The directors present the strategic report for the year ended 31 January 2023.
During the year to 31 January 2023, the retail business continued to recover from Covid-19. Both the retail and direct shopping channels were open for the full year and subsequently turnover increased to over £39m for the first time in the company’s history.
The direct shopping channels produced the majority of turnover during the Covid periods, which was previously not the case. In the year to January 2023 the direct shopping accounted for a fraction less than 50% of all turnover and is predicted to increase that proportion in the future.
The House of Bruar continue to promote some of Britain's finest produce, clothing and rural artwork. Within the various different halls you will find items ranging from traditional Scottish tweed to cashmere knitwear and locally sourced foodstuffs.
The traditional key performance indicators have been maintained and as the company creates more revenue proportionately from different sources, there are more measures and comparisons analaysed on a periodic basis.
The income is mainly generated from two distinct sources: over the counter sales and direct shopping. A key indicator of over the counter sales which is monitored daily is the number of visitors to the store. This is achieved by the use of a counter on the car parks.
Counter sales are also monitored daily against the same day of the previous calendar year, gross profit is monitored on a weekly basis and operating profit on a month by month basis.
Direct sales are monitored by reviewing the quantity of orders, the average value of orders placed and the average number of units per order on a daily basis. These values include orders generated by catalogues, off the page adverts and digital channels. The latter of which has grown significantly over the past few years.
The balance sheet has remained stable and turnover of the business continues to improve.
There continues to be an increasing demand for House of Bruar branded merchandise at retail and more significantly on the internet and via mail order. This is enhanced by the promotion of world famous brands offered via all channels to the customer. The growth in the use of the internet for shopping has increased the future opportunities of the business and opened up international markets.
The ease of price comparison on the internet is both a threat and an opportunity. Customers are able to benchmark all products online very easily and the purchase decision can be very price focussed. In turn this means that the theatre aspect of retail is more important as well as a difference in the product range. The House of Bruar is well placed to take advantage of the market position.
The ambition of long term relationships continues throughout all aspects of the business. Whilst this is an obvious statement for the relationship with staff members and customers, it is also true for suppliers and sub contractors. The House of Bruar is very proud of the fact that several suppliers have been with the company since the inception 30 years ago.
The future planning for the A9 dualling continues, although it would appear the start dates for the sections that cover The House of Bruar shop and the Ballinluig Distribution Centre have been delayed. It is the belief of the company that, once completed, the A9 will allow more people to visit Highland Perthshire and further north on a safer road.
During the disruptive construction phase of the A9, the business needs to expand the direct shopping elements of the operation. The core of mail order fulfilment operations has moved from the main site to Ballinluig, which will aid the progression to a multi-season mail order business. There is already a requirement for further expansion of the distribution site. The company has worked closely with Perth and Kinross council to secure the necessary permissions to permit the future development in a timely fashion.
With the development of electric vehicles, there are plans to create a charging hub at Bruar, which will incorporate chargers of various speeds. The main barrier to entry establishing this charging is the lack of capacity in the network and the extreme costs to improve the network.
Section 172 of the Companies Act 2006
The Directors of the Company must act in accordance with a set of personal duties. These duties are detailed in s172 of the UK Companies Act 2006 summarised as follows:
A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
• the likely consequences of any decision in the long term,
• the interests of the company's employees,
• the need to foster the company's business relationships with suppliers, customers and others,
• the impact of the company's operations on the community and the environment,
• the desirability of the company maintaining a reputation for high standards of business conduct, and
• the need to act fairly as between members of the company.
The longevity of employment for members of staff and internal promotion is a key policy of the business as proven by the fact that at 31 January 2023, all members the senior management team have been associated with the company for more than six years and some since the company was established.
The company has ensured that the staff are trained to a level, which provides excellent service to customers and guests.
The ambition of long term relationships continues throughout all aspects of the business. Whilst this is an obvious statement for the relationship with customers, it is also true for suppliers and sub contractors. The House of Bruar is very proud of the fact that several suppliers have been with the company since the inception 30 years ago.
With the development of electric vehicles, there are plans to create a charging hub at Bruar, which will incorporate chargers of various speeds. The main barrier to entry establishing this charging is the lack of capacity in the network and the extreme costs to improve the network.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 January 2023.
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £632,909. 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:
Details of the group's financial risk management objectives and policies are included in note 25 to the financial statements.
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The SECR regulations introduced in April 2019 is designed to increase internal awareness of energy usage and cost, drive adoption of energy efficiency measures, standardise external reporting, provide greater transparency for stakeholders on energy efficiency and emissions. Mark Birkbeck & Sons Group embraces these regulations and have made some important steps to help reduce the company’s energy efficiency and emissions.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in tonnes of CO2e per £1m of turnover,
The company is investigating the feasibility of utilising renewable energy sources to complement our energy usage. Additionally replacing company fleet with electric vehicles and the installation of electric car charging points.
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future outlook.
We have audited the financial statements of Mark Birkbeck & Sons Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 January 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
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:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £3,196,063 (2022: £2,112,974 profit).
Mark Birkbeck & Sons Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is The House of Bruar, by Blair Atholl, Pitlochry, Perthshire, United Kingdom, PH18 5TW.
The group consists of Mark Birkbeck & Sons 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 holding of previously revalued freehold property at deemed cost and to include investment properties and 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 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;
Section 26 ‘Share based Payment’: Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
The consolidated group financial statements consist of the financial statements of the parent company Mark Birkbeck & Sons 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 January 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
The directors have prepared financial forecasts which demonstrate the future viability of the business and that there are sufficient funds available to enable the company to meet its debts as they fall due. Therefore in the opinion of the directors the financial statements should be prepared on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
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.
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.
Freehold land is not depreciated.
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.
Investments in unlisted company shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Gains and losses are recognised in the profit and loss account for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment.
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.
Cost is calculated using the weighted average method.
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.
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.
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.
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.
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.
Investment property is measured at fair value at each reporting date, this is based on external valuations and the directors opinion on movement from these up until the reporting date. Included in the fair value movement is any differences in relation to foreign currency translations. Management will asses whether there has been any evidence of impairment for the investment property assets.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are assessed annually. There have been no changes to assumptions made in previous years.
Stock is stated at the lower of cost and estimated selling price less costs to complete and sell. The group estimates the net realisable value of stock based on an assessment of expected retail prices and the ageing of stock. Stock is reviewed on a regular basis and the group will make provisions or allowances for excess or obsolete stock and write down stock to net realisable value when deemed necessary. Stock of £9,185,640 (2022: £7,017,309) is stated after a provision of £99,753 (2022: £106,696).
FRS 102 requires goodwill to be amortised over its reliably estimated useful economic life. Management consider this to be a period of 20 years. Management also assess whether there are any indicators of impairment in considering the carrying value of goodwill.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
During the year retirement benefits were accruing to 2 directors (2022 - 2) in respect of defined contribution pension schemes.
Directors remuneration represents all remuneration in the current and prior year for key management personnel.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The amortisation charge of £1,158,061 (2022: £1,115,455) is included in administrative expenses in the profit and loss.
The goodwill arose on the acquisition of 100% of the share capital of The House of Bruar Limited on 6 April 2012. The goodwill is being amortised over 20 years to 6 April 2032.
Land and buildings were revalued at the date of transition to FRS 102 based on a valuation by DTZ Debenham Tie Leung Limited, independent valuers not connected with the company, on an open market value for existing use basis. The valuation conforms to International Valuation Standard and was based on recent market transactions on arm's length terms for similar properties.
The carrying amount of the assets pledged as security against the bank loan is £12,014,817 (2022: £12,334,985).
If the land and buildings held at deemed cost were stated on a historical cost basis rather than a deemed cost basis, the total amounts included would have been as follows:
Carrying value: £10,499,384 (2022: £10,769,936), being cost of £14,507,775 (2022: £14,490,603) and depreciation of £4,008,391 (2022: £3,720,667).
The directors' have evaluated the investment property valuations during the year and based on the selling prices of similar properties and post year end sales of properties, the directors consider an uplift in valuation of £1,294,866 to be appropriate.
The increase in fair value of £1,294,866 (2022: increase of £4,504,226) is recognised in the profit and loss account. Of this fair value inrease £1,294,866 (2022: £1,665,511) has been recognised in non distributable reserves.
Included in the fair value movement is an increase of £807,339 (2022: increase of £102,289) in relation to foreign currency translation which is recognised in the profit and loss account and recognised in non-distributable reserves.
Details of the company's subsidiaries at 31 January 2023 are as follows:
The registered office of The House of Bruar is The House of Bruar, by Blair Atholl, Pitlochry, Perthshire, PH18 5TW.
The registered office of M & L Birkbeck Property Limited is Fleet House, New Road, Lancaster, Lancashire, LA1 1EZ.
Bank loans amounting to £1,505,886 (2022: £3,634,794) are secured by fixed and floating charges over the assets of the company and The House of Bruar Limited, fixed charges over the the freehold land and buildings of The House of Bruar and also a cross-guarantee from The House of Bruar Limited.
Loan notes are unsecured and repayable to shareholders and related parties in line with the repayment schedule. The group pays 4% interest on the loan notes.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
During the year 1,179 ordinary A shares were reclassified as ordinary D shares.
The different classes of shares rank pari passu in respect of voting rights and in the event of winding up.
With respect to dividends, the shares participate in a distribution to such extent as the directors determine or recommend.
The group holds or issues financial instruments in order to achieve three main objectives, being:
(a) to finance its operations;
(b) to manage its exposure to interest and currency risks arising from its operations and from its sources of finance; and
(c) for trading purposes.
In addition, various financial instruments (e.g. trade debtors, trade creditors, accruals and prepayments) arise directly from the group's operations.
Transactions in financial instruments result in the group assuming or transferring to another party one or more of the financial risks described below.
Credit risk
The group has no significant concentrations of credit risk. Amounts shown in the balance sheet best represent the maximum credit risk exposure in the event other parties fail to perform their obligations under financial instruments.
Liquidity risk
The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring that the group has sufficient liquid resources to meet the operating needs of the business.
Currency risk
The group's principal foreign currency exposures arise via:
(a) Purchasing goods from overseas companies. The group seeks to invoice and be invoiced in its principal trading currency wherever possible so as to minimise its exposure to foreign currency movements.
(b) Bank accounts held in foreign currencies. The group has engaged in forward positions to minimise risk exposure.
The share premium account represents any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.
Revaluation reserve represents the accumulated revaluation gains on freehold land and buildings held by the group.
Profit and loss reserves represent accumulated comprehensive income for the year and prior periods net of equity dividends paid.
Non-distributable profit and loss account
Non-distributable profit and loss account represents the accumulated fair value gains on investment property held by the group.
Rent is payable to the Bruar Trust each year calculated at £1,300 plus 1.5% of turnover of certain departments of the business, subject to a minimum rental payment of £35,000 per annum. Rent paid in the year ended 31 January 2023 amounted to £373,288 (2022: £278,386).
The group had commitments to sell a total of 575,000 dollars at a rate of 1.2202 dollars : £1 on 30 June 2023.
The following amounts were outstanding at the reporting end date:
The company has taken advantage of the exemption contained in Financial Reporting Standard 102 and has therefore not disclosed transactions entered into between two or more members a group, provided that any subsidiary undertaking which is a party to the transaction is wholly owned member of that group.
During the year the group charged rent amounting to £4,450 (2022: £1,485) to a director.
During the year the group and company continued to borrow funds from directors. Interest of £753 (2022: £8,986) was charged on these loans to the group and company. During the year the group and company paid dividends amounting to £642,750 (2022: £632,025) to directors. At the balance sheet date the group and company owed £94,358 (2022: £38,638) to directors.
During the year the group and company continued to loan funds to directors. During the year the group received interest amounting to £34,044 (2022: £23,793) from directors and the company received interest amounting to £28,265 (2022: £19,745) from directors. At the balance sheet date the group was owed £1,596,482 (2022: £1,373,925) and the company was owed £1,384,184 (2022: £1,171,895) by directors.
During the year the group and company continued to borrow funds from shareholders. Interest of £11,175 (2022: £10,942) was charged on these loans to the group and company. During the year the group and company paid dividends amounting to £886 (2022: £886) to shareholders. At the balance sheet date the group and company owed £450,091 (2022: £441,518) to shareholders.
During the year the group and company continued to loan funds to shareholders. During the year the group and company received interest amounting to £112 (2022: £120) from shareholders. At the balance sheet date the group and company were owed £4,453 (2022: £4,785) from shareholders.
During the year the group and company loaned funds to other related parties. During the year the group received interest amounting to £18,596 (2022: £16,232) from other related parties and the company received interest amounting to £15,825 (2022: £13,456) from other related parties. At the balance sheet date the group was owed £847,382 (2022: £713,277) from other related parties. At the balance sheet date the company was owed £706,045(2022: £574,712) from other related parties.
During the year the group paid remuneration of £30,000 (2022: £30,212) to other related parties.
The ultimate controlling party in the current and previous year is Mr M N T Birkbeck by virtue of his majority shareholding.