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Registered number: 00669551









HMG Paints Limited









Annual Report and Financial Statements

For the Year Ended 30 September 2023

 
HMG Paints Limited
 
 
Company Information


Directors
D P Cleary 
S P Crossman 
J S Falder 
J S Falder 
S P Hutton 
M D Jennings 
J G Fenton (resigned 31 December 2022)




Company secretary
R L Bristow



Registered number
00669551



Registered office
Riverside Works
Collyhurst Road

Manchester

M40 7RU




Independent auditors
Hurst Accountants Limited
Chartered Accountants & Statutory Auditors

3 Stockport Exchange

Railway Road

Stockport

SK1 3GG




Bankers
Lloyds Bank Plc
Third Floor

53 King Street

Manchester

M2 4LQ





 
HMG Paints Limited
 

Contents



Page
Strategic Report
 
1 - 2
Directors' Report
 
3 - 4
Independent Auditors' Report
 
5 - 8
Statement of Comprehensive Income
 
9
Balance Sheet
 
10
Statement of Changes in Equity
 
11
Notes to the Financial Statements
 
12 - 26


 
HMG Paints Limited
 
 
Strategic Report
For the Year Ended 30 September 2023

Introduction
 
The directors present their strategic report of the year ended 30 September 2023.

Business review
 
During this year of continued economic uncertainty and political instability, the Company once again demonstrated its agility and adaptability in diversifying its product range and managing to secure several new contracts which have strengthened our customer base. We have continued to monitor costs and prices throughout this challenging year to navigate through the issues caused by the conflict in the Ukraine and spiralling inflation. Despite these adverse macro-economic factors, we succeeded in increasing turnover whilst reporting a slight improvement in gross margin which is reflected in these results.
Considering this combination of extraordinary adverse and unstable conditions, turnover and profitability are deemed by the Board to be satisfactory given the challenges faced by the company through the year.
HMG Paints Ltd maintains a strategy of long-term business, at the heart of which is the aim of building security for all the company stakeholders. During 2022/23 the company has continued to maintain its performance in line with those objectives. 
We have continued to invest heavily in the health and safety, technical training, and development of our people along with the continuous enhancement of our working environment. Indeed, in the year the Company invested £0.4 million in capital improvements throughout the business.
Overall, we are satisfied with the performance of the business through 2022/23 and we believe that, because of the continued investment, we are well positioned to embrace the challenges which the financial year 2023/24 will bring.   

Financial key performance indicators
 
The key performance indicators that are monitored on a weekly, monthly, and annual basis are revenue, profit, and cash balances, all of which are derived from the financial statements. The revenue and profit figures are stated below: 
 


2023
2022

£'000
£'000



Revenue
25,323 
24,657 
Gross profit
9,980 
9,566 
Operating profit
1,266 
1,453 

The results were acceptable throughout the year and the performance was in line with our budgeted expectations.

Page 1

 
HMG Paints Limited
 

Strategic Report (continued)
For the Year Ended 30 September 2023

Principal risks and uncertainties
 
The company’s activities expose it to several financial risks including credit risk and liquidity risk. The factors described below highlight risks and uncertainties which affect the company, but they are not intended to be an exhaustive analysis of all the potential risks which may arise in the ordinary course of business.
The directors are of the opinion that sufficient internal controls have been implemented to monitor these factors and to enable timely management action to be taken to mitigate the risks.
Political risk
The war in Ukraine and the departure of the UK from the European Union continue to represent a period of uncertainty for the business as our supply chain relies heavily on materials from the EU. We are managing this risk by ensuring we have appropriate finance in place should it be needed, as well as increasing levels of stock so that any disruption does not leave us exposed.
Financial risk 
Our financial risk management objectives are to ensure sufficient working capital for the company and plans remain absolutely to our expectations.
Financial risks are managed through internal management controls, timely and accurate management information and by careful monitoring of sales activity and margins. The company does not feel it is necessary to hedge its currency or interest rate risk.
Credit risk
The company's principal financial assets are bank balances and cash, trade, and other receivables. Its credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. The company has a credit insurance policy in place to mitigate the credit risk from trade receivables.
Liquidity risk
To maintain liquidity and to ensure that sufficient funds are available for ongoing operations and future developments the company has a mixture of long term and short-term finance.


This report was approved by the board and signed on its behalf.



J S Falder
Director

Date: 22 April 2024

Page 2

 
HMG Paints Limited
 
 
 
Directors' Report
For the Year Ended 30 September 2023

The directors present their report and the financial statements for the year ended 30 September 2023.

Directors' responsibilities statement

The directors are responsible for preparing the Strategic Report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

 In preparing these financial statements, the directors are required to:


select suitable accounting policies for the company's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006They 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.

Results and dividends

The profit for the year, after taxation, amounted to £1,151,742 (2022 - £1,204,195).

During the year the directors declared dividends totaling £265,195 (2022: £286,729).

Directors

The directors who served during the year were:

D P Cleary 
S P Crossman 
J S Falder 
J S Falder 
S P Hutton 
M D Jennings 
J G Fenton (resigned 31 December 2022)

Environmental matters

The company will seek to minimise adverse impacts on the environment from its activities, whilst continuing to address health, safety and economic issues. The company has complied with all applicable legislation and regulations.

Page 3

 
HMG Paints Limited
 
 
 
Directors' Report (continued)
For the Year Ended 30 September 2023

Future developments

The directors consider that the forthcoming financial year will be another year of solid performance building further security for all our stakeholders.

Research and development activities

The company will continue to invest heavily in research and development activities in the forthcoming year to ensure that it stays at the forefront of innovation in the coatings industry. The continued investment will enable the business to offer unique innovative products for its customers.

Disclosure of information to auditors

Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the company's auditors are unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company's auditors are aware of that information.

Post balance sheet events

No events have occurred since the balance sheet date which significantly affect the company.

Auditors

The auditorsHurst Accountants Limitedwill be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

This report was approved by the board and signed on its behalf.
 





J S Falder
Director

Date: 22 April 2024

Page 4

 
HMG Paints Limited
 
 
 
Independent Auditors' Report to the Members of HMG Paints Limited
 

Opinion


We have audited the financial statements of HMG Paints Limited (the 'company') for the year ended 30 September 2023, which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policiesThe financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).


In our opinion the financial statements:


give a true and fair view of the state of the company's affairs as at 30 September 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.


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 Auditors' 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 United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


Conclusions relating to going concern


In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.


Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.


Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.


Other information


The other information comprises the information included in the Annual Report other than the financial statements and  our Auditors' 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.


Page 5

 
HMG Paints Limited
 
 
 
Independent Auditors' Report to the Members of HMG Paints Limited (continued)


Opinion on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of the 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.


Matters on which we are required to report by exception
 

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.


We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:


adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.


Responsibilities of directors
 

As explained more fully in the Directors' Responsibilities Statement set out on page 3, 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.


Page 6

 
HMG Paints Limited
 
 
 
Independent Auditors' Report to the Members of HMG Paints Limited (continued)


Auditors' 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 Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.


Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

In identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
The nature of the industry and sector in which the company operates; the control environment and business performance including key drivers for directors' remuneration, bonus levels and performance targets.
The outcome of enquiries of local management and parent company management, including whether management was aware of any instances of non-compliance with laws and regulations, and whether management had knowledge if any actual, suspected, or alleged fraud. 
Supporting documentation relating to the Company's policies and procedures for:
°Identifying, evaluating, and complying with laws and regulations.
°Detecting and responding to the risks of fraud.
The internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.
The outcome of discussions amongst the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
The legal and regulatory framework in which the Company operates, particularly those laws and regulations which have a direct effect on the financial statements, such as the Companies Act 2006, pensions and tax legislation, or which had a fundamental effect on the operations of the Company, including General Data Protection requirements and Anti-bribery and Corruption.

Audit response to risks identified
Our procedures to respond to the risks identified included the following:
 
Reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with the provisions of those relevant laws and regulations which have a direct effect on the financial statements.
Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud.
Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities.
Enquiring of management about any actual and potential litigation and claims.
Performing analytical procedures to identify any unusual or unexpected relationships which may indicate risks of material misstatement due to fraud.
Reading minutes of meetings of those charges with governance.
Page 7

 
HMG Paints Limited
 
 
 
Independent Auditors' Report to the Members of HMG Paints Limited (continued)


We have also considered the risk of fraud through management override of controls by:
 
Testing the appropriateness of journal entries and other adjustments; we have used data analytics software to run tests designed to identify accounting transactions which may pose a heightened risk of material misstatement, whether due to fraud or error;
Challenging assumptions made by management in their significant accounting estimates, and assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
There are inherent limitations in the audit procedures described above, and the further removed non-compliance with laws and regulations are from the events and transactions reflected in the financial statements, the less likely we would become aware of them.  Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.


Use of our report
 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006Our 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 Auditors' 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.





Helen Besant Roberts (Senior Statutory Auditor)
for and on behalf of
Hurst Accountants Limited
Chartered Accountants & Statutory Auditors
3 Stockport Exchange
Railway Road
Stockport
SK1 3GG

23 April 2024
Page 8

 
HMG Paints Limited
 
 
Statement of Comprehensive Income
For the Year Ended 30 September 2023

2023
2022
Note
£
£

  

Turnover
 4 
25,322,763
24,657,055

Cost of sales
  
(15,342,455)
(15,091,038)

Gross profit
  
9,980,308
9,566,017

Distribution costs
  
(3,247,584)
(3,086,692)

Administrative expenses
  
(5,467,178)
(5,120,802)

Exceptional administrative income
 13 
-
94,000

Operating profit
 5 
1,265,546
1,452,523

Interest receivable and similar income
 9 
3,471
48

Interest payable and similar expenses
 10 
(1,783)
(2,580)

Profit before tax
  
1,267,234
1,449,991

Tax on profit
 11 
(115,492)
(245,796)

Profit for the financial year
  
1,151,742
1,204,195

There were no recognised gains and losses for 2023 or 2022 other than those included in the statement of comprehensive income.

There was no other comprehensive income for 2023 (2022:£NIL).

The notes on pages 12 to 26 form part of these financial statements.

Page 9

 
HMG Paints Limited
Registered number: 00669551

Balance Sheet
As at 30 September 2023

2023
2022
Note
£
£

Fixed assets
  

Tangible assets
 14 
3,247,911
3,407,464

Current assets
  

Stocks
 15 
4,709,681
5,890,750

Debtors: amounts falling due after more than one year
 16 
67,143
80,571

Debtors: amounts falling due within one year
 16 
4,915,568
4,641,148

Cash at bank and in hand
 17 
2,719,174
1,014,671

  
12,411,566
11,627,140

Creditors: amounts falling due within one year
 18 
(4,399,554)
(4,638,597)

Net current assets
  
 
 
8,012,012
 
 
6,988,543

Total assets less current liabilities
  
11,259,923
10,396,007

Provisions for liabilities
  

Deferred tax
 19 
(542,643)
(565,274)

Net assets
  
10,717,280
9,830,733


Capital and reserves
  

Called up share capital 
 20 
2,000,000
2,000,000

Profit and loss account
 21 
8,717,280
7,830,733

  
10,717,280
9,830,733


The financial statements were approved and authorised for issue by the board and were signed on its behalf by: 




J S Falder
Director

Date: 22 April 2024

The notes on pages 12 to 26 form part of these financial statements.

Page 10

 
HMG Paints Limited
 

Statement of Changes in Equity
For the Year Ended 30 September 2023


Called up share capital
Profit and loss account
Total equity

£
£
£

At 1 October 2022
2,000,000
7,830,733
9,830,733


Comprehensive income for the year

Profit for the year
-
1,151,742
1,151,742
Total comprehensive income for the year
-
1,151,742
1,151,742

Dividends: Equity capital
-
(265,195)
(265,195)


At 30 September 2023
2,000,000
8,717,280
10,717,280



Statement of Changes in Equity
For the Year Ended 30 September 2022


Called up share capital
Profit and loss account
Total equity

£
£
£

At 1 October 2021
2,000,000
6,913,267
8,913,267


Comprehensive income for the year

Profit for the year
-
1,204,195
1,204,195
Total comprehensive income for the year
-
1,204,195
1,204,195

Dividends: Equity capital
-
(286,729)
(286,729)


At 30 September 2022
2,000,000
7,830,733
9,830,733


The notes on pages 12 to 26 form part of these financial statements.

Page 11

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

1.


General information

HMG Paints Limited is a private company limited by shares and incorporated in England. The address of the registered office and principal place of business is Riverside Works, Collyhurst Road, Manchester, M40 7RU. The company's registered number is 00669551.
The nature of the company's operations and its principal activity continues to be the manufacture of paints, surface coatings and related products and services.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies (see note 3).

The following principal accounting policies have been applied:

 
2.2

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
the requirements of Section 7 Statement of Cash Flows;
the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
the requirements of Section 33 Related Party Disclosures paragraph 33.7.

This information is included in the consolidated financial statements of H. Marcel Guest Limited as at 30 September 2023 and these financial statements may be obtained from the Registrar.

 
2.3

Foreign currency translation

Functional and presentation currency

The company's functional and presentational currency is GBP.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.

Page 12

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

2.Accounting policies (continued)

 
2.4

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
the company has transferred the significant risks and rewards of ownership to the buyer;
the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the company will receive the consideration due under the transaction; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.

 
2.5

Operating leases: the company as lessee

Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.

 
2.6

Interest income

Interest income is recognised in profit or loss using the effective interest method.

 
2.7

Finance costs

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Page 13

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

2.Accounting policies (continued)

 
2.8

Pensions

The company operates two pension schemes as follows:
Defined contribution pension plan
The company operates a defined contribution pension scheme and the pension charge represents the amounts payable by the company to the fund in respect of the year.
Scheme membership and benefits
The company also operates a hybrid arrangement scheme with both benefit and defined contribution elements. The benefits of "director members" are provided on a money purchase basis, but such benefits are restricted to the net assets available, having first made full provision for the benefits of all defined benefit members.
The contributions are recognised as an expense in the Statement of income and retained earnings when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet.
The company is a participating employer with the principal employer being H Marcel Guest Limited, its ultimate parent company.

 
2.9

Current and deferred taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

 
2.10

Exceptional items

Exceptional items are transactions that fall within the ordinary activities of the company but are presented separately due to their size or incidence.

Page 14

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

2.Accounting policies (continued)

 
2.11

Research and development

Research expenditure is written off to the profit and loss account in the year in which it is incurred. Development expenditure is written off in the same way unless directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

 
2.12

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, on a reducing balance basis.

Depreciation is provided on the following basis:

Leasehold improvements
-
10%
reducing balance
Plant and machinery
-
15%
reducing balance
Motor vehicles
-
25%
reducing balance
Fixtures and fittings
-
20%
reducing balance / 33.33% straight line

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

 
2.13

Stocks

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads.

At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.

 
2.14

Debtors

Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.

 
2.15

Cash and cash equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

Page 15

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

2.Accounting policies (continued)

 
2.16

Creditors

Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

 
2.17

Provisions for liabilities

Provisions are made where an event has taken place that gives the company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance Sheet.

 
2.18

Financial instruments

The company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. 

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income.

For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

 
2.19

Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.

Page 16

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

3.


Judgements in applying accounting policies and key sources of estimation uncertainty

Preparation of the financial statements requires management to make significant judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could be different from those estimates. The items in the financial statements where these judgements and estimates have been made include:
Stock provision
Stock is reviewed to assess obsolescence on a regular basis. In determining whether provision for obsolescence should be recorded in profit and loss, the company makes judgements as to whether there is any observable data indicating that there is future saleability of the product and the estimated net realisable value for such product. Accordingly, provision for impairment is made where net realisable value is less than the cost based on best estimates by the management. The provision for obsolescence of stock is based on the ageing and historical sales pattern. As at 30 September 2023, the value of stock net of provision was £4,709,681 (2022: £5,890,750).
Stock valuation and overhead absorption
Stock is valued including raw material costs, production labour and an allocation of production related overheads. The overhead calculation is based on a judgement of the production element of certain overheads which may differ from the actual. As at 30 September 2023, the value of labour and overheads in stock was £677,951 (2022: £732,538)
Other estimates and judgements
Management exercises judgement in providing for impairment loss on trade receivables. The balance of trade receivables as at 30 September 2023, net of provision was £4,284,012 (2022: £4,147,454).
Management of the company also exercises judgement in estimating the useful economic life of property, plant and equipment, such estimations are reviewed regularly to ensure they remain appropriate. The net book value of fixed assets as at 30 September 2023 was £3,247,911
 (2022: £3,407,464).
Should these estimates vary, the profit or loss and balance sheet of the following years could be significantly impacted.


4.


Turnover

The whole of the turnover is attributable to the sale of paint products.

Analysis of turnover by country of destination:

2023
2022
£
£

United Kingdom
24,384,290
23,631,235

Rest of Europe
875,257
803,158

Rest of the World
63,216
222,662

25,322,763
24,657,055


Page 17

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

5.


Operating profit

The operating profit is stated after charging:

2023
2022
£
£

Research & development charged as an expense
6,470
12,178

Depreciation of owned tangible fixed assets
548,902
522,369

Exchange differences
16,248
26,548

Other operating lease rentals
305,204
287,712

Defined contribution pension cost
244,033
227,288


6.


Auditors' remuneration

During the year, the company obtained the following services from the company's auditors:


2023
2022
£
£

Fees payable to the company's auditors for the audit of the company's financial statements
28,750
27,150

Fees payable to the company's auditor and its associates for the audit of a pension scheme associated with the company pursuant to legislation
8,300
8,300

The company has taken advantage of the exemption not to disclose amounts paid for non-audit services as these are disclosed in the consolidated accounts of the parent company.

Page 18

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

7.


Employees

Staff costs, including directors' remuneration, were as follows:


2023
2022
£
£

Wages and salaries
6,176,693
5,893,347

Social security costs
614,969
592,056

Cost of defined contribution scheme
244,033
227,288

7,035,695
6,712,691


The average monthly number of employees, including the directors, during the year was as follows:


        2023
        2022
            No.
            No.







Production
72
77



Selling and distribution
71
75



Administration
31
26



Maintenance
16
19

190
197


8.


Directors' remuneration

2023
2022
£
£

Directors' emoluments
659,496
853,869

Company contributions to defined contribution pension schemes
27,392
30,324

686,888
884,193


During the year retirement benefits were accruing to 6 directors (2022 - 6) in respect of defined contribution pension schemes.

The highest paid director received remuneration of £122,067 (2022 - £116,468).

The value of the company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £8,787 (2022 - £8,242).

The total accrued pension provision of the highest paid director at 30 September 2023 amounted to £1,040 (2022 - £704).

Page 19

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

9.


Interest receivable

2023
2022
£
£


Other interest receivable
3,471
48


10.


Interest payable and similar expenses

2023
2022
£
£


Bank interest payable
-
781

Other interest payable
1,783
1,799

1,783
2,580


11.


Taxation


2023
2022
£
£

Corporation tax


Current tax on profits for the year
138,123
-

Adjustments in respect of previous periods
-
(26,950)


Total current tax
138,123
(26,950)

Deferred tax


Origination and reversal of timing differences
(22,631)
272,746

Total deferred tax
(22,631)
272,746


Taxation on profit on ordinary activities
115,492
245,796
Page 20

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023
 
11.Taxation (continued)


Factors affecting tax charge for the year

The tax assessed for the year is lower than (2022 - lower than) the standard rate of corporation tax in the UK of 22% (2022 - 19%). The differences are explained below:

2023
2022
£
£


Profit on ordinary activities before tax
1,267,234
1,449,991


Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 22% (2022 - 19%)
278,791
275,498

Effects of:


Expenses not deductible for tax purposes
110
1,395

Fixed asset timing differences
12,111
(44,407)

Adjustments to tax charge in respect of prior periods
-
(26,950)

Short term timing difference leading to an increase (decrease) in taxation
-
(754)

Other timing differences leading to an increase (decrease) in taxation
-
518

Adjustment in research and development tax credit leading to a (decrease) in the tax charge
(169,799)
(145,657)

Adjustments in respect of a change in corporation tax rate
(5,721)
135,666

Utilisation of tax losses
-
32,306

Group relief surrendered
-
18,181

Total tax charge for the year
115,492
245,796


Factors that may affect future tax charges

From 1 April 2023 the main rate of corporation tax increased to 25%. The 22% rate used above reflects 6 months of the new rate and 6 months of the previous rate of 19%.


12.


Dividends

2023
2022
£
£


Dividends paid on equity capital
265,195
286,729

Page 21

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

13.


Exceptional items

2023
2022
£
£


Sale of assets in relation to powder coatings
-
(94,000)

In the prior year, HMG Paints Limited sold the assets and trade in relation to the powder coatings operations to HMG Powder Coatings (Midlands) Limited for £94,000. 


14.


Tangible fixed assets





Leasehold improvements
Plant and machinery
Motor vehicles
Fixtures and fittings
Total

£
£
£
£
£



Cost or valuation


At 1 October 2022
1,499,878
6,082,108
495,721
1,246,741
9,324,448


Additions
85,642
223,442
59,544
51,708
420,336


Disposals
-
-
(135,751)
-
(135,751)



At 30 September 2023

1,585,520
6,305,550
419,514
1,298,449
9,609,033



Depreciation


At 1 October 2022
459,098
3,991,326
271,932
1,194,628
5,916,984


Charge for the year
110,301
336,485
55,983
46,133
548,902


Disposals
-
-
(104,764)
-
(104,764)



At 30 September 2023

569,399
4,327,811
223,151
1,240,761
6,361,122



Net book value



At 30 September 2023
1,016,121
1,977,739
196,363
57,688
3,247,911



At 30 September 2022
1,040,780
2,090,782
223,789
52,113
3,407,464

Page 22

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

15.


Stocks

2023
2022
£
£

Raw materials and consumables
2,544,900
3,677,521

Finished goods and goods for resale
2,164,781
2,213,229

4,709,681
5,890,750


The carrying value of stocks are stated net of impairment losses totaling £299,311 (2022: £373,625). Impairment gains totaling £74,314 (2022: gain £21,027) were recognised in the profit and loss.


16.


Debtors

2023
2022
£
£

Due after more than one year

Other debtors
67,143
80,571


2023
2022
£
£

Due within one year

Trade debtors
4,284,012
4,147,454

Amounts owed by group undertakings
190,058
154,202

Amounts owed by joint ventures and associated undertakings
120,666
106,253

Other debtors
106,087
69,870

Prepayments and accrued income
214,745
163,369

4,915,568
4,641,148



17.


Cash and cash equivalents

2023
2022
£
£

Cash at bank and in hand
2,719,174
1,014,671


Page 23

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

18.


Creditors: Amounts falling due within one year

2023
2022
£
£

Trade creditors
2,830,376
3,310,584

Amounts owed to group undertakings
136,066
103,843

Amounts owed to associates
-
1,200

Corporation tax
138,123
-

Other taxation and social security
766,958
559,224

Other creditors
95,152
72,783

Accruals and deferred income
432,879
590,963

4,399,554
4,638,597



19.


Deferred taxation




2023
2022


£

£






At beginning of year
(565,274)
(292,528)


(Charged)/credited to profit or loss
22,631
(272,746)



At end of year
(542,643)
(565,274)

The provision for deferred taxation is made up as follows:

2023
2022
£
£


Accelerated capital allowances
(552,272)
(574,726)

Other timing differences
9,629
9,452

(542,643)
(565,274)


20.


Share capital

2023
2022
£
£
Allotted, called up and fully paid



2,000,000 (2022 - 2,000,000) Ordinary shares of £1.00 each
2,000,000
2,000,000


Page 24

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

21.


Reserves

Profit and loss account
The profit and loss account includes all current and prior period retained profits and losses after dividends paid.


22.


Pension commitments

The company operates a defined contribution pension scheme and also a hybrid arrangement with both defined benefit and defined contribution elements. The assets of the schemes are held separately from those of the company in individual independently administered funds. The pension cost charge represents contributions payable by the group to the funds and amounted to £309,807 (2022: £227,288). Contributions totaling £38,518 (2022: £37,808) were payable to the funds at the balance sheet date.


23.


Commitments under operating leases

At 30 September 2023 the company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:

2023
2022
£
£


Not later than 1 year
287,767
289,709

Later than 1 year and not later than 5 years
486,225
99,315

773,992
389,024


24.


Directors' advances, credit and guarantees

Included within other debtors due within one year is an interest-free loan to a director totaling £5,000 (2022: £5,000). This is in relation to purchasing a new car which is used by the director for personal and business reasons. The amount will be repaid should the director cease their employment with the business or dispose of the car.

Page 25

 
HMG Paints Limited
 
 
 
Notes to the Financial Statements
For the Year Ended 30 September 2023

25.


Related party transactions

The company has taken advantage of the exemption available under FRS 102 section 33 "Related Party Transactions" not to disclose transactions with other wholly owned group companies.
The company undertook transactions and had balances with the following companies which are not wholly owned by the group:
The company made sales to associated companies totalling £158,398 
(2022: £335,870).
The company made purchases from associated companies totalling £33,216 
(2022: £157,595).
Amounts due to HMG Paints Limited from associated companies totalled £176,872 
(2022: £162,467) at the year end. The company has a provision against trade receivables from companies with common directors totalling £56,206 (2022: £56,206).
Amounts due from HMG Paints Limited to associated companies totalled £600 
(2022: £Nil) at the year end.
The directors consider the members of the company's operational board to be key management personnel, as defined by FRS 102. Total key management personnel remuneration amounted to £1,746,013 for the year, relating to 30 personnel 
(2022: £1,051,340, personnel:11).


26.


Ultimate parent undertaking and controlling party

The immediate and ultimate parent company is H Marcel Guest Limited, a company registered in England and Wales, company number 00251148.
The consolidated financial statements of the group are available to the public and may be obtained from H Marcel Guest Limited at Riverside Works, Collyhurst Road, Manchester, M40 7RU.
In the opinion of the directors, the ultimate controlling party, by virtue of their shareholding in the ultimate parent company, are the Falder family.

 
Page 26