The directors present the strategic report for the year ended 31 December 2022.
Atrium's core proposition revolves firmly around the concept of quality, encompassing the Quality of Light, Quality of Solution, and Quality of Service. Operating within a fiercely competitive sector, we distinguish ourselves by collaboratively engaging with brands of the utmost quality, a synergy that sets us apart from competitors. Unlike many in our industry who are wholly owned subsidiaries of European manufacturers, our independence stands as a significant competitive advantage, particularly in an era where swift decision-making holds increasing importance. Presently, our business boasts a wealth of industry and product knowledge, a diverse skill set, and an extensive customer network. These elements collectively contribute to our well-established and robust reputation.
Although trading showed signs of recovery in 2021 following the impact of COVID in 2020, the pace of trading in 2022 was notably slower compared to the previous year. This slowdown can be attributed, in part, to the lingering effects of reduced project initiation during the lockdown period from March 2020 to July 2021. The commercial office sector, which typically contributes 40% to 50% of our annual turnover, experienced a particularly sluggish recovery. The retail sector also faced challenges in returning to pre-pandemic levels.
Despite the subdued order intake and invoicing in 2022, we dedicated considerable efforts to fortify our pipeline for 2023. We also enhanced our pipeline management to ensure sustained growth beyond 2023. Additionally, a significant portion of our time and energy was directed toward optimising efficiency through our ERP system, which has evolved into an ongoing improvement initiative. Our current strategic focus centers on driving sustainable growth through efficiency, leveraging the capabilities of AI wherever feasible within our operations.
As a result of these investments in future growth, we anticipate closing 2023 with a turnover of approximately £16 million. This positions us well for entering 2024 with a robust pipeline, aligning with the forecasted 8% growth in the construction sector for 2024 and 7% for 2025. Notably, London is experiencing a surge in office building development, reaching levels unseen in the past two decades.
Key Performance Indicators
The Directors’ views on KPIs are that these remain consistent with the prior year as turnover, gross margins and profit before tax.
Results 2022 2021
Turnover £14,020k £15,218k
Gross margin 31.68% 31.96%
Loss before tax (£1,748k) (£269k)
The decline in order volume throughout 2022 resulted in a notable decrease in turnover compared to the levels achieved in 2021. As previously highlighted, 2022 was dedicated to advancing our systems and strengthening our pipeline. The positive outcomes of these initiatives have become evident through the orders secured for 2023, even in the face of a reported negative 20% growth in the construction sector during the same period. While 2022 presented its challenges, our focused efforts have positioned us well to embrace and navigate future growth with confidence.
Principal risks and uncertainties
Atrium Group's strategy takes into account risks, as well as opportunities, which need to be actively managed. Effective risk management is essential to executing our strategy, achieving sustainable long-term value, protecting our reputation and ensuring good governance
1) Brand and Reputational Risk
The vitality of the Atrium brand and its reputation, along with those of its suppliers, forms the bedrock of our business. Potential harm to Atrium can arise from internal actions or the conduct of external partners, with the risk of enduring and substantial reductions in revenue in the event of brand damage.
Atrium distinguishes itself as a brand selector, not merely a collector. Presently, our criteria for choosing brand partners extend beyond the products they offer; we prioritise shared values and a demonstrated commitment to innovation. Our portfolio strikes a balance—sufficiently extensive to provide diverse solutions yet compact enough to allow dedicated attention for effective promotion. Each brand, both collectively and individually, must excel in design, innovation, and responsiveness to the evolving demands of artificial lighting. We maintain continuous monitoring of our relationships with these brands.
Principal risks and uncertainties (continued)
In addition, our commitment extends to providing robust after sales care through a dedicated team, ensuring swift resolution of any issues that may arise.
2) Supply Chain
Our adherence to quality standards hinges on the reliability of our chosen brands. The timely delivery and adherence to specifications are crucial factors, as any deviations pose a potential risk to our revenue.
To proactively address this risk, we maintain close collaboration with our selected brands. Our strategic approach involves partnering with high-end brands known for delivering exceptional product quality. This deliberate selection process serves as a key measure to mitigate potential impacts on our revenue.
3) Economic Activity in the UK
The risk emerges from the decline in economic activity observed in the latter part of 2022, potentially reshaping the competitive dynamics as businesses vie for a reduced pool of opportunities. The prevailing pattern in our competitive landscape has undergone notable shifts over the years, particularly in recent times.
The dwindling number of independent organisations is a conspicuous trend, with many succumbing to acquisitions by their prominent foreign suppliers. Atrium's unique position as an independent entity, coupled with the excellence of our products and the commitment of our long-serving, knowledgeable team to delivering superior work, remains the cornerstone of our prosperity—a tradition upheld for the past 45 years.
4) Financial Risks
a. Liquidity Risk
Every business faces the inherent risk of being unable to meet its financial obligations when they come due. Atrium addresses this risk through robust management of operating cash flow, complemented by a judicious dividend policy and vigilant credit control measures. In the event that operating cash flow falls short of covering financial obligations, the company has access to credit facilities as a contingency measure. This comprehensive approach ensures a proactive stance in safeguarding the company's financial stability and meeting obligations as they arise.
b. Credit Risk
There is a risk that an Atrium customer may be unable to pay its debts on the due date. The company manages this risk through asking for deposits on account, maintaining strong customer relationships and closely monitoring outstanding debts from all sources.
c. Interest Rate Risk
A substantial increase in interest rates could escalate the cost of debt, exerting a detrimental influence on both cash flow and profitability. The surge in interest rates since the close of 2021 has exerted pressure on the economy, leading to a contraction in consumer spending. Despite the resultant elevation in the cost of debt, we have successfully navigated through these challenges and achieved growth throughout 2023.
d. Foreign Exchange Risk
Atrium, being reliant on imported products, is inherently susceptible to foreign currency risks, predominantly in Euros. The Board consistently reviews and establishes policies to effectively manage exchange rate risks. In appropriate circumstances, the company employs financial instruments to mitigate these risks. All engagements in derivatives, notably forward exchange contracts, are exclusively undertaken for the purpose of risk management, with no speculative transactions being pursued. This cautious approach ensures a proactive stance in safeguarding the company against adverse currency fluctuations.
Principal risks and uncertainties (continued)
5) Our People
Atrium’s performance and success are dependent on its capacity to attract and retain the best people. Not employing the best people at all levels could affect the company’s operations and prospects. We continue to navigate uncertainty caused by Brexit. Global trading disruption continues to impact our people’s ability to meet planned business goals. We are committed to ensuring we have a strong employee brand and culture in order to attract and retain the best people.
Actions taken include:
Regular reviews of salaries and bonus structures.
Improved benefits, including additional holiday, improved maternity benefits, improved healthcare provision and subsidised membership of museums,
Empowering and equipping our leaders to lead through change.
Defining the company’s Roots, Passion & Vision.
Setting up an Employee Experience Committee to help drive improvements in company culture and morale.
Regular surveys of employee engagement resulting in clearly defined actions.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with section 485 of the Companies Act 2006, a resolution proposing that Arnold Hill & Co LLP be reappointed as auditor of the company will be put at a General Meeting.
We have audited the financial statements of Atrium Group Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group profit and loss account, 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, the company 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
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
The COVID-19 virus and its sustained impact on the global economy and businesses around the world (as explained in note 1 to the financial statements), indicate the existence of uncertainty which may cast doubt about the company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. 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 directors and other management (as required by auditing standards), and discussed with the directors and other management 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 company has 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/auditorsresponsibilities. 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.
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 £61,694 (2021 - £10,978 loss).
Atrium Group Holdings Limited (Consolidated) (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Sixth Floor Capital Tower, 91 Waterloo Road, London, United Kingdom, SE1 8RT.
The group consists of Atrium Group Holdings Limited (Consolidated) and all of its subsidiaries.
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 consolidated financial statements incorporate those of Atrium Group Holdings Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Atrium Limited and Acanthus Investments Limited, acquired in March 2019 through restructuring, have been consolidated using the merger accounting method. An indirect holding, Kelvin Lighting Limited, was acquired by Atrium Limited in 2019. Kelvin Lighting Limited's results are incorporated within Atrium Limited's results from June 2019 using the purchase method.
All financial statements are made up to 31 December 2022. 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.
Atrium Limited and Acanthus Investments Limited have been included in the group financial statements using the merger method of accounting following a restructuring in March 2019.
The group profit and loss account and statement of cash flows also include the results and cash flows of the indirect holding of Kelvin Lighting Limited for the period from its acquisition by Atrium Limited in June 2019, and additionally the indirect holding of Atrium Lighting Ireland Limited for the period from its acquisition by Atrium Limited in 2022.
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.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Additionally, the directors continue to monitor the impact of COVID-19 and potential implications on future operations. The directors have undertaken a number of scenario projections to understand the potential impact on the business and remain satisfied that the Company is able to meet its liabilities as they fall due over the next 12 months. Thus the directors continue to adopt the going concern basis of accounting 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.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the 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 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 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 credit for the year based on the profit or loss and the standard rate of tax as follows:
Freehold Land and Buildings brought forward comprised a warehouse space owned by Atrium Limited. This warehouse was valued as at 31st December 2015 at a value of £1.7m. This valuation was carried out by an independent valuer, Jones Lang LaSalle Ltd and the valuation was based upon the valuer's experience within the market. Upon transition to FRS 102 in 2015, the company adopted the historical cost accounting policy of recognising this freehold property, with the £1.7m valuation carried forward as the deemed cost of the property.
In 2019, the warehouse was sold within the group. The sale of the asset has been adjusted for on consolidation of these accounts.
Investment properties rented to another group entity have been accounted for using the cost model. There are no investment properties included within company tangible fixed assets. The carrying value of investment properties included within group tangible fixed assets is £1,442,493 (2021 - £1,482,493).
Details of the company's subsidiaries at 31 December 2022 are as follows:
Details of associates at 31 December 2022 are as follows:
Included in other debtors is an amount for £440,115 in respect of a rent deposit for leased office space. This amount is considered to be recoverable in greater than a year.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
Of the operating lease commitments disclosed, £163,216 payable within the next 12 months and £1,052,184 of the total commitments relate to obligations between members of the group, in regards to leased warehouse space.
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:
The operating leases represent leases of £1,052,184 to members of the group, of which £163,216 is payable within 12 months of the balance sheet date. After 5 years, the lessee has an option to terminate the lease on the provision that 6 months notice is given.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
As at 31 December 2022, the directors of the company owed the group £3,396,692 (2021: £3,140,691), of which £3,396,692 was owed to the company (2021: £3,140,691).
As at 31 December 2022, the group owed a former director of the company £586,945 (2021: £586,920), of which £nil was owed by the company (2021: £nil).
As at 31 December 2022, directors of group subsidiaries owed the group a further £96,003 (2021: £129,357) of which £nil was owed to the company (2021: £nil.)
The Directors are considered to be the key management personnel of the company and its subsidiaries and as such, their remuneration is disclosed in note 8 of these financial statements.
As at 31 December 2022, the company was owed £45,125 by Atrium Limited (2021: £45,125).
During the year, the company's subsidiary Atrium Limited paid rent of £163,216 (2021: £163,216) to Acanthus Investments Limited.
As at 31 December 2022, Acanthus Investments Limited owed £600 to Atrium Limited (2021: £nil).
Loans were interest-free and repayable on demand.
The company has taken advantage of the exemption available in accordance with FRS 102 paragraph 33.1A from the requirements to disclose details of transactions entered into between two or more members of the group, provided that any subsidiary which is party to the transaction is wholly owned by such a member.