The directors present the strategic report for the year ended 30 April 2023.
The company is an intermediate holding company within the group headed by Premier Forest UK Group Holdings Limited. The company's purpose is to hold shares in Premier Forest Products Limited, a trading company whose activity is that of timber supply. The strategic aim of this business is the same as its subsidiary and its aims are noted as follows.
Premier Forest Products (Premier) is one of the UK’s leading importers and distributors of timber and timber-based products. The company 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 year (to 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.
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.
General Market Conditions: Premier'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. Premier continues to have a strong balance sheet position at year end. To best protect Premier, 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 Premier'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 Group Limited and of its subsidiary Premier Forest Products 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 ultimate holding company Premier Forest UK Group Holdings Ltd. 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.
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 11.
Ordinary dividends were paid amounting to £2,055,000 (2022: £6,200,000). 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:
Strategy, likely future developments and post balance sheet events in the business of the company are discussed in the strategic report.
Going concern
The company is part of a group headed by Premier Forest UK Group Holdings Limited. In preparing the financial statements, the directors have considered the current financial position of the company and 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 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.
The directors of the company have also received confirmation that the group will not recall payment of inter-company debt balances if it causes financial difficulty to any of the companies in the group.
Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.
The company has taken exemption of the energy and carbon report as this is included with the group consolidation financial statements.
Financial risk management policies and objectives
The company’s and 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 (though the company does not itself utilise such instruments).
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.
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.
Premier Forest Group Limited is a private company limited by shares incorporated in England and Wales. The registered office is Premier Forest Products West Way Road, Alexandra Dock, Newport, United Kingdom, NP20 2PQ.
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 £.
This 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:
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.
Premier Forest Group Limited is a wholly owned subsidiary of Premier Forest UK Group Holdings Limited and the results of Premier Forest Group Limited are included in the consolidated financial statements of Premier Forest UK Group Holdings Limited which are available from West Way Road, Alexandra Dock, Newport, United Kingdom, NP20 2PQ.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
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 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.
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.
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.
The company 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.
During the year ended 30 April 2023, Premier Forest Estates Limited, a subsidiary company, was dissolved and as such the liability owed to the subsidiary by the company was discharged and written off.
The company's audit fee of £3,500 (2022: £3,500) was borne by Premier Forest Products Limited and not recharged.
The average monthly number of persons (including directors) employed by the company during the year was:
No remuneration was paid to the directors for their services to the company.
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:
Details of the company's subsidiaries at 30 April 2023 are as follows:
The registered office of all subsidiaries is West Way Road, Alexandra Dock, Newport, NP20 2PQ.
On 27 December 2022 Premier Forest Estates Limited, a dormant subsidiary, was dissolved. The related investment values were written off upon dissolution.
The directors believe that the carrying values of the remaining investments as at 30 April 2023 are supported by their underlying net assets at the end of the period.
Amounts due from group undertakings are unsecured, interest-free, have no fixed date of repayment and are repayable on demand.
Amounts due to group undertakings are unsecured, interest-free, have no fixed date of repayment and are repayable on demand
The overdraft is secured by fixed and floating charges over the assets of the company.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
No shares have been issued which are not fully paid.
Premier Forest UK Group Holdings Limited is the immediate parent company and ultimate parent company as at 30 April 2023. Copies of the financial statements of Premier Forest UK Group Holdings Limited can be obtained from the company's registered office of West Way Road, Alexandra Dock, Newport, NP20 2PQ.