The director presents the strategic report for the period ended 31 July 2023.
The Directors are pleased with the results for the financial period. Cherrytree Bakery Limited has managed a 33.3% increase in turnover in a highly competitive marketplace. This has been achieved through pursuing opportunities which are complimentary to our production capability, providing significant cost synergies, without attracting any additional overheads.
Additionally, some significant and ongoing raw material cost price increases have been managed through effective contract timing and this has shown in the results. We continued to see increasing demand from our core strategic client base.
We are always mindful of the uncertainties in the ingredients marketplace which has led to closer collaboration with our supply base. Effective raw material planning during the period mitigated significant raw material price fluctuations for certain products but we are mindful of the potential for sudden and unknown raw material cost price increases.
The well publicised issues with the labour market continue unabated and we have ongoing competition with other local businesses for staff at all levels. This will undoubtedly add to the cost base in the coming months as we continue to scale up the operation.
The group does not actively use financial instruments as part of its financial risk management. The group is exposed to the usual credit and cash flow risks associated with selling on credit and manages this through credit control procedures. The group finances working capital through retained earnings and its exposure to price risk is therefore minimal.
The fit out of the new facility is likely to come onstream in Q2 2024 and will add significant capacity in our core markets. We are confident in our ability to fill this capacity with our client base and we remain confident that this site will be a significant catalyst for the next phase of growth at Cherrytree Bakery.
Multiple export contracts have been negotiated which will further increase turnover from Q1 2024 and facilitate the need to bring on stream the new facility.
A branded presence will form part of the next phase of growth, and we have formed a close working relationship with one of the UKS largest confectionary brands. Additionally, we continue the roll out of our Cherrytree brand into the UK foodservice marketplace.
New production capabilities will be enabled in the new facility, and we have already agreed contracts to this end.
Our core objective is to be a great place to work making great products for great customers. This objective is always at the forefront of our thinking and will be integral into the next phase of growth, with CSR in mind.
On behalf of the board
The director presents his annual report and financial statements for the period ended 31 July 2023.
The results for the period are set out on page 7.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the period and up to the date of signature of the financial statements was as follows:
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Fina Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 July 2023 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 and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the 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 period 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In identifying and assessing risks of material misstatements in respect of irregularities (including fraud) we considered the following:
The nature of the industry, the company’s control environment, the significant laws and regulations relevant to the company, and the company’s policies on detection of fraud;
Results of our enquiries of management, those charged with governance, and of staff in compliance roles;
Our review of disclosures included in the financial statements; and
Engagement team discussions in respect of any potential indicators of non-compliance or fraud.
We have also performed specific procedures to consider the risk of management override and of fraud arising in significant transactions outside the normal course of business.
We did not identify a material risk of non-compliance with laws and regulations or of fraud.
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.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
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 £4,999.
Fina Holdings Limited (“the company”) is a private limited company limited by shares incorporated in England and Wales. The registered office is Belshaw Court, Billington Road, Burnley, Lancashire, BB11 5UB.
The group consists of Fina Holdings Limited and all of its subsidiaries.
The group has extended its current accounting reference period so that it is coterminous with the accounting reference period of Cherrytree Bakery Limited, the trading subsidiary.
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. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Fina Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 July 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.
On 4 August 2022 the company acquired the entire issued share capital of Cherrytree Bakery Limited for a consideration of the issue of its own 200 'A' ordinary shares of 0.5p each.
The 'acquisition' of Cherrytree Bakery Limited has been accounted for as a merger in the consolidation. The director is of the opinion that the introduction of a new parent company, Fina Holdings Limited, does not alter the relative rights of the individual shareholder.
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.
The group finances its business operations through trading profits and the ongoing support of its bankers and a connected company.
The director is not aware of any reasons why the bank loan facilities and connected company borrowings will not be maintained at their current levels.
The director is satisfied that in preparing the financial statements he has taken into account all the information that could reasonably be expected to be available.
On this basis he considers that it is appropriate to prepare the financial statements on the going concern basis.
Turnover represents amounts receivable for goods and services net of VAT and trade discounts.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The 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.
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.
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.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
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.
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.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The actual charge for the period can be reconciled to the expected charge/(credit) for the period based on the profit or loss and the standard rate of tax as follows:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
On 4 August 2022 the company acquired the issued share capital of Cherrytree Bakery Holdings Limited by way of a share for share exchange. On the same date the company acquired the issued share capital of Cherrytree Bakery Limited by way of a dividend in specie of £1 from Cherrytree Bakery Holdings Limited.
Following the completion of the above transactions, Fina Holdings Limited entered into a demerger agreement with Fina Developments Limited, a company under common control. On 4 August 2022 300 'B' 0.5p ordinary shares in issue in this company were cancelled and repaid to the individual shareholder. The consideration for the repayment was satisfied by the issue of 299 0.5p ordinary shares in Fina Developments Limited, to G J Entwistle and the transfer of shares held in Cherrytree Bakery Holdings Limited to Fina Developments Limited.
Details of the company's subsidiaries at 31 July 2023 are as follows:
Other creditors consist of a loan of £1,322,794 owed to a connected company, Cherrytree Bakery Holdings Limited.
The above loan is unsecured and interest-free.
The group's bank loan is secured by the Bounce Back Loan Scheme managed by the British Business Bank.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is three years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Obligations under finance leases are secured upon the assets for which they are held.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within five years and relates to accelerated capital allowances which are expected to mature in the same period.
The deferred tax asset set out above is expected to reverse in the following year and relates to the utilisation of unrelieved pension contributions against the future expected profits of the same period,
Deferred income is included in the financial statements as follows:
During the period a grant was received to assist with the acquisition of new items of plant and equipment.
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.
During the period the group granted options to certain employees and directors of Cherrytree Bakery Limited, under the EMI option scheme, to acquire up to 10 'B' Ordinary shares of 0.5p each in this company for an exercise price of £3,123 per share.
The options can be exercised on an Exit, disposal of the assets or shares in the company or a listing.
The 'B' Ordinary shares are non-voting and have no entitlement to dividends.
The assessed fair value of the options granted in the period to 31 July 2023 is £nil.
The company was incorporated on 16 June 2022 with one 1p ordinary subscriber share.
On 4 August 2022 the company issued a further 249 ordinary shares of 1p each for the acquisition of the issued share capital of Cherrytree Bakery Holdings Limited. The ordinary shares of 1p each were subsequently redesignated on the same date as 200 'A' ordinary shares of 0.5p each and 300 'B' ordinary shares of 0.5p each.
Following the above redesignation, the 300 'B' ordinary shares of 0.5p in issue were cancelled in full on 4 August 2022.
On 31 January 2023 24 'A' ordinary shares were redesignated as 10 'B' ordinary shares of 0.5p each and 14 'C' ordinary shares of 0.5p each.
The 'B' ordinary shares are non-voting and have no entitlement to dividends.
On 4 August 2022 Fina Holdings Limited acquired the entire issued share capital of Cherrytree Bakery Holdings Limited and Cherrytree Bakery Limited. On the same date the investment in Cherrytree Bakery Holdings Limited was disposed of in full to Fina Developments Limited, a connected company. See additional details re Note 11.
The acquisition of Cherrytree Bakery Limited has been accounted for as a merger in the consolidation. The above goodwill has been recognised as retained profit and loss account reserves in the balance sheet.
The group has given a guarantee, supported by a debenture over its assets, in respect of the bank borrowings of Cherrytree Bakery Holdings Limited. At 31 July 2023 this company had an amount of £681,985 outstanding.
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:
Amounts contracted for but not provided in the financial statements:
The remuneration of key management personnel, who are also directors of Cherrytree Bakery Limited, is as
follows.
Certain directors of Cherrytree Bakery Limited are considered to be key management personnel by virtue of their authority and responsibility for planning, directing and controlling the activities of the group.
During the period the group entered into the following transactions with related parties:
See details re Note 15 for details of the loan advanced from a connected company.
The following amounts were outstanding at the reporting end date: