The directors present the strategic report for the year ended 30 April 2023.
Premier Forest UK Group Holdings Limited was incorporated on 25 February 2021 and on 1 March 2021 acquired the entire share capital of Premier Forest Group Limited and its subsidiaries ('Premier) which is one of the UK’s leading importers and distributors of timber and timber-based products. Premier was established in 1993 and operates out of its head office in Newport, South Wales.
The directors are pleased to report that Premier has continued to make excellent progress in the year. The previous trading period, which was a 14 month period to 30 April 2022, reflected unprecedented financial results where strong demand and some supply shortages in the market contributed to significant product price inflation, particularly in the 1st half but falling back somewhat in the 2nd half as supply came more into line with demand. The trading year ended 30 April 2023 saw more normal market conditions return with supply chains becoming less strained and more general stability in market prices, although the latter are still at higher levels than those achieved before the Covid-19 pandemic.
Analysis of group performance is undertaken monthly. The directors observe the usual financial indicators of performance – turnover, gross margin, net margin, debtor days and stock turn – and compare these measures against budgets. In addition, the directors produce management information that analyses customer performance, sales performance, product performance, stock ageing, market segments, supplier analysis and supplier performance. Gross margin, the group’s key measurement of performance was 23.1% (2022: 30.7%). Sales in the year were £106.2m (2022: £139.4m), a decrease of 23.9% (albeit the 2022 sales level was for a 14 month period), which resulted in a 42.8% decrease in gross profit. Operating profit was also reduced to £5.6m (2022: £23.6m) and profit before tax was £5.4m (2022: £23.7m). The group continued to strengthen its balance sheet and net assets increased to £19.5m (2022: £17.6m). The easing of the supply shortages experienced in the prior year, allowed the group to draw down inventory levels to £15.7m (2022: £19.9m) supporting strong cash flow generation from operating activities. There are no non-financial measures considered as KPI’s by management.
Progressive thinking, quality, integrity and value combine to make Premier a highly competitive force in the market. Alongside the prerequisite requirements of a competitive price and a fast and efficient service, the directors firmly believe that Premier, in addition to having a leading brand, offers a level of expertise, trust and understanding that goes beyond that of its competitors.
The group has continued progress with its ambitious growth plans through a combination of organic growth and strategic acquisitions, the latter including
the acquisition of the entire share capital of Monmouthshire Timber Supplies Limited (Mon Timber) in May 2022, this strengthening the position of the group in the timber supply market place, adding further value and opportunities, including entry into joinery production and the timber engineering arena.
the acquisition of the entire share capital of Décor Panel Limited (Décor) in February 2023, this signifying further expansion into the north of England, whilst simultaneously enhancing Premier’s processing and machining capability and capacity to meet growing customer demand.
The group also successfully completed an agreement to sell the assets of its sawmill (based at Croespenmaen, South Wales) to SDL Sawmills Limited in April 2023.The asset sale agreement including an offtake agreement with Premier continuing to then supply the finished sawn products from the mill to its existing diverse customer base.
General Market Conditions: The group's main markets are dependent on general economic conditions (including interest rates, inflation and general cost of living pressures). The situation remains uncertain and it remains to be seen the impact of persistently higher inflation levels and the geopolitical backdrop on the economy. At this point, it is not possible to predict the full extent of any potential future market changes and impact if any on revenues. The group continues to have a strong balance sheet position at year end. To best protect the group, the directors continue to manage stringently all costs and all elements of working capital to enhance operating cash inflows during this period.
People: A strong and experienced management team, and committed, knowledgeable staff at every level of the business constitute the primary raw ingredient for Premier’s growth and success. Whilst the loss of no one individual would represent a significant long-term threat to the business in its own right, sustained erosion or, transversely, difficulties in continuing to attract new talent to help drive growth could present problems. Fortunately, Premier greatly values its staff as its primary asset. This approach engenders a high degree of loyalty and commitment from staff, meaning staff turnover is extremely low, and Premier is seen as an attractive employer within the industry.
Competition: In general, the timber products market remains a crowded and volatile one, and one that is often subject to extremely changeable market conditions. This does lead to both shortages and acute over-supply situations. As some of Premier’s competitors are more dependent on commodity materials for their income, they are more prone to problems resulting from these market swings. When it occurs, oversupply represents a bigger problem, as some of Premier’s competitors are quick to liquidate stock in large volumes, driving down prices and margins sharply. Premier has spent many years building its defences against this recurrent trend; significant diversification in product offering and customer sectors now provides robust insulation against the worst of these fluctuations. Significant capital investment was progressed during the year ended 30 April 2023, in particular focussing on further enhancing the group's timber processing capabilities. Agile decision-making, fast responses to changing market conditions, and efficient purchasing also further mitigate the risk. Indeed, in a falling market, Premier often benefits.
Health & Safety: For a group which operates multiple sites with many risk factors (including heavy vehicles and lifting equipment, storage and stacking risks, complex and hazardous wood-processing machinery etc), the potential danger to staff, customers and the wider public is a perennial concern. Failure by the group to execute the lawful obligations to protect all parties from harm represents a threat which cannot be underestimated. Considerable resource and management time is allocated to ensuring risk mitigation is of paramount concern. External consultation is employed to provide impartial observation and critique and a robust process exists to provide a framework for Health & Safety management in the business. It is an ongoing process, which seeks continuous improvement. If at any point Health & Safety concerns regarding any operation, site or function are deemed too great to be overcome to the required standard, the group will not hesitate to call a halt to that activity in order to remove the risk entirely.
UKTR: UK Timber Regulation rules exist to heavily penalise any UK importer found to have imported timber deemed to be from an illegal source/supply chain. The law is robust enough to result in criminal prosecutions and substantial fines. The damage to the business and its reputation, should it be found to be in breach, could be significant. Risk mitigation and extremely detailed and forensic supply chain examination is therefore carried out independently by an expert supply chain auditing company, Track Record. This provides Premier with highly accurate and transparent scoring of every single supplier and contract enabling forward-facing assessment of risk and removal of supplier which could constitute a threat.
Stakeholder engagement
The directors of Premier Forest UK Group Holdings Limited have executed their duties in full accordance with section 172 (1) Companies Act 2006, ensuring all relevant decisions during the course of the year were taken explicitly in order to safeguard and further the success of the business, in good faith and meeting all legal obligations.
Structural changes made to the business during the last year were made following considerable scrutiny and careful consideration by the board of directors, as part of a medium and long-term strategy to strengthen Premier’s position within the UK as a diverse, service-orientated, and market-leading supplier of timber products.
Key stakeholder groups essential to the success of the business are an integral consideration in the decision making processes, and the impact of any such decisions upon those groups is carefully assessed to ensure that the nett effects are positive. Those key stakeholder groups include:
Employees
Premier has always recognised that the key to the successful implementation of our plans and strategies are down to the willing and efficient participation of our staff.
Professional, loyal and committed staff and management are at the heart of everything we do, so it is essential for the business to recruit, train and retain the very best. Premier’s proportion of long-service staff and our low turnover bear testament to the value we place upon our people and the investments we make in them.
Our management culture places the physical and mental well-being of our staff at the core of its values. A rigorous and well-managed Health & Safety regime is enforced across all sites, with structured, regular and active participation by the relevant management teams and representatives. Mental Health is a subject dear to our hearts; we take the mental well-being of our staff very seriously and we invest heavily in both time and effort to compassionately support any staff members experiencing difficulties in their lives.
We are proud to be able to demonstrate an excellent record of professional development within our management team and beyond. We make full use of the opportunities created by the dynamic and ambitious growth of our company to further the development and careers of those staff with the desire and aptitude for progression. Overall, the business culture within Premier makes it an easy, enjoyable and, above all, fair environment for all our staff to thrive in, where success and commitment is rewarded.
The group conducts regular board and senior management meetings in a correct, structured and recorded fashion. Strategies and directives resulting from these meetings are immediately communicated to relevant management parties and staff via clear internal communications. Staff meetings are organised and held wherever and whenever significant changes within the operations of the business (or external circumstances) are likely to directly impact staff, and reciprocal engagement is both encouraged and listened to.
Customers
Of equal value to our staff are our customers. Retention, growth and diversification of our customer-base in key target areas are at the very centre of our strategic objectives. Attentive, knowledgeable and professional representation and customer service is a key strength of Premier. Our performance in these areas is constantly measured through data and anecdotal evidence, and every effort is made to continually surpass our customers’ expectations. Training and investment to ensure we maintain a keenly competitive edge in these areas is prioritised. Premier operates in a largely commodity-driven marketplace, which is highly susceptible to market fluctuations caused by global trends. In order to ride out the resultant peaks and troughs, Premier enhances its value to its customers beyond competitive pricing wherever possible, and it is that extra dimension which enables our business to form long-lasting and mutually beneficial partnerships with our clients.
Funders and financial institutions
Premier enjoys strong and enduring support from its chosen financial partners. That support is constantly fortified by strong and transparent relationships which benefit from accurate, reliable and prompt financial management reporting. This enables our financial partners to monitor our financial headroom and performance with significant assuredness. The relationship with our banker HSBC stretches back to the inception of Premier and has been mutually beneficial to both parties over this time.
Suppliers
Maintaining a competitive edge in a constantly changing market is essential to our continuing success. That is dependent on the strength of relationships we develop with strategic long-term supply partners. Premier’s senior purchasing and commercial management team facilitate excellent relationships with our key supply infrastructure. These relationships ensure maximum exposure to market opportunities, the best financial and product delivery agreements, and collaborative agendas for mutually beneficial growth.
Shareholders
Premier’s board of directors includes the shareholders of the company. Non-shareholding directors on the board diligently fulfil their obligations to the shareholders and the business to ensure success beneficial to both entities.
Local community
As a diverse, multi-site operation, we recognise and fulfil our obligations to be considerate of the impact we have upon our neighbours, our local communities, and the wider environment. Premier’s plans for development, as well as our day-to-day operations, take full consideration of our social and legal responsibilities and actively aim to minimise our environmental impact.
Our management teams are well advised and trained, and are supported by additional external consultation where required, to ensure we operate to the highest professional standards of conduct and governance in respect of environmental legislation. Our investments in on-site renewable energy generation further offset our carbon footprint.
We strive to be sensitive to any concerns from local communities that may arise regarding our operations at any point, and always seek to resolve any concerns through active engagement and dialogue. Premier continues to support many local community projects and youth groups when approached, through donation and sponsorship, and we hope that such involvement and consideration helps maintain Premier’s standing within our local communities, so many members of whom we employ.
FUTURE DEVELOPMENTS
The directors believe that future-year results will continue to show a solid financial performance following actions undertaken in the current year.
Approved by the Board of Directors and 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 14.
Interim dividends were paid amounting to £2,055,000 (2022 - £6,450,000) on the A ordinary £1 shares. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group is committed to significant investment in research and development (R&D) with the general aim to improve performance in an ethical and ecologically sustainable manner.
The major objectives of the R&D programme are as follows:
i) To ensure the sustainability of timber suppliers
ii) The sustainability of the company's energy requirements
iii) To lead the sector through CHP waste management and a reduced energy requirement
iv) To achieve zero waste to landfill
v) To increase and improve the sustainability of forestry assets: a) by ethical sourcing; b) advanced production with reduced wastage; c) environmentally clean processes and waste minimisation to reduce the carbon footprint.
Strategy, likely future developments and post balance sheet events in the business of the group are discussed in the strategic report.
The preparation of the Streamlined Energy and Carbon Reporting (SECR) was developed using the methodology provided in The Greeenhouse Gas Protocol – A Corporate Accounting and Reporting Standard (Revised Edition)and use of the relevant UK Government GHG Conversion Factors for Company Reporting for 2023. The SECR for the company is the consolidated data for the company and for the subsidiary companies as set out in note 15.
Given the diverse operational activities of the group the chosen intensity measurement ratio is linked to financial activity in terms of per £100,000 turnover.
During the past year Premier has continued to push a pro-active agenda of decarbonisation within the business.
The business’ electrical energy consumption is partly offset by energy generation. This is conducted via large-scale roof mounted solar arrays at three locations, as well as an advanced on-site gasification plant at Newport which drives a generator. This latter operation largely eliminates all wood-waste from our processing and fabrication division, as well as timber based packaging from the adjacent distribution site, saving significant waste disposal to landfill, and producing a high-grade charcoal which is recycled. The gasification plant and solar panels arrays between them generated 421,317/kwh (2022: 717,838/kwh) of energy during the last year, which was fed back to the grid.
Reduction of dependency of fossil fuels is an ongoing process. As lease contracts expire, forktrucks are being systematically replaced with electric versions wherever possible. This process began in 2020, with more scheduled for coming periods.
Similarly, the group car fleet is undergoing changes. Specific policy changes have been implemented to encourage drivers to move vehicles to low emission hybrids at the very least, with full EV’s being promoted wherever viable. With several full EV’s already added to the fleet, it is expected that this switch will continue this coming year. In support of this, Premier has invested in on-site and at-home charging wherever possible, and is expanding and upgrading those facilities to future-proof and keep pace with the growing demand.
Whilst the Covid 19 pandemic certainly curtailed travel to and between offices, like many businesses Premier has observed the benefits of the hybrid working model and has been happy to since embrace this in the culture of the company. This has meant a considerable reduction in business miles driven by staff, contributing to the reduction of CO2, particulate and tyre debris emissions.
Whilst at this stage the HGV fleet does not have an alternative to internal combustion engines, Premier nonetheless recognizes the importance of ensuring the best possible fuel efficiency of these vehicles. Driver training, enhanced telematics data and a move to software assisted route planning will all help deliver improved fuel efficiencies and help reduce carbon emissions.
Lighting is another key area where significant work has been undertaken (and continues on a rolling basis); existing halogen, fluorescent and Sodium lighting in warehouses and offices is being replaced with energy efficient LED lighting, both reducing energy consumption and improving the safe lighting levels, particularly in the warehouses during the winter months. A program of replacement of warehouse skylights has also begun, reducing the need to use of lighting during daylight hours.
In preparing the financial statements, the directors have considered the current financial position of the group and the likely future cash flows. At the date of signing the financial statements, the directors have concluded that it is appropriate to prepare them on a going concern basis. In forming this conclusion, the directors have considered the group’s strong financial performance in the current financial year and prospects for the subsequent financial periods. The directors have reviewed projected cash flows of the group and have considered different market scenarios within this based on sensitivities if market demand changes. The group’s costs and working capital requirements are managed rigorously. The group's trading activities are forecast to generate positive future cash flows for at least 12 months from the date the financial statements are signed, thus enabling the group to meet its obligations as they fall due.
The group has an import line facility and an invoice finance facility to assist with the financing of the business together with a fixed term loan. The group has met all capital and interest payments as they have fallen due in respect of financing arrangements, up to the date of approving the financial statements, and the forecasts indicate that the group can continue to meet such payments as they fall due. There have been no covenant breaches and the forecasts indicate that this will continue into the foreseeable future.
The group’s banking facilities were formally reviewed and renewed in April 2023 and the directors are confident that these will be renewed by HSBC when they fall for renewal in April 2024.
Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.
The group’s principal financial instruments comprise bank overdrafts, bank loans, trade creditors, trade debtors, forward contracts and invoice discounting facilities. The main purpose of these instruments is to raise funds for the group’s operations and to finance the group’s operations.
Due to the nature of the financial instruments used by the group, there is limited exposure to price risk. The group’s approach to managing other risks applicable to the financial instruments concerned is shown below. The group enters into forward contracts to hedge against foreign currency fluctuations (note 16).
In respect of bank overdrafts, the liquidity risk is managed by maintaining a balance between the continuity of funding and flexibility through the use of overdrafts and factoring facilities.
In respect of loans, these comprise loans from financial institutions. The interest rate on the loans is variable but the monthly repayments are fixed. The group manages the liquidity risk by ensuring there are sufficient funds to meet the payments.
Trade debtors are managed in respect of credit and cash flow risk by managing advances from the factor. Customer balances are regularly monitored by reference to amounts outstanding for time and credit limits.
Trade creditor liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the group’s auditor is aware of that information.
Auditor
Azets Audit Services were appointed as auditor to the group and company in the year.
In accordance with the group's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put in a General Meeting.
We have audited the financial statements of Premier Forest UK Group Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
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 entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £2,055,000 (2022 - £6,649,916 profit).
Premier Forest UK Group Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is West Way Road, Alexandra Dock, Newport, NP20 2PQ .
The group consists of Premier Forest UK Group Holdings Limited and all of its subsidiaries.
The current reporting period is for the year ended 30 April 2023. The length of the prior reporting period was from the date of incorporation on 25 February 2021 to the period end date of 30 April 2022. As a result, the results for the current period are not entirley comparable.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Premier Forest UK Group Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 30 April 2023 except those for Decor Panel Limited which are made up to 30 June 2023. The results for Decor Panel Limited have been consolidated based on management information for the period between acquisition and 30 April 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
In preparing the financial statements, the directors have considered the current financial position of the group and the likely future cash flows. At the date of signing the financial statements, the directors have concluded that it is appropriate to prepare them on a going concern basis. In forming this conclusion, the directors have considered the group’s strong financial performance in the current financial year and prospects for the subsequent financial periods. The directors have reviewed projected cash flows of the group and have considered different market scenarios within this based on sensitivities if market demand changes. The group’s costs and working capital requirements are managed rigorously. The group’s trading activities are forecast to generate positive future cash flows for at least 12 months from the date the financial statements are signed, thus enabling the group to meet its obligations as they fall due.
The group has an import line facility and an invoice finance facility to assist with the financing of the business together with a fixed term loan. The group has met all capital and interest payments as they have fallen due in respect of financing arrangements, up to the date of approving the financial statements, and the forecasts indicate that the group can continue to meet such payments as they fall due. There have been no covenant breaches and the forecasts indicate that this will continue into the foreseeable future.
The group’s banking facilities were formally reviewed and renewed in April 2023 and the directors are confident that these will be renewed by HSBC when they fall for renewal in April 2024.
Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, 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.
Gross debts are shown in the statement of financial position as trade debtors and advance payments from the factor are included within creditors as a liability. All interest and charges are written off to the statement of comprehensive income as and when they arise.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to revenue or to assets. Grants relating to revenue are recognised in income over the period in which the related costs are recognised. Grants relating to assets are recognised over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Factoring and invoice discounting
Gross debts are shown in the statement of financial position as trade debtors and advance payments from the factor are included within creditors as a liability. All interest and charges are written off to the statement of comprehensive income as and when they arise.
Related party transactions
The group discloses transactions with related parties which are not wholly-owned within the same group. Where appropriate, transactions of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to understand the effect of the transactions on the group financial statements.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Goodwill is amortised over its expected useful life. The actual lives of the assets are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as a change in the business, technological advancement and changes in market prices are taken into account.
Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
The group considers whether investments are impaired. This requires consideration of the financial position and financial performance of the subsidiary companies and the estimation of future revenues and future cash flows from the companies as well as the selection of appropriate discount rates in order to calculate the net present value of the cash flows.
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.
Provision is made for those items of stock which are obsolete and where the net realisable value is estimated to be lower than cost. Net realisable value is based on both historic experience and assumptions regarding future selling values, and is consequently a source of estimation uncertainty.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
There are no employees in the parent company and no associated costs.
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:
UK tax rates
Deferred tax (assets)/liabilities have been accounted for at the applicable tax rates enacted or substantively enacted.
In its Budget held in March 2021, the UK Government announced that the UK rate of corporation tax would increase from 19% to 25% from 1 April 2023.
These legislative changes have been enacted within the current year, and these rates have therefore been considered when calculating the closing deferred tax balances at the reporting date.
The goodwill has arisen on acquisitions made by the group and is being amortised over a 10 year period, recognising the long term benefit to the group of the assets acquired.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 30 April 2023 are as follows:
The registered office of all subsidiaries incorporated in the United Kingdom is West Way Road, Alexandra Dock, Newport, NP20 2PQ.
The directors believe that the carrying values of the investments are supported by their underlying net assets at the end of the period.
Under S479A of the Companies Act 2006, Monmouthshire Timber Supplies Limited (registered number 05035832) is exempt from the requirements of the Act relating to the audit of individual accounts. Premier Forest UK Group Holdings Limited has guaranteed the liabilities of Monmouthshire Timber Supplies Limited.
The company enters into forward contracts to hedge against foreign currency fluctuations. At 30 April 2023, the group was contracted to sell US dollars to the value of $500,000 (2022: purchase $545,766) and the purchase of euros to the value of €300,000 (2022: €nil). The company does not hold derivatives for speculative purposes.
The forward currency contracts and hedges are measured at fair value, which is determined by using valuation techniques that utilise observable inputs. The key assumptions used in valuing the derivatives are the forward exchange rates for the relevant currencies. As at 30 April 2023, the fair value is a gain of £2,261 (2022: loss £1,265) and the change in value included in the statement of comprehensive income is a gain of £666 (2022: gain £10,513). The expiry dates of all forward contracts are within 12 months of the balance sheet date.
The directors are of the opinion that there are no material differences between the replacement cost of stock and the statement of financial position amounts. A provision of £212,625 (2022: £85,000) was made against impairment of stocks due to slow moving and obsolete stock.
Trade debtors are stated after provisions for impairment of £276,160 (2022: £204,635). Amounts due from group undertakings are unsecured, interest-free, have no fixed date of repayment and are repayable on demand.
Included within other debtors within one year (2023: £532,788; 2022: £nil) and after one year (2023: £2,080,400; 2022: £nil) is a loan receivable over 60 months that commenced on 30 April 2023. Interest is charged at a rate of 10% per annum on this balance. This loan is secured by way of a fixed charge over the assets transferred.
Included in other creditors is £2,822,072 (2022: £5,593,336) advanced in respect of the group's invoice discounting facility, which are secured against the trade debtors to which they relate. Secured balances are considered further in note 23.
Secured balances are considered in note 23.
Included within loans payable within one year are short-term loans against imported goods of £707,407 (2022: £1,770,432). The loans attract interest of 1.4% above base rate.
Included within loans payable within one year and after one year is a loan repayable over 36 months of £3,279,708 (2022: £4,861,111) that commenced on 3 March 2022. Interest is charged at a rate of 1.99% above the Bank of England Base rate.
Also included within loans payable within one year and after one year is a loan repayable over 36 months of £5,000,000 (2022: £nil) that commenced on 1 April 2023. Interest is charged at a rate of 2.25% above the Bank of England Base rate.
Finance lease payments represent rentals payable by the group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3-4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The bank loans and bank overdraft are secured by fixed and floating charges over the assets of the company. The hire purchase contracts are secured over the assets to which they relate. The invoice discounting account is secured by assignment of trade debtors.
There are no secured debts on the company.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse over the course of the life of the assets and relates to accelerated capital allowances that are expected to mature within the same period.
The group operates a defined contribution pension scheme on behalf of its employees. The assets of the scheme are held separately from those of the company in an independently administered fund. There were no amounts outstanding at 30 April 2023 (2022: £nil).
On incorporation of Premier Forest UK Group Holdings Limited on 25 February 2021, one £1 ordinary share was issued at par. On 1 March 2021, an additional £45,110,999 ordinary £1 shares were issued at par in exchange, and at market value, for the entire share capital of Premier Forest Group Limited.
On 2 March 2021, the share capital was reclassified into £5,502,000 A ordinary £1 shares and £39,609,000 B ordinary £1 shares. On the same date the company undertook a reduction in share capital. The B ordinary £1 shares were cancelled in exchange for the repayment of capital in the form of the transfer of the investment held by the company in Premier Forest (ROI) Limited, to a separate company under common ownership of the shareholders of Premier Forest UK Group Holdings Limited.
Profit and loss reserve represents the accumulation of the performance of the business after the deductions of dividends paid to shareholders of the company.
On 23 May 2022 the group, through an investment made by Premier Forest Products Limited, acquired the entire ordinary share capital of Monmouthshire Timber Supplies Limited for £7,134,751.
On 1 February 2023 the group, through an investment made by Premier Forest Products Limited, acquired 100% of the issued capital of Decor Panel Limited.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Transactions with other companies within the group have not been disclosed in these financial statements as the company has taken advantage of the exemption outlined in FRS102 on Related Party Disclosures, which exempts wholly-owned subsidiaries from disclosing related party transactions in their statutory financial statements.
During the period the group entered into the following transactions with associate companies:
The following amounts were outstanding at the reporting end date:
Ankur Scientific UK Limited and Piercefield Limited are associate companies in which a family member of a director of the company has an interest. Two directors of the company have separate interests in Penllyn Castle, Howells Farm Limited and Howells 2020 Limited.
Brooks Timber & Building Supplies Limited was an associated company due to being under common ownership with Premier Forest Uk Group holdings Limited during the period.
On 18 October 2023, PF UK Holdings Limited changed its name to Premier Forest UK Group Holdings Limited.
On 31 October 2023, the group announced the acquisition of PWDIF Limited, a company that specialises in the manufacturing of technical fire door sets as well as a comprehensive supplier of door furniture, for total consideration of £1.5m.
On 10 November 2023 the group announced the acquisition of Northeast Sheets and Panels Limited, a specialist manufacturer and supplier of made-to-measure doors, panels, cabinets and worktops to trade customers and retailers in the fitted kitchen, bathroom and bedroom sector, for total consideration of £100k.