The directors present the strategic report for the year ended 30 April 2023.
Fair review of the business
Turnover has decreased during the year from £42.9m to £40.8m but up on forecast of £40.5m. The business is continuing to adapt to the continued negative effects of BREXIT, predominantly around labour security/availability and extra costs of red-tape and transport, together with the uncertainty around the UK having no strategy on Food Security, and sending mixed messages if we should encourage cheap imports to help the consumers cost of living costs, or to produce in the UK for Food Security, health or quality reasons.
The directors forecast an decrease of 10% in turnover in the 23/24 year.
In the 22/23 the reticence of overseas suppliers to send to the UK was compounded by the UK multiples not being willing to increase their prices to cover cost increases. In 22/23 year the extra costs were at a level that customers had to pay more, some of which was a result of the war in Ukraine.
The directors consider the performance for the period achieved on ordinary activities before taxation to be satisfactory when considered in the Global, BREXIT and Ukraine war context, and the company has again outperformed the general sector and at the very least shown consistency and resilience in what appears to be a challenging few years ahead. The company net profit before tax (but before exceptional items and foreign exchange revaluations) didn’t materially change, which the Company believes to be satisfactory overall, given all the ongoing challenges post-Brexit, particularly labour shortages.
Accurate figures as to total market and market share are readily available and so the Company can better judge its own performance against the overall sector, and indeed in terms of the individual fruits being sold. Key competitors are limited and are also known entities.
The company aims to manage risks by providing added value services to its customers and ensuring high quality products, as well as continued investment in bespoke in-house produced IT solutions, to streamline efficiencies within the business. The Company is particularly focused on the continued development of its bespoke Packhouse Production system software and has started to commercialise the software, which has now been rolled out to 9 other sites. Directors believe that it is the best Packhouse Production software available anywhere in the world, albeit currently focused on soft fruit packing.
The Company meets its day-to-day working capital requirements through loan finance and the Company's forecasts and projections show that it should be able to operate within its existing facilities.
The soft fruit market and the margins and overall profits that can be achieved are affected by the Sterling exchange rate. This is predominately against the South African Rand where production is increasing. The currency risks are known, but their quantum is out of the Company’s control. Management have determined that extensive hedging would not be cost effective, although the seasonal pattern of the ZAR means that some of the exposure is brought forward in the six months pre-season, where management judges the rate reduces future risk.
There is a material risk with the supply chain in general, and specifically to the ability to find labour for seasonal picking work, and the whole support staff in the industry e.g. Warehouse staff and Supermarket shelf filling staff and store pickers. The Company estimates a 10% reduction in the available labour pool YOY for the next 2 years as the Government has refused to change its strategy. Longer term, the restriction of anyone working in UK under SWS visa scheme, means such people are not suitable to train for development within the Company as has been the preferred route in the past i.e. to promote from within. This is becoming restrictive to growth with like businesses competing for an ever-decreasing pool of trained people. Untrained UK born people also seem to be less receptive to the pattern of working their way up from lower levels. There is no end in sight, as UK unemployment is very low, especially in our local area, and the Government has a policy of not helping growers.
The issue is that the Government still views the transition to be one of robots picking fruit, but this is over 10 years away from making an impact, and in those 10 years, the industry will therefore have to contract. Unemployment is low (and ~3% in the main area of Company UK business) and UK unemployed (understandably) want full time and not seasonal work, and so UK staff filling the gap is also not realistic. UK workers also lose benefits if they take on seasonal work and so this makes such work disproportionately less attractive to full time work.
The business therefore has to invest in efficiency, which it believes is 2-4% pa as a maximum, so therefore has to grow 5-10% less UK fruit each year in order to pick it all, and so although a bad situation, it is one where there is already a plan in place. The UK growing side of the business in terms of volume picked, is forecast to be similar in 23/24 to the previous year. The giving up of leased ground in 22/23, due to the lack of pickers, means less like for like hectares in 23/24 leading to a drop in production.
Despite the challenges, directors believe that the Company is well placed to manage its business risks successfully going forward, and specifically when compared to other companies in the sector, but they continue to monitor the position carefully. Overall however the level of confidence in any meaningful expansion has decreased over the past 12 months, mostly due to labour availability. The Company will continue active lobbying of MP’s and also support industry lobbying groups to educate those that make decisions, as currently the Government is totally out of touch with realities facing the Horticultural industry.
Other material uncertainties that can negatively affect the business are the Governments red-tape around import and export of fruit to/from the EU. Some of the more unworkable ideas put forward by DEFRA have continually been put back (e.g. phyto paperwork and physical border checks), but noticeably not cancelled. This demonstrated that those responsible in this area of Government do not know what they are doing, which is a threat to the industry in general, and highly concerning.
Analysis of Development and Performance
Even though the current main packhouse building is now 15 years old, it is still working well. A new £1m Optical Sorting Line was installed in 2018, in line with management's continued desire to be a leader in the industry – the machine was the first of its kind to be installed in the UK. The company’s continued policy is to reinvest profits in the business rather than to take any dividends. The packhouse continues to be the largest dedicated soft fruit supply site in Europe. Winterwood’s customer base remains similar in the UK, although the nature of the way the multiples trade in the UK is evolving. The overall customer splits have remained within similar ranges as the previous year. Directors view this as overall a positive illustration of the company’s stable position in the marketplace. The supplier and customer base is under continuing review, but the expectation is to continue to sell 85-90% of its product through the UK multiples. As previously reported, exports have been killed of with BREXIT, and see no likelihood of being viable again any time soon.
No major changes in its sourcing are expected, except that the volumes from South Africa are expected to steadily increase over the next 5 years, and this trend continues. The volume available increased by 23% in the 22/23 year but the UK did not see much of an increase as other markets have less red tape, but the Company is hopeful to maintain steady growth with Southern Hemisphere fruit over time.
Poland is also increasing albeit at a steadier rate, but as it sells a lot of its fruit already directly into Europe, the increases the company expects to see coming to the UK are estimated to be in the 2-5% pa increase. If UK growers continue to have problems with pickers, then this will increase and the Company will ironically benefit when in other areas, the same limitation will cause difficulties. Ironically therefore for BREXITEERS the restriction imposed on UK pickers, will likely mean that there are more opportunities to import Polish fruit to the UK to make up the shortfall. We saw this in both 21/22 and 22/23 with Raspberries and expect the trend to develop with perennial crops as replant decisions are taken.
The Company is increasing its recycling efforts but limited in space for such operations as there are so many categories of recycled materials that need to be separated to make recycling viable. Also the cost of recycling in terms of transport of recycled material to various locations is heavily dependent on the volumes transported each time. Recycling expanded a small amount in 22/23, and there are still issues in viably recycling some recyclable items. For some waste this means keeping material in stock for longer periods to make this viable e.g. glass, cans, some types of plastic. Many recyclable materials also require dedicated baler equipment e.g. cardboard and plastic, and all this takes up space compared to putting everything into a single skip.
The company will continue to value its staff and the new facilities in the packhouse have been designed with the staff in mind and the facilities are continuing to enable the company to attract suitable staff as well as to keep the current team. The company has a policy of recruiting from within where possible and believes this is a key reason why the staff turnover is so low. The Company uses very little agency staff, but this increased in 22/23 due to general labour shortages, and this has led to increased costs as staff need training before fully efficient, and agency fees also need to be paid.
The company, together with its associations with Polana Sp. zo. o. in Poland, remains the largest grower group in Europe of blueberries, and its related operations through farms in RSA under the umbrella of Winterwood Holdings SA (Pty) Ltd, continue to keep it as the largest blueberry grower in Africa, south of the equator. Market penetration continues to increase in line with predictions and market penetration for blueberries now stands at around 55%.
Winterwood Farms Limited has always targeted higher value products, and especially where there is a high degree of value-added services related to the product. This enables the company to continue to extend its turnover with a relatively low bulk of product when compared to similar operations handling, for example with top fruits. The company and the group in South Africa will continue to invest in new state of the art machinery and believes its future is with specialisation rather than chasing volume, or any significant diversification.
Winterwood has a large loan to Winterwood Holdings SA (Pty) Ltd in South Africa, which is the vehicle used to fund the RSA investment opportunities, and a key part of the Winterwood plan to increase its own offering to its customers in the UK. Directors are pleased to report again that the group continues to move in a positive direction with YOY improvements to the cash position. A drought in the North of the country seriously affected the two newest farms crops in 2019 and 2020 seasons, and although the dams are all now full, the effect was to knock back the main farm in the region (Kruger Berries) by about 3 years, but it is now almost back to the blueberry hectarage pre-drought. The future prospects are assessed as excellent in both the early and late growing regions, and Southern Africa continues to be the prime focus for future investments especially, as due to BREXIT related issues in the UK, there will be a contraction to UK soft fruit grown.
Analysis of Development and Performance (continued)
Winterwood has never planned or expected the RSA loan to be repaid in the short term and remains confident the loan is a sound longer term investment. In the short term the company will increasingly benefit from the supplies of fruit, which will continue to increase at a fast rate as the farms come into production. With the supermarkets constantly looking at ways to improve the efficiency of their own supply chain, RSA is a key part of the group strategy in ensuring that it has something that all the Company’s customers want. The coming year is expected to be a better pricing year than 2022/23 season, which saw prices fall by 7% back to the growers as an average over the season. These drops in price are factored into the respective budgets, and will be partly offset by greater volume efficiencies through increased sales of cheaper packs.
UK wages are increasing considerably faster than inflation due to the introduction of the National Living Wage, and although this will continue to be a challenge, the directors believe that the company is better placed than many of its competitors to deal with this increase and will more proactively drive efficiency levels in order to mitigate the effects of this. The Company’s bespoke software is also designed to drive efficiency within the packhouse, and the Company believes that this software is world beating, and the best in its field – it also has enormous potential in the future as labour efficiencies become more important, both due to expected labour supply issues post BREXIT and increases in wages that are expected to continue to increase at levels far more than inflation (+10% increase expected in 23/24 again). The effects on UK businesses labour availability cannot be ignored, and the Company is adapting it's operations to take into account the increases in labour costs, but also capitalising on the continued downward cost of automation.
The Company is disappointed and surprised that there seems to be no redress to the anomaly whereby the Company appears to be paying substantially ‘over the top’ rates. This bleed on finances continues to take away money from potential internal investments in further automation that are currently in the pipeline.
Going concern
During the period 01/05/22 – 30/04/23, in common with preceding years, the Company has no reason to believe that there is any reason to otherwise assume that the business is, or has been, run as a going concern, and that there is no known reason to doubt that this will also be the case in the forthcoming 12 months. In the past 12 months, debt has decreased, both as a lump sum, but also as a proportion of annual turnover, and prospects for the coming years look very positive.
Key performance indicators
The KPIs used to determine the progress and performance of the group are set out below:
Turnover
Turnover decreased by 4.6% compared to the previous year. This is above budgeted 2.9% increase, and for the reasons given in the review of the business above.
The budgeted turnover for 23/24 is £39.0m; latest forecast shows it will be £36.6.m.
Gross profit margin
The Company's gross profit margin was 8.2% a change from 10.9% in the previous year. This was in in line with Company expectations.
The budgeted gross margin for 23/24 is similar to the previous couple of years. This is mainly due to uncertainty on the effects of the war in Ukraine.
Carbon footprint
As based on a Consumption model, this was measured at 0.0150 kg CO2 equivalent per £ of turnover of fruit sold going through the Winterwood site. This was not materially different to the previous year and one aspect is the imposition of packaging and transport used to supply +80% of our customers, namely the UK retailers. It is unfortunate that many initiatives are for PR only and some actually increase the Footprint e.g. some lines now have to be supplied in Cardboard punnets that are not good for the environment in terms of water used to produce and also the fact that much is either unrecyclable due to a thin plastic film applied or simply as local councils do not recycle a meaningful % of what consumers separate for collection.
The Company is committed to reduce this figure over time, as well as developing ways to measure the footprint of a “field-to-fork” model (i.e. a “Production” based model, as the Company can actively influence the total field-to-fork figure e.g. through better fruit leading to less waste, and this has been identified as a more financially and environmentally efficient way to reduce global footprint when it is compared to reducing the packhouse part only.
The budgeted figure for 23/24 is expected to show a very small improvement.
Employees
Details of the number of employees and the related costs can be found in note 7.
The Board of Directors consider that they have, in good faith, acted in a way to most likely promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to the stakeholders and matters set out in s172(1)(a-f) of the Act) in the decisions taken during the year ended 30 April 2023.
When the Board take any decisions, they take due account of the following:
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 maintain fairness between all stakeholders of the company, including shareholders, employees, Customers and Suppliers.
The Board achieves the above in a variety of ways, including, but not limited to the following:
An inclusive relationship with employees, where openness is encouraged.
All shareholders are represented on the Board of Directors.
The building of important and open relationships with key suppliers and customers.
Regular in-depth management meetings, where all departments interests are considered where possible, before any decisions are taken that might affect them, and also in order to fully evaluate any major project or plan under consideration, as well as maximise expert input on new projects.
Management meetings used to disseminate Company strategy and decision-making processes.
Annual employee equality reports are produced, and equality is monitored and actively analysed at pay level, as a means to self-audit the effectiveness of the Company’s inclusive Policies and mindset.
External audits are carried out on a range of areas, including Ethical, BRC, Red Tractor, BRC, Organic, LEAF, Assured Produce. All of these are seen as independent validations of the Company’s Policies and Strategies, designed to maintain efficiency, fairness and risk reduction, both from a H&S perspective and also of Product quality and Employee wellness.
The Company Policies are also framed to ensure that the Company operates in a defined manner that is clearly understood by all, with all ‘Company manual’ documents available on an intranet, for employees to freely view and actively use.
The Company has developed an array of Procedures to cover all aspects of work, as well as forms to document such procedural compliance.
The Company has also developed in-house, a bespoke management system for all aspects of the Packhouse, in order to maintain it's position as ‘best in class’ within its packing operations.
Considering the Carbon footprint of any item purchased, or projects considered, and committed to develop an in-house Carbon Footprint calculation tool addition to its packhouse Management software system, with the aim to monitor Carbon reduction of its operations, as measured by CO2 equivalent per Kg of fruit sold. This work is underway and commitment to continue its development. The Company will continue to use industry standard toolkits for measurement of Carbon footprint of its whole business, and to publish such results annually, including growing, and the farm will also be measured separately in order to benchmark against other similar growing operations.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 April 2023.
The results for the year are set out on page 15.
Ordinary dividends were paid amounting to £4,444. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company's financial instruments comprise its financing facilities with Barclays Bank plc. The main purpose of these instruments is to raise funds for and to finance operations.
In respect of bank balances the liquidity risk is managed by weekly cash reconciliations and regular monitoring by management of the cash requirements.
The company purchases interest rate swaps to manage interest rate risk volatility. The fair values of the assets and liabilities held at fair value through profit and loss at the balance sheet date are determined using quoted prices. Where quoted prices are not available for derivatives the fair value of derivatives has been calculated by discounting the expected future cash flows at prevailing interest rates.
Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits.
Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.
In carrying out Company business, and making plans for the future, directors will pay due regard to the need to foster the company’s business relationships with suppliers, customers and others, and the effect of Company decisions and plans will have on all relevant stakeholders as well as the environment.
Since 30 April 2023, there have been no material changes to the customers or risks of the business. The previous largest risk was continued energy costs at over 3 times the previous norms, but the current contract that covers until the end of 2024 represents ‘only’ an 80% increase. As an offset, a further 80kW of photovoltaic went on line in 2023 in a continued mitigation effort to future spikes in energy costs.
The two main areas of R&D are the continued development of Packhouse production software that we refer to as “the Winternet” and continued support for Blackcurrant breeding program. The latter is a long-term project that has the aim of producing new Blackcurrant varieties that are more suitable to the English climate as we see Global warming making some varieties impossible to grow, at least in the South of the UK due to the lack of chill required in the winter to initiate fruit buds in the plants. We are also trying to develop sweeter varieties that are more suited to eating without sweet accompaniments. We also want varieties that are viable to pick by hand, as the increasing cost of labour since BREXIT, combined with the associated above inflationary cost of harvesting labour, means that this is a prerequisite to commercial selection, rather than a “nice to have” when the project begun. Breeding is a long process, and typically takes 20 years for new varieties to be commercialised.
The Winternet is now showing early commercialisation promise, with 10 sites now using the product. Each site around the globe has its own ways of working (WOW), and so continued development is required to enable the one product to be made bespoke to the WOW of the sites that choose to take it up. As one example, the products multi-lingual capability has been well received and has good uptake by individuals that prefer to use their native language even if working in an English spoken environment. Other major features are being added regularly to make the overall product more attractive to a great range of businesses, and ultimately to those packing or processing other products than soft fruit.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
UK Greenhouse gas emissions and energy use data for the period 1 May 2022 to 30 April 2023
Energy Source | Consumption | Scope | Emissions | ||
Gas | 38,073 | Kg | 1 | 38,073 | kgCO2e |
Electricity | 756,408 | Kwh | 2 | 156,633 | kgCO2e |
Transport – Freight & delivery | 419,983 | Km | 1 | 411,221 | kgCO2e |
Transport – Passenger vehicles | 29,984 | Km | 3 | 5,445 | kgCO2e |
Total |
|
|
| 611,372 | kgCO2e |
| |||||
Intensity Ratio |
| 0.0150 | kgCO2e per £ turnover fruit sold |
UK Greenhouse gas emissions and energy use data for the period 1 May 2021 to 30 April 2022
Energy Source | Consumption | Scope | Emissions | ||
Gas | 96,769 | Kg | 1 | 148,944 | kgCO2e |
Electricity | 1,347,550 | Kwh | 2 | 260,589 | kgCO2e |
Transport – Freight & delivery | 470,200 | Km | 1 | 488,307 | kgCO2e |
Transport – Passenger vehicles | 28,456 | Km | 3 | 5,215 | kgCO2e |
Total |
|
|
| 903,055 | kgCO2e |
| |||||
Intensity Ratio |
| 0.0211 | kgCO2e per £ turnover fruit sold |
Quantification and Reporting Methodology:
We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting.
Intensity measurement:
The chosen intensity measurement ratio is total gross emissions in metric kilogrammes CO2e per value by turnover of fruit sold, a recommended ratio for the sector.
Measures taken to improve energy efficiency:
These include continuing to look at ways to reduce waste overall and specifically the potential for recycling of the label backing paper and the Skelton film after heat-sealing. A new ground based solar panel project is planned but it is currently taken over 9 months for EDF to respond with permission to go ahead and this is becoming an increasingly difficult hurdle to overcome, and after that planning permission might be needed as well even though it’s accepted that there are not enough pickers now to grow a crop commercially and so the ground remains fallow for the foreseeable future.
We are also planning to purchase a plastic shredding machine to shred the increasing number of single trip plastic crates that we receive. This is driven by retailers telling us not to use single use plastic punnets even though the crates are a greater amount of plastic per kg of fruit delivered and so although a retailer can say its reducing its use of plastic punnets, its actually doing so by increasing the carbon footprint of its operations overall.
The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt a going concern basis in preparing the annual financial statements.
Further details regarding the adoption of the going concern basis can be found in note 1.2 to the financial statements.
Basis for 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
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.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
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;
Reviewing minutes of meetings of those charged with governance;
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 company 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Winterwood Farms Ltd (the 'company') is a private company limited by shares incorporated in England and Wales. The registered office and principal place of business is Chartway Street, East Sutton, Maidstone, Kent, United Kingdom, ME17 3DN.
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 £1.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
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 company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, 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 company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
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.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
As indicated in note 1.2 it is the directors’ assessment that the company continues to be a going concern. Accordingly, assets and liabilities have been valued on the basis that the company will continue in business. If this presumption proved to be mistaken the carrying value of assets and liabilities would need to be reappraised to reflect the impact of cessation.
In assessing whether there have been any indicators of impairment of assets, the directors have considered both external and internal sources of information such as market conditions, counterparty credit ratings and experience of recoverability. There have been no indicators of impairments identified during the current financial year other than in respect of bad and doubtful trade debtor balances and loans made to related parties recognised in the financial statements.
Under FRS 102 where loans due after more than one year have been made an assessment is required of the present value of that loan value where the interest charged is less than a market rate. As indicated in note 21 the directors have determined that the present value of loans due after more than one year made by the company is not materially different to the value reported in the balance sheet.
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.
Where an indication of impairment exists the directors will carry out an impairment review to determine the recoverable amount, which is the higher of fair value less cost to sell and value in use. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the asset and a suitable discount rate in order to calculate present value.
The company establishes a provision for receivables when they are estimated not to be recoverable. When assessing recoverability the directors consider factors such as the ageing of the receivables, past experience of recoverability, and the credit profile of individual or groups of customers.
The company depreciates intangible, biological and tangible assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes.
Judgement is applied by management when determining the residual values for intangible, biological and tangible fixed assets. When determining the residual value management aim to assess the amount that the company would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful economic life. Where possible this is done with reference to external market prices.
For more information refer to the following notes:
Note 22 - Write back of impairment of loans due from related parties
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2022 - 2).
Total remuneration for qualifying services was £89,413 (2022: £84,970). £9,411 (2022: £8,733) of remuneration costs have been capitalised as Intangible Fixed Asset additions in the year.
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 net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Depreciation amounting to £129,795 (2022: £169,509) was charged in respect of leased assets during the year.
Investment property comprises a residential property on Oaktree Avenue, Maidstone. The fair value of the investment property has been arrived at on the basis of the purchase cost plus directly attributable expenditure. The purchase was made on an open market value basis by reference to market evidence of transaction prices for similar properties.
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
These financial statements are separate company financial statements for Winterwood Farms Ltd.
The company has holdings in associate undertakings which are not consolidated. Separate financial statements for each associate are prepared.
Details of the company's associates at 30 April 2023 are as follows:
Amounts due from associate undertakings
Winterwood Holdings SA (Pty) Ltd
Amounts due from associate undertakings includes £13,111,987 (2022: £8,131,228) from Winterwood Holdings SA (Pty) Ltd, a company registered in South Africa. The loan is denominated in Rand and at the year end amounted to R411,043,307/£17,838,219 (2022: R353,460,783/£17,793,320) before impairment and interest. The loan is unsecured, bears interest at a rate determined from time to time and is repayable within 25 years with no fixed repayments within the next twelve months. In addition Winterwood Farms Ltd has agreed to assist Winterwood Holdings SA (Pty) Ltd by subordinating a claim of R230,212,777 (2022: R250,506,501) of Winterwood Farm Ltd's loan account against Winterwood Holdings SA (Pty) Ltd.
A write back of impairment adjusments made in prior periods has been made to this loan to reflect the positive expectations of profitablility of the underlying subsidiaries of Winterwood Holdings SA (Pty) Ltd. Whilst as at 30 April 2023 this company did not have sufficient net assets should the loan be called in, the forecasts prepared by management support the future recoverability of more of this loan in time. With an impairment brought forward of £9,589,760 and a write back of impairment of £4,863,528, the resulting net balance due to Winterwood Farms Ltd at 30 April 2023 of £13,111,987 (2022: £8,131,228).
It is the directors' opinion that the present value of the loan falling due after more than one year is not materially different to the value reported in the balance sheet.
The company purchases interest rate swaps to manage interest rate risk volatility. The fair values of the assets and liabilities held at fair value through profit and loss at the balance sheet date are determined using quoted prices. Where quoted prices are not available for derivatives the fair value of derivatives has been calculated by discounting the expected future cash flows at prevailing interest rates.
The bank loans and overdrafts are secured by a debenture between the company and the bank, incorporating a fixed and a floating charge over the current and future assets of the company.
A bank loan was taken out in September 2007 for £4,450,000, repayable over 20 years bearing interest of 0.95% over the prevailing Bank of England base rate.
In July 2019, all other bank loans were consolidated and refinanced into one loan. This amounted to £2,200,000, repayable over 5 years bearing interest of 1.95% over the prevailing Bank of England base rate.
One of the directors has provided a personal guarantee of £6,000,000 in favour of Barclays Bank plc, and the bank loan and overdraft are also secured by incorporating a charge on his personal assets.
Obligations under hire purchase contracts are secured against the related assets.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
Deferred income is included in the financial statements as follows:
In the year ended 30 April 2019 the company received a grant amounting to £264,688 from the Rural Payments Agency in relation to a project to purchase packhouse equipment. The grant is recognised in income over the useful economic life of the asset, in this case 5 years.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company has one class of shares which carry no right to fixed income. All shares rank pari passu to each other.
The company became a surety and co-principal debtor on 11 October 2006 for repayment on demand of any sum or sums of money which Lushof Fruit (Pty) Ltd may now, or at any time thereafter, owe ABSA Bank Ltd or its successors. The amount recoverable from Winterwood Farms Ltd will not exceed the sum of ZAR1,750,000, together with such further sums in respect of interest and costs already accrued or which may thereafter accrue until the date of payment of the ZAR1,750,000. Lushof Fruit (Pty) Ltd is a subsidiary undertaking of Dreammaker Fruits (Pty) Ltd; Dreammaker Fruits (Pty) Ltd is a subsidiary undertaking of Winterwood Holdings SA (Pty) Ltd, an associate of the company.
The company became a surety and co-principal debtor in 2002 for repayment on demand of any sum or sums of money which Melwood Fruit (Pty) Ltd may now, or at any time thereafter, owe Standard Bank Ltd or its successors. The amount recoverable from Winterwood Farms Limited will not exceed the sum of ZAR300,000, together with such further sums in respect of interest and costs already accrued or which may thereafter accrue until the date of payment of the ZAR300,000. Melwood Fruit (Pty) Ltd is a subsidiary undertaking of Winterwood Holdings SA (Pty) Ltd, an associate of the company.
Operating lease payments represent rentals payable by the company for certain of its properties. the financial statements include £77,535 (2022: £57,363) in payments recognised as an expense.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
At 30 April 2023 the company had entered into no capital commitments.
As at 30 April 2023, the company has entered into forward currency agreements to purchase Polish Zloty to the sum of £125,000 and South African Rand to the sum of £161,621 after the reporting date.
During the year the company entered into the following transactions with related parties:
Winterwood Holdings SA (Pty) Ltd and Dreampack (Pty) Ltd are registered in Republic of South Africa. Blue Forest Sp. z o.o, Pioterrberry Sp. z o.o and Polana Sp. z o.o are registered in Poland.
At the year end the loan due from Winterwood Holdings SA (Pty) Ltd was considered to be impaired by £4,887,161 (2022: £9,589,760).
At the year end the loan due from Blue Forest Sp. z o. o (Pty) Ltd was considered to be impaired by £160,929 (2022: £160,929).
Loans have been granted by the company to its directors as follows:
During the year the company paid rent to a director amounting to £75,424 (2022: £57,363).
The ultimate controlling party is S M Taylor.