The director presents the strategic report for the year ended 31 March 2023.
The Data Direct group has developed a strategic plan which is reviewed every year. This is being delivered in all areas of the business to:
Maintain and strengthen our position in the marketplace
Develop and support our customers to ensure that we maintain high standards of professionalism
Maintain and build upon our financial performance
Credit Risk
The company mitigates its credit risk through the use of its invoice financing facility with Lloyds TSB Invoice Financing.
Competitive Risk
The company operates in a competitive environment, to mitigate this risk, we ensure that the services provided are in line with our customers needs, and that strong relationships are maintained with our key customers.
Technical Risk
The company ensures that it has appropriate professional indemnity insurance.
The turnover remained at a consistent £18.7million for 2023 and 2022.
EBITDA has increased from £530k in 2022 to £906k in 2023.
We have continued to sustain a net current asset position within the group, and our key performance indicators of debtor days have increased 3 days from 57 days last year to 60 days this year. Stock days however have decreased to 65 days (2022: 67 days). This is representative of the market conditions, and our move to ensure we have appropriate stock levels in place to counter and delays in shipping.
The directors continue to ensure strategies are in place to innovate and ensure efficiencies throughout the business. The directors continue to remain agile to current market conditions.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 March 2023.
The results for the year are set out on page 9.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
In accordance with the company's articles, a resolution proposing that Verallo be reappointed as auditor of the group will be put at a General Meeting.
The director is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the director is required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The director is responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The group has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of principal risks and uncertainties and future developments.
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 auditor of the company and group 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 auditor of the company and group is aware of that information.
The director has carefully considered the future forecasts of the group and company, for a period of at least 12 months from the date these accounts are signed. The director is confident that the group and company have sufficient resources available to meet the group and company's obligations as they fall due and to enable the group and company to continue to operate for the foreseeable future.
In concluding that it is appropriate to adopt the going concern basis in preparing the financial statements, the director has considered the current and future trading, which are based upon expected market trends.
The director has further considered the continued facilities provided by the group's financiers over the invoice factoring facility of £3 million, where no contra indicators to continuation have been observed and the Coronavirus Business Interruption Loan Scheme loan of £2 million, repayable by December 2027.
In our opinion the financial statements:
give a true and fair view of the state of the group's and the parent company's affairs as at 31 March 2023 and of the group's profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 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 director's 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 director 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 director is 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's 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 director's 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 director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the parent company or to cease operations, or has 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Extent to which the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and its management.
Our approach was as follows:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the director and other management (as required by auditing standards), the policies and procedures regarding compliance with laws and regulations;
We considered the legal and regulatory frameworks directly applicable to the financial statements reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations in the UK;
We considered the nature of the industry, the control environment and business performance, including the key drivers for management’s remuneration;
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit;
We considered the procedures and controls that the companies have established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included: testing manual journals; reviewing the financial statement disclosures and testing to supporting documentation; performing analytical procedures; and enquiring of management, and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditors/audit-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor%E2%80%99s-responsibilities-for. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £5,011 (2022 - £210).
Data Direct Holdings Limited (06041619) (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is 11 Ivanhoe Road, Hogwood Industrial Estate, Finchampstead, Wokingham, RG40 4QQ.
The group consists of Data Direct Holdings Limited and its subsidiary Data Direct Thames Valley Limited.
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 on the historical cost convention. 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
Reclassification of expenditure
Distribution costs of £735,838 incurred during the year ended 31 March 2022 have been reclassified as cost of sales, in order to better reflect the reality of the costs incurred.
Management charges of £256,790 received during the year ended 31 March 2022 have been reclassified as other operating income, having previously been aggregated within cost of sales. The revised presentation more accurately reflects the substance of the transactions.
The consolidated financial statements incorporate those of Data Direct Holdings Limited and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 March 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.
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.
The director has carefully considered the future forecasts of the group and company, for a period of at least 12 months from the date these accounts are signed. The director is confident that they have sufficient resources available to meet the group and company's obligations as they fall due and to enable it to continue to operate for the foreseeable future.
In concluding that it is appropriate to adapt the going concern basis in preparing the financial statements, the director has considered the current and future trading, which are based upon expected market trends.
The director has further considered the continued facilities provided by the group's financiers over the invoice factoring facility of £3 million and the Coronavirus Business Interruption Loan Scheme loan of £2 million, repayable by December 2027.
The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of Value Added Tax. Turnover is recognised on the delivery of the goods and services.
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 delivery 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.
Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years in respect of the group and 20 years in the trading company.
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
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.
The trading company holds an interest in a related party. This investment is initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the profit or loss.
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.
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
Cost is calculated on a first in, first out basis.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
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 and bank loans, 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 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 at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the director is 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.
A key area of uncertainty is the recoverability of all related party debtor balances. Please refer to note 16 in the financial statements.
Key accounting estimates include the assessment of impairment of the loans to a related party. This is considered by the directors on an annual basis, based on the expectations of repayment by the related party. In the current year no impairment was required.
Each year the directors review the carrying value of the fixed asset investments to determine if any impairment is required. The historical and projected financial performance of the investment is reviewed to ascertain that the amount invested by the company remains recoverable. To date the directors believe no impairment is considered necessary, additional support for this consideration has been provided by the personal guarantee by P Winterbotham, should there be a shortfall in repayment of the preference shares. The impairment considerations are continually monitored.
In addition the directors have considered the appropriateness of the accounting treatment for the loans as long term other investments. On the basis that there is no traded active market for the shares for recognition at fair value, and the timing of the repayment is unknown, for recognition at amortised cost, the directors consider the recognition at cost less impairment is to be most appropriate.
Each year, the directors review the stock for slow moving and obsolete items to determine if any provision is required. In doing so, the company projects the expected consumption of stock lines to calculate how long it will take for the stock to be consumed or sold. Stock lines which are projected to take longer than 12 months are provided against accordingly.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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:
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25% (rather than remaining at 19% as previously enacted). The Finance Bill 2021 had its third reading on 24 May 2021 and is now considered substantively enacted. This means that the 25% main rate of corporation tax and marginal relief will be relevant for any asset sales or timing differences expected to reverse on or after 1 April 2023. Deferred taxes at the balance sheet date have not been measured using these enacted tax rates and not reflected in these financial statements on the grounds of immateriality.
On 21 December 2018, Data Direct Thames Valley Limited loaned £1.7 million to SRS Works Limited, in return for 1,700,000 Ordinary B £1 shares, at a dividend rate of 0.001%. The Ordinary B shares have no voting rights, but will take precedence on wind up.
The company is related by a mutual director and controlling party, although there is no formal repayment schedule for the preference shares, the director has confirmed that it is anticipated to be repaid in full in a short period of time.
On the basis that there is no traded active market for the shares for recognition at fair value, and the timing of the repayment is unknown, for recognition at amortised cost, the directors consider the recognition at cost less impairment is to be most appropriate.
The directors have considered the carrying value of the fixed asset investments to determine if any impairment is required. To date the directors believe no impairment is considered necessary, additional support for this consideration has been provided by the personal guarantee by P Winterbotham, should there be a shortfall in repayment of the preference shares. The impairment considerations are continually monitored.
Details of the company's subsidiaries at 31 March 2023 are as follows:
The company holds both Ordinary and Ordinary A shares in the subsidiary, the only distinction between them is the priority to assets on winding-up.
Financial instruments policy
Data Direct Holdings Limited use financial instruments, other than derivatives, comprising cash, short term borrowings, trade creditors and trade debtors, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operation. It is the Group's policy to minimise the cost of borrowings whilst retaining the flexibility of funding opportunities.
Interest rate exposure
The Group's commercial finance loans incurred interest during the year at 1.9% above base. The director will revisit the appropriateness of this policy should the Group's operations change in size or nature.
Currency exposure
As at 31 March 2023, the group had currency exposures relating to trading activities. The Group's financial instruments are materially denominated in sterling. Some purchases are made in other currencies. The Company manages these through use of foreign currency bank accounts.
Fair value of financial assets and liabilities
An assessment of the fair value of the Group's financial instruments held for financing purposes has been undertaken as at 31 March 2023.
Credit risk
The Group has credit limits in place. If credit limits are exceeded, no more sales are made to that customer.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. This is also minimised by the relationship trading of suppliers and customers.
Included in other debtors is an amount of £2,860,210 (2022 - £2,422,601), in relation to monies due from related companies. The companies are related by a mutual director who has a significant interest in each entity. At the date of signing these financial statements, substantially all of these debtor balances remain outstanding. There are no formal agreements in place in respect of these debtor balances and there is no scheduled repayment or interest charged. The group expects to recover these balances from the future cash flows generated by the related companies.
The mutual director has carefully considered the recoverability of these debtor balances, through his detailed knowledge of the operations of the related party companies, their future strategies and their projected future profitability. The director is confident in the ultimate recoverability of these debtor balances, on the basis that Mr P Winterbotham has pledged via a letter of guarantee dated 30 January 2024, to personally meet any shortfall in the repayment of £2,435,444 of the other debtors balance, should this be required to pay to the creditors of Data Direct Thames Valley Limited, or should the related entities cease to trade.
There is a further balance of £160,000 (2022:£ £160,000) in other debtors, loaned with no scheduled repayment or interest charged to a third party. The directors consider this amount to be recoverable, based upon the financial position of the company in question.
Trade debtors were assigned to Lloyds TSB Invoice Financing under a discounting arrangement. The facility offers an invoice discounting limit of £3m and charges 1.65% above base rate for balances up to £1m and 1.5% above base rate for balances above £1m. A fixed and floating charge over the undertaking and all property and assets present and future, including goodwill, book debts, uncalled capital, buildings, fixtures, fixed plant and machinery exists in favour of Lloyds TSB Invoice Financing in relation to debts not transferred to that company. At the year end, an amount of £2,804,764 (2022: £2,872,364) was factored.
The invoice factoring arrangement is also secured by a personal guarantee provided by the director. This has further been supported by a postponement of the directors' loan account balance, which limits the repayments against the loan period in a given period, and prevents its assignment.
A £2 million Coronavirus Business Interruption Loan Scheme loan was taken out on 6 May 2020, the amount is repayable by 66 monthly instalments commencing 12 June 2021, at a rate of 2.85%. The security held by Lloyds PLC, as per note 17 also cover the Coronavirus Business Interruption Loan Scheme loan.
The Lloyds mortgage loans, are secured by a fixed charge over:
the freehold property known as 11 Ivanhoe Road, Hogwood Industrial Estate, Finchampstead, RG40 4QQ;
the freehold property known as The New Barn, Home Farm, The Avenue, Esholt, Shipley, BD17 7RH; and
the land lying to the south-west of Ivanhoe Road, Finchampstead.
In addition, a fixed and floating charge over the undertaking and all property and assets present and future, including freehold and leasehold property, fixed plant and machinery, book debts, goodwill and uncalled capital exists in favour of Lloyds TSB plc in relation to the mortgage loans.
The mortgage loan over 11 Ivanhoe Road is subject to interest at a rate of 3.1% per annum, above base and is repayable over a 240 month period, commencing 1 July 2018.
An amount of £217,400 is due between 2 and 5 years (2022: £217,400), with £630,142 (2022: £668,363) due in more than 5 years.
The mortgage loan over The New Barn is subject to interest at a rate of 3.75% per annum, above base and is repayable over a 180 month period, commencing 10 February 2020.
An amount of £68,000 is due between 2 and 5 years (2022: £68,000), with £128,912 (2022: £141,498) due in more than 5 years.
Finance lease payments represent amounts payable by the company for motor vehicles. Agreements include purchase options at the end of the finance period, and no restrictions are placed on the use of the assets. The average lease term is 48 months. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Each ordinary share held entitles the bearer to one vote. There are no restrictions on the distribution of dividends and repayment of capital on winding up.
This reserve records retained earnings and accumulated losses.
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:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
As per note 18, a director's loan is pledged against the invoice factoring facility. At the start of the year the balance owed to the director was £626,060. During the year the director withdrew £212,334 (2022: £427,176) and made repayments of £nil (2022: £nil). At the balance sheet date the company owed the director £413,726.
The ultimate controlling party is Mr P. Winterbotham by virtue of his majority shareholding.