 5 -
Opinion
We have audited the financial statements of Proof Drinks Limited (the 'company') for the year ended 31 March 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 March 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the 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.
PROOF DRINKS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PROOF DRINKS LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to industry sector regulations and unethical and prohibited business practices, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and UK Tax Legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls). Appropriate audit procedures in response to these risks were carried out. These procedures included:
Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
Reading minutes of meetings of those charged with governance;
Obtaining and reading correspondence from legal and regulatory bodies including HMRC;
Identifying and testing journal entries;
Challenging assumptions and judgements made by management in their significant accounting estimates.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members; and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, 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 or intentional misrepresentations, or through collusion.
PROOF DRINKS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PROOF DRINKS LIMITED
- 7 -
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.
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.
Stephanie Hardwick FCA
Senior Statutory Auditor
For and on behalf of Hardwick & Morris LLP
20 February 2024
Chartered Accountants
Statutory Auditor
41 Great Portland Street
London
W1W 7LA
PROOF DRINKS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
28,384,460
28,078,161
Cost of sales
(24,566,074)
(24,641,680)
Gross profit
3,818,386
3,436,481
Administrative expenses
(3,563,309)
(3,279,031)
Other operating income
49,415
Operating profit
4
255,077
206,865
Interest receivable and similar income
7
1,151
20
Interest payable and similar expenses
8
(252,645)
(119,224)
Profit before taxation
3,583
87,661
Tax on profit
9
(25,064)
Profit for the financial year
3,583
62,597
The profit and loss account has been prepared on the basis that all operations are continuing operations.
PROOF DRINKS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
- 9 -
2023
2022
£
£
Profit for the year
3,583
62,597
Other comprehensive income
-
-
Total comprehensive income for the year
3,583
62,597
PROOF DRINKS LIMITED
BALANCE SHEET
AS AT
31 MARCH 2023
31 March 2023
- 10 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
10
54,568
18,560
Investments
11
29
29
54,597
18,589
Current assets
Stocks
13
4,183,415
3,493,719
Debtors
14
6,614,211
6,578,220
Cash at bank and in hand
64,758
119,582
10,862,384
10,191,521
Creditors: amounts falling due within one year
15
(9,809,352)
(8,964,864)
Net current assets
1,053,032
1,226,657
Total assets less current liabilities
1,107,629
1,245,246
Creditors: amounts falling due after more than one year
16
(329,467)
(470,667)
Net assets
778,162
774,579
Capital and reserves
Called up share capital
20
147,000
147,000
Share premium account
458,920
458,920
Profit and loss reserves
172,242
168,659
Total equity
778,162
774,579
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.true
The financial statements were approved by the board of directors and authorised for issue on 20 February 2024 and are signed on its behalf by:
P Ferguson
Director
Company registration number 06558609 (England and Wales)
PROOF DRINKS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 11 -
Share capital
Share premium account
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 April 2021
147,000
458,920
106,062
711,982
Year ended 31 March 2022:
Profit and total comprehensive income
-
-
62,597
62,597
Balance at 31 March 2022
147,000
458,920
168,659
774,579
Year ended 31 March 2023:
Profit and total comprehensive income
-
-
3,583
3,583
Issue of share capital
20
147,000
-
147,000
Reduction of shares
20
(147,000)
(147,000)
Balance at 31 March 2023
147,000
458,920
172,242
778,162
PROOF DRINKS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
- 12 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
24
102,072
420,796
Interest paid
(252,645)
(119,224)
Income taxes paid
(25,064)
(29,890)
Net cash (outflow)/inflow from operating activities
(175,637)
271,682
Investing activities
Purchase of tangible fixed assets
(52,917)
(15,150)
Proceeds from disposal of tangible fixed assets
(13)
6,337
Interest received
1,151
20
Net cash used in investing activities
(51,779)
(8,793)
Financing activities
Repayment of bank loans
172,592
(170,651)
Net cash generated from/(used in) financing activities
172,592
(170,651)
Net (decrease)/increase in cash and cash equivalents
(54,824)
92,238
Cash and cash equivalents at beginning of year
119,582
27,344
Cash and cash equivalents at end of year
64,758
119,582
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
- 13 -
1
Accounting policies
Company information
Proof Drinks Limited is a private company limited by shares incorporated in England and Wales. The registered office is 41 Great Portland Street, London, W1W 7LA.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
This 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:
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: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of JP Drinks Limited. These consolidated financial statements are available from its registered office, 41 Great Portland Street, London, United Kingdom, W1W 7LA.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
Proof Drinks Limited is a subsidiary of JP Drinks Limited and the results of Proof Drinks Limited are included in the consolidated financial statements of JP Drinks Limited which are available from 41 Great Portland Street, London, United Kingdom W1W 7LA.
1.2
Turnover
Turnover represents amounts receivable for the distribution, sales and marketing of goods and services net of VAT and trade discounts.
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.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 14 -
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
1.3
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Fixtures, fittings & equipment
25% straight line
Motor vehicles
25% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.4
Fixed asset investments
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 15 -
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.8
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 16 -
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
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.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans 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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 17 -
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Taxation
The tax expense represents the sum of the tax currently payable.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
1.14
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
1.15
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 18 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2022
£
£
Other revenue
Interest income
1,151
20
Grants received
-
49,415
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange losses
110,424
16,273
Government grants
-
(49,415)
Fees payable to the company's auditor for the audit of the company's financial statements
22,500
18,000
Depreciation of owned tangible fixed assets
14,693
8,395
Loss/(profit) on disposal of tangible fixed assets
2,229
(1,812)
Operating lease charges
89,756
47,907
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
45
40
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
5
Employees
(Continued)
- 19 -
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
1,857,319
1,661,699
Social security costs
252,787
178,784
Pension costs
78,385
65,459
2,188,491
1,905,942
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
26,070
26,340
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
1,035
20
Other interest income
116
Total income
1,151
20
8
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loans
186,892
107,140
Other interest
65,753
12,084
252,645
119,224
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
25,064
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
9
Taxation
(Continued)
- 20 -
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
Profit before taxation
3,583
87,661
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
681
16,656
Tax effect of expenses that are not deductible in determining taxable profit
3,623
11,004
Tax effect of income not taxable in determining taxable profit
(344)
Unutilised tax losses carried forward
4,999
Permanent capital allowances in excess of depreciation
(9,303)
(2,252)
Taxation charge for the year
-
25,064
10
Tangible fixed assets
Fixtures, fittings & equipment
Motor vehicles
Total
£
£
£
Cost
At 1 April 2022
33,579
33,579
Additions
34,248
18,669
52,917
Disposals
(4,273)
(4,273)
At 31 March 2023
63,554
18,669
82,223
Depreciation and impairment
At 1 April 2022
15,019
15,019
Depreciation charged in the year
11,970
2,723
14,693
Eliminated in respect of disposals
(2,057)
(2,057)
At 31 March 2023
24,932
2,723
27,655
Carrying amount
At 31 March 2023
38,622
15,946
54,568
At 31 March 2022
18,560
18,560
11
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
12
29
29
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
11
Fixed asset investments
(Continued)
- 21 -
Fixed asset investments not carried at market value
The value of investments is based on the cost to acquire the shares.
12
Subsidiaries
Details of the company's subsidiaries at 31 March 2023 are as follows:
Name of undertaking
Address
Nature of business
Class of
% Held
shares held
Direct
Proof Drinks Australia PTY LTD
Australia
Alcohol distributor
Ordinary
52.00
13
Stocks
2023
2022
£
£
Finished goods and goods for resale
4,183,415
3,493,719
14
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
4,841,131
5,916,436
Amounts owed by group undertakings
222,397
Other debtors
584,474
120,753
Prepayments and accrued income
1,188,606
318,634
6,614,211
6,578,220
15
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans
17
520,353
206,561
Trade creditors
3,359,612
3,445,149
Corporation tax
25,064
Other taxation and social security
238,864
244,961
Deferred income
18
327,000
179,226
Other creditors
5,039,224
4,525,332
Accruals
324,299
338,571
9,809,352
8,964,864
A charge is in place in respect of the invoice discounting agreement which is held over the company's assets.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 22 -
16
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Bank loans and overdrafts
17
329,467
470,667
17
Loans and overdrafts
2023
2022
£
£
Bank loans
849,820
677,228
Payable within one year
520,353
206,561
Payable after one year
329,467
470,667
18
Deferred income
2023
2022
£
£
Other deferred income
327,000
179,226
19
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
78,385
65,459
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
20
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
147,000
-
147,000
-
Ordinary Shares A of £1 each
-
1,900
-
1,900
Deferred Shares of £1 each
-
145,000
-
145,000
Ordinary Shares B of £1 each
-
100
-
100
147,000
147,000
147,000
147,000
21
Charges
HSBC Bank Plc holds a fixed and floating charge over all assets of the company.
PROOF DRINKS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 23 -
22
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2023
2022
£
£
Within one year
95,000
63,333
Between two and five years
285,000
380,000
380,000
443,333
23
Ultimate controlling party
The parent company is JP Drinks Limited, company number 13572694, registered in England and Wales. The registered office for JP Drinks Limited is 41 Great Portland Street, London, W1W 7LA.
24
Cash generated from operations
2023
2022
£
£
Profit for the year after tax
3,583
62,597
Adjustments for:
Taxation charged
25,064
Finance costs
252,645
119,224
Investment income
(1,151)
(20)
Loss/(gain) on disposal of tangible fixed assets
2,229
(1,812)
Depreciation and impairment of tangible fixed assets
14,693
8,395
Movements in working capital:
Increase in stocks
(689,696)
(1,472,796)
Increase in debtors
(35,991)
(2,180,021)
Increase in creditors
407,986
3,680,939
Increase in deferred income
147,774
179,226
Cash generated from operations
102,072
420,796
25
Analysis of changes in net debt
1 April 2022
Cash flows
31 March 2023
£
£
£
Cash at bank and in hand
119,582
(54,824)
64,758
Borrowings excluding overdrafts
(677,228)
(172,592)
(849,820)
(557,646)
(227,416)
(785,062)
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