The directors present their strategic report for the year ended 31 July 2023.
Principal activity
The company's principal activity is that of the holding company for the group, the principal activity of which is printing. There has not been any change in the year under review and the directors are not aware, at the date of this report, of any likely major change in the company's or group's activities in the current year.
Overall Strategy
The group's overall strategy is to maintain and grow a high quality printing business delivering high value to its customers, employees and shareholders. This is achieved by:
Delivering professional services to our customers.
Combining tradition and technology in order to achieve excellence.
Establishing close working relationships with both customers and suppliers to ensure that we are fully aware of the individual requirements of all.
Recruiting and training appropriate staff at all levels to enable them to fulfil their potential to the maximum and thus provide both job satisfaction and fair financial reward.
Sales for the year increased by £1,439,185 (12.8%) to £12,688,970 (£11,249,785 in 2021/22). Gross profit increased by £573,790 to £2,532,845 (£1,959,055 in 2021/22). Profit before tax increased to £617,093 (£403,981 in 2021/22).
The group invested a further £975,626 in new plant during the year, bringing the cost of the group's investment in capital equipment to £17,715,198. Profit after tax increased to £495,904 (£136,268 in 2021/22). The directors believe that ultimately the group's policy of continued investment in new technology is essential for continuing success in the industry, but given the ongoing economic uncertainties brought about by the pandemic's effect and the war in Ukraine on the global economy, they continue to monitor and amend capital expenditure programmes as necessary.
There were no significant events after the balance sheet date.
As a holding company, the principal risks are in relation to the performance of its subsidiary undertaking.
Due to the pandemic and the impact of the war in Ukraine the group closely monitors revenue streams and affected supply chains.
Market: Competition from key competitors and pressure on margins.
The group endeavours to ameliorate this risk by continuing to explore alternative markets, adding value to its services, providing fast response times and maintaining strong relationships with its customers.
IT Systems: Sufficiently rapid access to and accuracy of data; cyber security.
The group continues to attach great importance to its IT systems and their regular upgrading with direct participation at board level.
Reputation: Quality of products and services; information security.
The group places great emphasis on security awareness, particularly at mid and high management levels.
Credit and cash flow:
The group ensures that appropriate due diligence is carried out on new customers and maintains a strong emphasis on the management of good credit control overall.
Interest rates: Exposure to cash flow interest rate risk.
The group traditionally has ensured that it has no requirement for any significant borrowings and thus has no significant exposure to interest rate risk.
Liquidity: Exposure to inadequate cash flows.
The combined availability of bank balances and continued strong positive cash flows prevents any significant exposure to liquidity risk.
The group monitors its performance using the following key performance indicators:
| 2023 | 2022 |
Turnover | £12,688,970 | £11,249,785 |
Gross Profit Margin | 19.96% | 17.41% |
Profit before tax | £617,093 | £403,981 |
Liquidity: current assets to current liabilities | 3.60 times | 4.92 times |
Return on capital employed | 4.48% | 2.87% |
Employee involvement
Details of the number of employees and related costs are shown in note 6 to the financial statements.
Environmental matters
The group recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by the group's activities. The group has accreditation under the Forestry Stewardship Council's Chain of Custody Standard and the Environmental Standard ISO 14001. The group has been awarded the Gold Medal for sustainability by Ecovadis, putting the group within the top 5% of the 100,000 plus companies assessed by Ecovadis globally.
Approved by the Board and signed on its behalf by:
The directors present their annual report and financial statements for the year ended 31 July 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Strategic Report
In accordance with the Companies Act the Strategic Report on pages 1 to 3 provides a fair review of the group's business and description of the principal risks and uncertainties facing the group. It also contains information on the group's performance and strategy.
The results for the year are set out on page 9. A summary of the group's results for the year are set out in the review of the business section of the Strategic Report. Profit after tax was £495,904 (2022 - £136,268).
Ordinary dividends were paid amounting to £149,981 (2022 - £299,798). The directors do not recommend payment of a final dividend.
In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at the forthcoming Annual General Meeting.
During the year the group made charitable donations of £7,103 (2022 - £12,587). There were no political contributions.
We have audited the financial statements of HC Holdings (Southampton) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 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, the company 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 our knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where 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 £240,936 (2022 - £29,124 loss).
H C Holdings (Southampton) Limited ("the company") is a private company limited by shares and incorporated in England and Wales. The registered office is:
c/o Azets
Lulworth Close
Chandlers Ford
Hampshire
SO53 3TL
The principal place of business is:
Brunel Road
Totton
Hampshire
SO40 3WX
The group consists of H C Holdings (Southampton) Limited and its subsidiary.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.
The consolidated financial statements incorporate those of H C Holdings (Southampton) Limited and its subsidiary (ie an entity that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).
All financial statements are made up to 31 July 2023. Where necessary, adjustments are made to the financial statements of the subsidiary 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.
At the time of approving the financial statements, the directors confirm that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised as the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
The Group recognises revenue when goods are delivered and title has been transferred to the customer. The parent company recognises revenue on a periodic basis from the provision of property to its subsidiary and from management's services.
Freehold land and buildings are held under the historical cost model in line with amendments made to FRS102 resulting from the Triennial Review 2017. Residual value is reviewed at each financial year end and if the same, or greater than book value, then there is no depreciable amount. Consequently, no depreciation has been recognised in the year under review.
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.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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.
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.
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 and loans from fellow group companies are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
Judgements
In preparing these financial statements, the directors have made the following judgements:
Impairment of fixed assets
Determine whether there are any indications of impairment of the group's tangible fixed assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset.
Work in progress
Determine the stage of completion of work in progress and assess the progress of each contract.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are detailed below:
Depreciation and residual values of fixed assets
Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and project disposal values.
Allowances for doubtful debts
The group maintains allowances for doubtful debts for estimated losses resulting from the subsequent inability of customers to make required payments. If the financial conditions of customers were to deteriorate, resulting in impairment of the ability to make payments, additional allowances may be required in future periods.
Provisions for obsolete and slow moving stocks
The group maintains allowances for stock which is not expected to be, or is deemed difficult, to be utilised.
All turnover has been generated within the United Kingdom.
The average monthly number of persons (including directors) employed by the group during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 1).
Reconciliation of the charge for the year with tax at the standard rate on the profit before tax as shown in the group statement of comprehensive income:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Details of the company's subsidiary at 31 July 2023 are as follows:
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The group operates a number of defined contribution pension schemes for all qualifying employees. The assets of the schemes are held separately from those of the group in independently administered funds.
During the year, the company purchased 6,100 ordinary shares (36%) with a nominal value of £1 each from a former director for consideration of £937,000.
H C Holdings (Southampton) Limited and Hobbs The Printers Limited have a group registration for Value Added Tax. The company therefore has a contingent liability in respect of amounts due to H M Revenue & Customs by its subsidiary undertaking. As at the balance sheet date, the amount due in respect of the contingent liability was £nil (2022 - £nil).
At the year end, the group had a capital commitment to purchase plant and machinery for £6,710 (2022 - £720,000). Included within other debtors is £3,355 (2022 - £144,000) in respect of this capital commitment.
During the year, the group and company received services totalling £nil (2022 - £10,000) from a company under control of a director. A balance of £nil (2022 - £nil) remained outstanding at the year end.
Dividends totalling £149,981 (2022 - £299,798) were paid in the year in respect of shares held by the company's directors.
The ultimate controlling party is D A Hobbs.