The directors present the strategic report for the year ended 31 July 2022.
Performance over the year to 31 July 2022 was mixed. Having acquired John Truswell & Sons in December 2021 the Group looked to expand its network of sites across the UK. Truswell performed well during its first 7 months as part of OTIF Distribution with increased revenues of 5.8% and increases in Gross Margin from 16.4 to 19.24%.
The performance of John Truswell is one of the high points within the Group. The other subsidiaries within the group included Kenyon Road Haulage Limited which did not perform so well and Kenyon Warehousing Limited which faired more favourably.
Kenyon Road Haulage Limited really struggled during this period, as escalating fuel costs, the hangover from the driver shortage and covid severely affected the performance of the company. Market forces drove down margins as competitors offered cheaper and cheaper rates despite increased costs. Its site in Andover struggled to control its costs due to increased volumes through its pallet network operation. The higher the volumes the worse the position got for Andover given the territory it covered and associated costs in operating within a mainly rural location.
The deterioration in margins due to increased costs also affected the site at Blackburn for Kenyon Road Haulage and the directors decided to take steps to boost revenues and protect the business from a potential downturn in the UK economy from mid 2022. This involved targeting more blue-chip clients who were big enough to withstand the financial pressures of a predicted downturn in the UK economy and therefore enabling Kenyon Road Haulage to trade through this period.
Unfortunately the cost pressures brought on by the escalating fuel costs, the increased cost of drivers and the performance of its Andover operation resulted in KRH falling behind with its commitments to HMRC. The business took steps mid 2022 and agreed an 18 month Time To Pay arrangement with HMRC to clear the arrears. At the time given the blue-chip revenues it had secured, it was felt that maintaining the TTP payments was achievable for Kenyon Road Haulage.
The problems for Kenyon Road Haulage led to a significant post year end event in that funding through its Invoice Finance facility was lost for Kenyon Road Haulage on two of its main customers. The result was that in March 2023, despite trying to raise funding through refinancing of assets, Kenyon Road Haulage was unable to maintain its TTP commitment to HMRC. The arrangement was cancelled and Kenyon Road Haulage was placed into administration.
Given the significant intercompany balances owed by Kenyon Road Haulage to Kenyon Warehousing, this company also was placed into administration.
John Truswell continues to operate as the only trading subsidiary of OTIF Distribution Limited, and has since has taken over the operations of Kenyon Warehousing Ltd at Woodville.
Worldwide escalation of fuel prices as a result of the conflict in Ukraine, has been a major risk to the business and whilst the directors have worked to offset this by working with sub-contractors to minimize the impact of fuel increases as much as possible, this risk has been ever present throughout 2022.
Further economic challenges include the risk of Increasing interest rates which have risen during 2023. In anticipation of possible interest rate increases the Directors took steps including sensitivity analysis across all forecast to reflect various interest rate scenarios. Based on this and headroom created from Profits, the Directors are satisfied that the business can withstand interest rate increases over the next 12-18 months.
In addition to the above the business has seen other costs escalating including Electricity, Vehicle parts, Adblue and staff costs. All of these cannot be simply absorbed by the company and rather than simply passing on such increases to customers, the business is exploring ways where efficiencies can be realized.
It is anticipated that the challenging market conditions will continue through 2022 and beyond. During such period, the haulage industry is severely affected with prices being driven down as haulage providers compete for less and less business. However is recent years we have seen driver costs increase by over 20% on average and fuel prices by over 40%. The strategy for OTIF Distribution via John Truswell will be to focus on what it is good at and continue to deliver service excellence to its customers.
If this means that turnover stagnates for a period and the business has to curtail its fleet strategy to save costs, if this means it can retain its customers that is the strategy this business will adopt.
Further investment in the fleet is part of future plans with replacement of the double deck trailer fleet and increases to the size of the 18T & 26T Truck fleet planned over the next few years.
The service level target is 98% which is being achieved. MPG targets for the fleet are also being achieved and are being measured and monitored using software provided by Wedfleet. The MPG improvement achieved since the introduction of Webfleet has averaged 9.5% across the fleet.
Further improvements are planned with the introduction of a rate calculator to support commercial activities within the business. This will assist the business in understanding the financial weakness of certain rates as well as justifying rate increases with customers.
Each truck type has revenue targets per day which are either based on a total revenue figure or the number of pallets the truck needs to deliver. These are monitored daily at a video conference across all sites as well as during flash report review that takes place each week where the gross margin is reported.
The administration of Kenyon Road Haulage and Kenyon Warehousing occurred in March 2023 and as a subsidiary of OTIF Distribution Limited, this has had an impact on these financial statements. In terms of the balance sheet such an event subsequently leads to an impairment of the investments in the subsidiaries in the balance sheet of OTIF Distribution. An agreement has also been reached with administrators of both subsidiaries to write down the level of indebtedness that was owed by OTIF Distribution. This has meant that the group can continue to trade and thereby maintain employment for all staff within the remaining group companies. In the group figures, the remaining goodwill has not been impaired due to the portion of trade that has continued of Kenyon Warehousing Ltd under John Truswell & Son (Garage) Limited. More information is provided in Note 28 in the accounts
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 July 2022.
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of OTIF Distribution Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2022 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 uncertainty relating to going concern
We draw attention to Note 1.4, which indicates that as two subsidiaries in the group went into administration post-year end, this has had a considerable effect on the group and even at year end the group was in a net liability position of £1,000,718. The administrators have proposed that the debts owing to the two subsidiaries by the parent company may be settled by paying £200,000, which would be funded by the remaining trading subsidiary, John Truswell & Sons (Garage) Limited. The group is expected to be financially stable if this figure is accurate, but if the settlement is significantly higher, then the group could struggle to continue for a period of 12 months following the signing of these financial statements.
The group is reliant on the successful completion of the sale and leaseback of the freehold property, the support of HMRC, a positive negotiation of the loan write off and a successful trading period as outlined in the projections. Failure in any one or more of these would lead to uncertainty over whether the group can maintain its cashflow. This therefore indicates that a material uncertainty exists that may cast significant doubt over the group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Projections prepared by the directors show that the company can meet its liabilities as and when they fall due over the next 12 months. Our evaluation of the director’s assessment of the entity’s ability to continue to adopt the going concern basis of accounting included auditing these projections and undertaking stress-testing of the figures included within. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below:
Enquiry of management, those charged with governance around actual and potential litigation and claims.
Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
Reviewing minutes of meetings of those charged with governance.
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations such as health & safety, employment law and operating licencing.
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.
Review of the risk of fraud in revenue recognition.
Because of the field in which the client operates, we identified the following areas as those most likely to have a material impact on the financial statements: Health and Safety, operator licencing and compliance with the UK Companies Act.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
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.
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 £197,933 (2021 - £18,841 profit).
OTIF Distribution Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is c/o John Truswell & Sons (Garage) Ltd, Fall Bank Industrial Estate, Dodworth, Barnsley, S75 3LS.
The group consists of OTIF Distribution Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
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’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company OTIF Distribution Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 July 2022. 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.
The Directors believe that the impact of the administrations after the year end of the two Kenyon companies to the group is a setback in that its effect on other group companies has been minimal, however the impact on the whole group has been more significant. The strategy of the group was to build a network of companies across the UK that could provide a high quality distribution solution to all group customers. However whilst these business worked together they were each ran by a local team focused on optimising profits and revenues for their companies. So whilst the ability to share freight is no longer available, the financial effect of the loss of both Kenyon businesses, on the other group companies has been minimal.
Furthermore the Directors have provided personal support to help support the remaining group companies financially to help the remaining group withstand the impact the loss of Kenyon Road Haulage Limited and Kenyon Warehousing Limited has had on the group. Other projects include refinancing of subsidiary assets including sale and leaseback projects to release funds. Both of these projects are edging towards a successful conclusion.
As has been outlined in the Strategic Report and above, the administration of both Kenyon businesses has affected OTIF Distribution Ltd significantly, in particular the post period end balance sheet. Impairment of the investments has been put through as a result of the administrations, but on a positive note, discussions have taken placewith the administrators to repay a proportion of the loan owed by OTIF Distribution Ltd to Kenyon Road Haulage Limited and Kenyon Warehousing Limited with the balance being written off.Agreement has not been formally reached yet butinitial reviews by the administrators have already been undertaken, which indicate acceptance of a £200,000 settlement. This gives stability to the remaining group to retain jobs and to allow it to recover financially and operationally following the loss of these two subsidiaries.
The group is reliant on the successful completion of the sale and leaseback, the support of HMRC, a positive negotiation of the loan write off and a successful trading period as outlined in the projections. Failure in any one or more of these would lead to uncertainty over whether the group can maintain its cashflow and the would indicate that a material uncertainty exists that may cast significant doubt over the group's ability to continue as a going concern.
Based on the above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. The following criteria must also be met before revenue is recognised:
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the Group will receive the consideration due under the contract;
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract can be measured reliably.
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.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial 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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The useful economic life of tangible fixed assets is judged at the point of purchase and reviewed at each financial reporting date. This judgement is based upon the director's in depth knowledge of the industry in which the group operates and of the individual assets.
As standard, a useful economic life of 4 years is applied to fixtures and fittings and plant and machinery, between 8 and 10 years is applied to motor vehicle and 10 years for leasehold property and improvements.
At each balance sheet date, the directors undertake an assessment of the carrying amounts of its tangible fixed assets based upon their knowledge of the assets to determine whether there is any indication that the assets have suffered an impairment loss. Where necessary, an impairment is recorded as an impairment loss.
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.
At each balance sheet date and on a weekly basis the debtors are reviewed, and tactical decisions made to ensure payment is received from customers. A standard process is in place to pursue payment including the use a debt collection agencies, suspension of deliveries and retention of customer inventory, until payment is made.
Furthermore, the credit worthiness of each customer is checked monthly to review the validity of credit limits agreed and to establish the extent of any adjustment. This calculation is based on the financial position of the customers, the historical speed of payment and any ongoing discussions between relevant parties to the individual debtor.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Following the year end two of the subsidiaries of the group, Kenyon Road Haulage Limited and Kenyon Warehousing Limited, went into administration. Part of the trade of Kenyon Warehousing Limited has transferred to the new subsidiary on John Truswell & Sons (Garage) Limited.
Amounts from continuing operations include results of the portion of the trade that is continuing in Kenyon Warehousing Limited plus part year worth of the results of John Truswell & Sons (Garage) Limited, from the date of it's acquisition in the year.
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
The carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 July 2022 are as follows:
The long-term loan is unsecured and interest is payable at 4.9% over base. The invoice discounting facilities included within bank overdrafts are secured by way of a charge over the group's debtor's ledger.
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.
Finance leases are secured upon the asset to which they relate.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period. The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
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.
On 21 December 2021 the group acquired 100 percent of the issued capital of John Truswell & Sons (Garage) Limited.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The administration of Kenyon Road Haulage and Kenyon Warehousing occurred in March 2023 and as a subsidiary of OTIF Distribution Limited, this has had an impact on these financial statements. Since that point a profitable part of the trade of Kenyon Warehousing Ltd has been transferred to the remaining trading subsidiary in the group, John Truswell & Sons (Garage) Limited.
The investment in both companies by OTIF Distribution Limited has been fully impaired in the current year in respect of this and charged as a cost to the profit and loss account in the entity accounts. Likewise, OTIF Distribution Limited owed similar amounts to each company which the administrators have agreed to waive except for an amount of £200,000. The net decrease to the profit and loss account of OTIF Distribution Limited is £197,831.
These impairments and write offs have been reversed on consolidation. The goodwill on acquisition of the two subsidiaries has a net book value of £217,878 and was considered that no impairment would be necessary due to a portion of trade that has continued in the group which is expected to generate profits in the coming years.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Dividends totalling £0 (2021 - £18,900) were paid in the year in respect of shares held by the company's directors.