Company registration number 01978855 (England and Wales)
FRANCHI PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
FRANCHI PLC
COMPANY INFORMATION
Directors
Mr M Franchi
Mr J Mason
(Appointed 30 June 2023)
Mr M R Robinson
Mr N Holmes
(Appointed 14 April 2022)
Secretary
Mr J Bellingham
Company number
01978855
Registered office
278 Holloway Road
London
United Kingdom
N7 6NE
Auditor
Azets Audit Services
7 - 8 Britannia Business Park
Comet Way
Southend-On-Sea
Essex
United Kingdom
SS2 6GE
FRANCHI PLC
CONTENTS
Page
Strategic report
1 - 3
Directors' report
5
Directors' responsibilities statement
4
Independent auditor's report
6 - 8
Profit and loss account
9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 26
FRANCHI PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 1 -

The directors present the strategic report for the year ended 31 March 2023.

Fair review of the business

 

The purpose of the Strategic Report is to demonstrate how the directors have performed in promoting the success of the Company, and to provide a fair and balanced review of the Company's business including:

 

- The development and performance of the business during the year

- The position of the Company at the year end

- Future developments

- A summary of principal risks and uncertainties facing the Company

 

Jack Mason was appointed as a director on 30 June 2023.

 

Review of business

The principal business activities are split into several niche areas:

- Architectural ironmongery specification and supply division incorporating a glass door fittings division.

- Builders' hardware, tools and specialised key cutting retail/trade stores.

- Locksmith and security products supply and installation division.

 

The results for the year and the financial position at the end of the year were considered satisfactory by the directors.

 

The Company monitors the business performance through a number of key performance indicators, including revenue growth, gross profit margins and profit before taxation, which are summarised as follows:

 

 

2023

 

2022

 

£m

 

£m

Turnover

 

11.40

 

9.21

Gross profit margin

 

44%

 

44%

(Loss)/Profit before taxation

 

(0.31)

 

(0.25)

Shareholders' funds

 

(0.05)

 

0.24

 

The Company had a 23% increase in sales from the previous year, mainly due to the recovery from the Covid pandemic and increased marketing activity. Gross profit margin dropped slightly due to increased sales from the lower margin glass division. Overheads increased substantially with investment in people and infrastructure to sow the seeds for future expansion and profitability.

 

The results for the year which are set out in the Income Statement show a loss before tax of £0.31 million, compared to a loss of £0.25 million in 2022.

 

The Company has experienced major problems since the installation of new computer systems in July 2021. This has resulted in some costs being allocated to the wrong financial year. The loss for year ended 31 March 2021 was understated by £0.25 million. The reserves brought forward have been adjusted to include this additional loss.

 

The Company continues to meet all of its financial and statutory obligations. This is achieved through strong financial controls, specifically around cash flow and working capital and reflected in the gross profit margin.

 

FRANCHI PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 2 -
Principal risks and uncertainties

The directors are alert to the matter of risk and consider that they have established adequate systems to manage those limited areas of risk to which the Company might be vulnerable. The directors are confident that the Company has adequate financial resources to take advantage of any opportunities which may arise. The directors therefore consider the state of affairs of the Company to be satisfactory.

 

The directors continually monitor the key risks facing the Company together with assessing the controls used for managing these risks. The principal risks and uncertainties facing the Company are as follows:

 

Business risk

The Company competes in a rapidly evolving and highly competitive market, and competition is expected to continue to intensify. The Company's response to these competitive pressures is to keep pace with technological advances and marketing opportunities.

 

Credit risk

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. Trade creditor liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.

 

Liquidity risk

The Company's policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash and continued support from the major shareholder.

 

War in Ukraine

The Ukraine War continues to cause periodic disruption to our supply chain pushing out customer delivery dates.

Funding

At the year end the Company had a loss after tax of £0.29 million and negative shareholders' funds of £0.05 million. There are no bank loans or overdrafts, but there is an invoice discounting facility of £1.25 million. The unsecured loan from the previous owner, which is interest free and unsecured, has been reduced to £0.3 million. The provider of the private loan of £0.5 million in October 2021 with annual interest of 6%, has provided an additional loan of £0.5 million in March 2023 with annual interest of 9%. Both these loans have been secured on external assets and are repayable in full in the second half of 2025.

 

Future developments

The directors are planning to move the Company into a substantial profit position, with the following key strategic initiatives:

- Increase further growth of the contracts division with additional resource & new products.

- Launch a new automatics security division.

- Improve further the gross profit margin with operating efficiencies.

- Further investment in outsourced marketing and business development activities.

 

FRANCHI PLC
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 3 -

Section 172(1) statement

The directors of the Company consider, that they have acted in good faith and in the way that would be most likely to promote the success of the Company for the benefit of its members as a whole and in accordance with a set of general duties which are detailed in section 172 of the Companies Act 2006. In particular, by performance of the following:

 

- Our business aims are designed to have a long-term beneficial impact on the Company and to contribute to its success.

- Our employees are fundamental to our business aims. We are a responsible employer in our approach to the pay and benefits our employees receive.

- Our business requires strong relationships with suppliers, customers and others and we continually strive to maintain and improve these relationships.

- The impact of the Company's operations on the community and environment are considered and reviewed regularly.

- Our intention is to behave responsibly and ensure that management operate the business in a responsible manner, operating within the high standards of business conduct and good governance.

- Our intention is to behave responsibly toward our shareholders and treat them fairly and equally, so they too may benefit from the success of our Company.

.

On behalf of the board

Mr J Mason
Director
5 March 2024
FRANCHI PLC
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:

 

 

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.

FRANCHI PLC
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 5 -

The directors present their annual report and financial statements for the year ended 31 March 2023.

Results and dividends

The results for the year are set out on page 9.

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:

Mr M Franchi
Mr J Mason
(Appointed 30 June 2023)
Mr M R Robinson
Mr N Holmes
(Appointed 14 April 2022)
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.

On behalf of the board
Mr J Mason
Director
5 March 2024
FRANCHI PLC
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF FRANCHI PLC
- 6 -
Opinion

We have audited the financial statements of Franchi Plc (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:

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 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 related to going concern

We draw attention to note 1.2 of the financial statements which summarises the directors' opinion on going concern based on the current trading performance of the company giving rise to a material uncertainty. Our opinion is not modified in respect of this matter.

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:

FRANCHI PLC
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF FRANCHI PLC
- 7 -
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:

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.

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.

FRANCHI PLC
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF FRANCHI PLC
- 8 -

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

 

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

 

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

 

 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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.

Julian Golding
Senior Statutory Auditor
For and on behalf of Azets Audit Services
5 March 2024
Chartered Accountants
Statutory Auditor
7 - 8 Britannia Business Park
Comet Way
Southend-On-Sea
Essex
United Kingdom
SS2 6GE
FRANCHI PLC
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2023
- 9 -
2023
2022
as restated
Notes
£
£
Turnover
3
11,391,591
9,205,538
Cost of sales
(6,437,708)
(5,157,578)
Gross profit
4,953,883
4,047,960
Administrative expenses
(5,122,374)
(4,297,238)
Other operating income
-
0
10,215
Operating loss
4
(168,491)
(239,063)
Interest payable and similar expenses
7
(145,206)
(13,752)
Loss before taxation
(313,697)
(252,815)
Tax on loss
8
26,376
(27,789)
Loss for the financial year
(287,321)
(280,604)

The profit and loss account has been prepared on the basis that all operations are continuing operations.

FRANCHI PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
- 10 -
2023
2022
as restated
£
£
Loss for the year
(287,321)
(280,604)
Other comprehensive income
-
-
Total comprehensive income for the year
(287,321)
(280,604)
FRANCHI PLC
BALANCE SHEET
AS AT
31 MARCH 2023
31 March 2023
- 11 -
2023
2022
as restated
Notes
£
£
£
£
Fixed assets
Intangible assets
9
308,979
292,454
Tangible assets
10
359,609
363,726
668,588
656,180
Current assets
Stocks
11
1,565,742
1,069,854
Debtors
12
3,175,445
1,903,645
Cash at bank and in hand
216,176
303,263
4,957,363
3,276,762
Creditors: amounts falling due within one year
13
(4,537,518)
(3,030,654)
Net current assets
419,845
246,108
Total assets less current liabilities
1,088,433
902,288
Creditors: amounts falling due after more than one year
14
(1,000,000)
(500,000)
Provisions for liabilities
Deferred tax liability
17
92,039
118,573
(92,039)
(118,573)
Net (liabilities)/assets
(3,606)
283,715
Capital and reserves
Called up share capital
19
50,000
50,000
Profit and loss reserves
(53,606)
233,715
Total equity
(3,606)
283,715
The financial statements were approved by the board of directors and authorised for issue on 5 March 2024 and are signed on its behalf by:
Mr J  Mason
Director
Company Registration No. 01978855
FRANCHI PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 12 -
Share capital
Profit and loss reserves
Total
£
£
£
As restated for the period ended 31 March 2022:
Balance at 1 April 2021
50,000
764,319
814,319
Effect of prior year adjustments
-
(250,000)
(250,000)
As restated
50,000
514,319
564,319
Year ended 31 March 2022:
Loss and total comprehensive income for the year
-
(280,604)
(280,604)
Balance at 31 March 2022
50,000
233,715
283,715
Year ended 31 March 2023:
Loss and total comprehensive income for the year
-
(287,321)
(287,321)
Balance at 31 March 2023
50,000
(53,606)
(3,606)
FRANCHI PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
- 13 -
2023
2022
as restated
Notes
£
£
£
£
Cash flows from operating activities
Cash (absorbed by)/generated from operations
22
(352,363)
121,998
Interest paid
(145,206)
(13,752)
Income taxes (paid)/refunded
(158)
116,413
Net cash (outflow)/inflow from operating activities
(497,727)
224,659
Investing activities
Purchase of intangible assets
(16,525)
(114,612)
Purchase of tangible fixed assets
(52,023)
(90,763)
Proceeds on disposal of tangible fixed assets
(891)
5,184
Net cash used in investing activities
(69,439)
(200,191)
Financing activities
Repayment of borrowings
488,594
173,759
Payment of finance leases obligations
(8,515)
(1,736)
Net cash generated from financing activities
480,079
172,023
Net (decrease)/increase in cash and cash equivalents
(87,087)
196,491
Cash and cash equivalents at beginning of year
303,263
106,772
Cash and cash equivalents at end of year
216,176
303,263
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
- 14 -
1
Accounting policies
Company information

Franchi PLC is a private company, registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

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. The principal accounting policies adopted are set out below.

1.2
Going concern

Atruet the time of approving the financial statements, the directors acknowledge that the current levels of reserves held give rise to concern over the company’s operational existence for the foreseeable future.

 

The current economic conditions present increased risk for all businesses. The directors have reviewed and considered relevant information, including the annual budget and future cash flows in making their assessment.

 

In response to such conditions, the directors have carefully considered these risks including an assessment of uncertainty on future trading projections for a period of at least 12 months from the date of signing these financial statements, and the extent to which they might affect the preparation of the financial statements on a going concern basis.

 

Based on this assessment, despite expected measures that could be undertaken to mitigate the current adverse conditions and the current resources available, the Directors acknowledge that there could be seen to be doubt over whether the level of reserves and liquidity held will be sufficient to meet the demands of the business including any capital and servicing obligations and external debt liabilities. Whilst the Directors remain optimistic about future growth, they do also acknowledge these material uncertainties may lead to doubts about the Company's ability to continue as a going concern.

 

This being said, a good relationship continues to be held with external finance providers and assurances have been made that debt will not be recalled within the next 12 months.

 

Given the level of expected support the directors have continued to adopt the going concern basis of accounting in preparing these financial statements.

1.3
Turnover

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.

 

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 15 -

Revenue from contracts 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, 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.

1.4
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation 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:

Software
20% on cost
1.5
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:

Leasehold improvements
10% on reducing balance
Plant and equipment
10% on reducing balance
Fixtures and fittings
10% on reducing balance
Computers
33% on cost
Motor vehicles
20% on reducing balance

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.

1.6
Impairment of fixed assets

At each reporting period end date, the company 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.

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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 16 -

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.

1.7
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.

 

Cost is based on the first-in - first out (FIFO) principal.

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.

1.8
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.

1.9
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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 17 -
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, 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.

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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 18 -
Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.10
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.

1.11
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

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.

Deferred tax

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 when the company has 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.

1.12
Provisions

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 19 -
1.13
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.

1.14
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.15
Leases

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 hire purchase contracts and 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 leases asset are consumed.

1.16
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.

1.17

Long term contracts

Amounts recoverable on long term contracts, which are included in debtors, are stated at the net sales value of the work done after provision for contingencies and anticipated future losses on contracts, less amounts received as progress payments on account. Excess progress payments are included in creditors as payments on account.

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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 20 -
3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by class of business
11,391,591
9,205,538
2023
2022
£
£
Other revenue
Grants received
-
10,215
4
Operating loss
2023
2022
Operating loss for the year is stated after charging/(crediting):
£
£
Government grants
-
(10,215)
Fees payable to the company's auditor for the audit of the company's financial statements
21,500
12,000
Depreciation of owned tangible fixed assets
53,894
54,187
Loss/(profit) on disposal of tangible fixed assets
3,137
(1,668)
Operating lease charges
221,454
96,825
5
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
61
61

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
3,041,465
2,462,523
Social security costs
325,617
294,163
Pension costs
60,497
66,213
3,427,579
2,822,899
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
170,000
75,000
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 21 -
7
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
104,367
12,500
Other finance costs:
Interest on finance leases and hire purchase contracts
38,151
970
Other interest
2,688
282
145,206
13,752
8
Taxation
2023
2022
£
£
Deferred tax
Origination and reversal of timing differences
(26,376)
27,789

The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Loss before taxation
(313,697)
(252,815)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
(59,602)
(48,035)
Tax effect of expenses that are not deductible in determining taxable profit
17,757
24,057
Tax effect of income not taxable in determining taxable profit
596
-
0
Permanent capital allowances in excess of depreciation
(5,763)
(39,982)
Trading losses carried forward
47,012
63,960
Deferred tax movement
(26,376)
27,789
Taxation (credit)/charge for the year
(26,376)
27,789
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 22 -
9
Intangible fixed assets
Software
£
Cost
At 1 April 2022
292,454
Additions
16,525
At 31 March 2023
308,979
Amortisation and impairment
At 1 April 2022 and 31 March 2023
-
0
Carrying amount
At 31 March 2023
308,979
At 31 March 2022
292,454
10
Tangible fixed assets
Leasehold improvements
Plant and equipment
Fixtures and fittings
Computers
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 April 2022
92,878
388,260
120,061
83,698
126,615
811,512
Additions
3,172
-
0
9,804
35,646
3,401
52,023
Disposals
-
0
-
0
-
0
-
0
(20,635)
(20,635)
At 31 March 2023
96,050
388,260
129,865
119,344
109,381
842,900
Depreciation and impairment
At 1 April 2022
9,287
249,002
34,767
59,486
95,244
447,786
Depreciation charged in the year
8,385
13,926
9,428
15,600
6,555
53,894
Eliminated in respect of disposals
-
0
-
0
-
0
-
0
(18,389)
(18,389)
At 31 March 2023
17,672
262,928
44,195
75,086
83,410
483,291
Carrying amount
At 31 March 2023
78,378
125,332
85,670
44,258
25,971
359,609
At 31 March 2022
83,591
139,258
85,294
24,212
31,371
363,726
11
Stocks
2023
2022
£
£
Finished goods and goods for resale
1,565,742
1,069,854
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 23 -
12
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
2,808,312
1,694,061
Other debtors
-
0
2,325
Prepayments and accrued income
303,171
143,297
3,111,483
1,839,683
2023
2022
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 17)
63,962
63,962
Total debtors
3,175,445
1,903,645
13
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Obligations under finance leases
16
-
0
8,515
Other borrowings
15
516,499
527,905
Trade creditors
2,012,056
1,172,626
Corporation tax
24,751
24,751
Other taxation and social security
687,810
625,199
Other creditors
1,226,920
589,822
Accruals and deferred income
69,482
81,836
4,537,518
3,030,654
14
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Other borrowings
15
1,000,000
500,000
15
Loans and overdrafts
2023
2022
£
£
Other loans
1,516,499
1,027,905
Payable within one year
516,499
527,905
Payable after one year
1,000,000
500,000
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
15
Loans and overdrafts
(Continued)
- 24 -

The company bank borrowings are secured by a fixed and floating charge over the assets of the company.

 

£1m of other borrowings from third parties are secured against other non company assets.

16
Finance lease obligations
2023
2022
Future minimum lease payments due under finance leases:
£
£
Within one year
-
0
8,515
17
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Balances:
£
£
£
£
Accelerated capital allowances
92,039
118,573
-
-
Tax losses
-
-
63,962
63,962
92,039
118,573
63,962
63,962
2023
Movements in the year:
£
Liability at 1 April 2022
54,611
Credit to profit or loss
(26,534)
Liability at 31 March 2023
28,077

Deferred tax assets and liabilities are not expected to be reversed within the next 12 months and have therefore been disclosed as non - current assets and liabilities.

18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
60,497
66,213

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.

FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 25 -
19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
50,000
50,000
50,000
50,000
20
Related party transactions
Transactions with related parties

During the year the company entered into the following transactions with related parties:

At the balance sheet date creditors include £306,146 (2022: £438,146) owed to G Franchi, Former owner-director of Franchi PLC. The balance is unsecured, interest-free and repayable on demand.

During the year the Company received services from M Franchi Consultancy Limited amounting to £32,640 (2022: £120,835). Marco Franchi is the owner-director of both Franchi PLC and M Franchi Consultancy Limited.

 

In 2022, M Franchi Consultancy had loaned Franchi PLC £99,000 of which £39,959 was outstanding at the year end (2022: £89,760) A 9.1% interest rate is applied to the loan.

 

Rent is paid at a commercial rate to G Franchi for the use by the Company of premises owned personally by Mr G Franchi and the amount paid in the year totalled £132,000 (2022: £nil).

 

Mr M Robinson is also a director of Optimal Power Techniques Limited. During the year, the company received services of £29,788 from Optimal Power Techniques Limited (2022: £nil).

 

During the year, total remuneration of £63k was paid to the wife of a director.

 

During the year, a total of key management personnel compensation of £170,000 (2022 - £75,000) was paid.

21
Ultimate Controlling Party

The controlling party is Franchi Holdings Limited.

22
Cash (absorbed by)/generated from operations
2023
2022
£
£
Loss for the year after tax
(287,321)
(280,604)
Adjustments for:
Taxation (credited)/charged
(26,376)
27,789
Finance costs
145,206
13,752
Loss/(gain) on disposal of tangible fixed assets
3,137
(1,668)
Depreciation and impairment of tangible fixed assets
53,894
54,187
Movements in working capital:
Increase in stocks
(495,888)
(50,200)
Increase in debtors
(1,271,800)
(120,011)
Increase in creditors
1,526,785
478,753
Cash (absorbed by)/generated from operations
(352,363)
121,998
FRANCHI PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 26 -
23
Analysis of changes in net debt
1 April 2022
Cash flows
31 March 2023
£
£
£
Cash at bank and in hand
303,263
(87,087)
216,176
Borrowings excluding overdrafts
(1,027,905)
(488,594)
(1,516,499)
Obligations under finance leases
(8,515)
8,515
-
(733,157)
(567,166)
(1,300,323)
24
Prior period adjustment
Reconciliation of changes in equity
1 April
31 March
2021
2022
£
£
Adjustments to prior year
Stock correction - 2021
(250,000)
(250,000)
Equity as previously reported
814,319
533,715
Equity as adjusted
564,319
283,715
Analysis of the effect upon equity
Profit and loss reserves
(250,000)
(250,000)
Reconciliation of changes in loss for the previous financial period
2022
£
Total adjustments
-
Loss as previously reported
(280,604)
Loss as adjusted
(280,604)
Notes to reconciliation
Stock adjustment

£250,000 of old stock was written off in March 2021, but not accurately reflected per the new financial systems implemented in July 2021. As a result, the stock value and overall reserves recognised in 31st March 2021 and 31st March 2022 was overstated by £250,000. This has now been corrected.

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