The director presents the strategic report for the year ended 30 September 2023.
Principal activity
The principal activity of the company was the holding of investments in a trading Group.
The principal activities of the Group continued to be that of free range and organic poultry farming for the production of eggs, along with the packing, marketing and sale of eggs and egg related products.
The Group works closely with producers to collect, grade and package free range and organic eggs. We deliver daily from hen houses right across the country to many of the UK's leading supermarkets and to the most exclusive restaurants, as well as first class egg products to some of the biggest names in food manufacturing.
Every discerning consumer who purchases our eggs has peace of mind in knowing they are produced in the UK to the rigorous BEIC "British Lion" quality standard. By working in collaboration with our producers, wholesalers and top retailers, we can rapidly identify and satisfy the ever-changing demands of those consumers.
The Group experienced turnover growth of 23% in the period to £195.6m (2022: £158.8m). Operating profit was £4.8m (2022: £1.0m), profitability improved as commodity inflation pressures eased combined with lower availability of eggs in the UK. The director considers the Group to be in a strong financial position given net assets of £12.3m as of 30 September 2023 (2022: £9.5m).
The Group will continue to strengthen the business through the development and evolution of high-quality core products focused on our customers' needs. Investment will continue in equipment and technology at the primary packing site.
During the year, the Group has continued to invest in its grading capabilities. The Group has also continued to invest in its new egg processing facility to provide customers and consumers with a wider range of products to meet their requirements.
The Group continues to support and invest in its supply chain focusing on providing a competitive, sustainable model for the long term. Within the competitive marketplace in which we operate, we face the constant challenge of being both adaptive and reactive to market price changes such as feed prices.
Throughout the year, the Group has continued to invest in staff at all levels, which we believe to be important, not least for the productivity gains that result.
We have a long and strong relationship with our customers, working together to ensure the end consumer demands, both now and in the future, can be met and often exceeded. We continue to monitor market trends across egg types and sizes to ensure we have the right mix to meet customer demand.
Raw Material Risk
The volatility of commodity prices, particularly wheat, is a constant challenge for the Group. In addition to reviewing the market trends we work with both our suppliers and customers to minimise the impact to any one party.
Supply Risk
The risk to supply of egg has continued in the year with the impact of the Russia-Ukraine war on costs, and the increasing impact of Avian Influenza on the UK laying flock. Producers have felt cost increases in all aspects of their business, encompassing feed, energy, labour, transportation and in respect of new investment cost of materials and cost to raise finance. These have all compounded to impact the willingness of producers to invest in new infrastructure to house new free range or organic flocks, and with the impending move away from caged egg by retailers this is putting pressure on the supply of egg.
The Group works closely with its producer base and is proactive in passing through price increases in partnership with our strategic retailers to ensure our supply base has a viable business to continue as long-term partners to us and our retailers.
The Group holds our own farms and those of our producers to the highest standards of biosecurity to mitigate the risk of Avian Influenza. The Group has insurance in place specifically against the risk of our own farms being directly impacted by Avian Influenza.
Health & Safety Risk
Employee safety remains paramount in our day-to-day activities. The Group ensures that regular, thorough reviews of the workplace are carried out with any relevant actions taken to provide a safe working environment for all our employees. In addition to our own reviews the Group engages with third parties to provide an independent review.
Cash flow Risk
The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and as such, no hedge accounting is applied.
Given the size of the Group, the director has not delegated the responsibility of monitoring financial risk management to a sub-committee of the Senior management team. The policies set by the Senior management team are implemented by the Group's finance department.
The director will revisit the appropriateness of this policy should the Group's operations change in size or nature.
Credit Risk
The Group's principal financial assets are bank balances and cash, trade and other receivables, and investments.
The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
Trade debtors are managed in respect of credit and cash flow by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
Liquidity Risk
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of longer-term asset finance and short-term debt finance.
Market Risk
The Group recognises the risk of competition in a highly active market. Through investment in our products, genetics, facilities, and people we aim to meet or exceed the demands of our customers and the consumer. Being a 100% free range and organic operation, and so having long removed ourselves from caged and barn egg production, the business is less at risk from consumer and retail pressure against intensive egg production associated with lower welfare standards.
Given the straightforward nature of the Group's operations, the director is of the opinion that analysis using KPIs other than the financial results, is not necessary for an understanding of the development, performance or position of the business.
The key focus of the business continues to be health, safety, quality, and the environment.
Our policies aim to provide and support a culture where health, safety, quality, and the environment are consistently on our agenda. This has been achieved by ensuring that our team receive adequate training and feel empowered to raise any concerns that they may have.
From the Food Quality Management System perspective, we are accredited against the British Retail Consortium (Global Food Safety Initiative) rather than following ISO9001. Our current BRC grade is AA+ for shell egg and AA+ for the convenience foods sites. The scope of these accreditations is as follows:
Shell Egg
Grading and packing, of hen, goose, ostrich, pheasant, quail, duck, emu, turkey, rhea, and guinea fowl eggs. Packing into pulp or plastic cartons. Separation of shell from eggs and harvesting the liquid for filtering and chilling <4% for further processing.
Convenience Foods
The cooking (boiling) cooling, shelling of hen and quail’s eggs, the blending of sandwich fillings, assembly of hen and quail eggs with and without value-added components or brine into MAP, Non-MAP, bulk buckets and bags. The poaching, pasteurisation of egg products packed into plastic film lidded trays. The breaking, pasteurisation of liquid egg with and without additions pre and post pasteurisation, packed into bags, retail cartons and pouches. The filling of Raw egg whites into bags.
Both Sites are also accredited against the BEIC (British Egg Industry Council) Lion Code, RSPCA (Royal Society for The Prevention of Cruelty to Animals) and Organic Food Standards with both Organic Farmers and Growers and Soil Association.
Stonegate Farmers are also member of Campden BRI Food Research Organisation and the Chilled Foods Association.
This statement by the director describes how the responsibilities under s172 (1) (a) to (f) of the Companies Act 2006 have been approached.
The director:
considers having acted in good faith to promote the success of the Group on behalf of the employees, clients and suppliers of the business in relation to matters set out in s172.
monitors and reviews strategic objectives against growth plans, and regular reviews at departmental and senior management team level are held across the business in the key areas being H&S, Financial performance, Operations, Human Resources and Risks and Opportunities.
considers H&S fundamental to the management of the business. Safe working practices that minimise environmental impact are key to the success of the business and vitally important for our stakeholders, the communities, and the environments we work in.
recognises and understands that it is important to keep employees informed of all matters concerning them and does this in several ways including site notices, meetings, verbal and written communications. The views and interests of employees are considered in consultation with them through working groups or forums, which evolve over time to meet the needs of all parties. The policy of the Group is to consult and discuss with employees any issues that arise in accordance with relevant procedures or legislation.
The fundamental principle in the governance of the Group is the clear, fair, and trusting approach to all interactions with employees, clients, and suppliers; this is reflected in the length of service of employees and management teams and the longevity of the relationships with our clients and suppliers.
The Group's employees, clients and suppliers are critical to the success of the business and so it is recognised that engagement is an important aspect in those relationships.
The Group has an equal opportunities policy and is committed to the principles within the policy in respect of all stakeholders.
The Group has built, and continues to grow, the business on a reputation for delivering excellent customer service. The Group, through the senior management team and employees, strives continuously to improve in every aspect of the products and services it provides, for the mutual benefit of all stakeholders.
The director, supported by the senior management team, has overall responsibility for delivering the Group's strategy and values and for ensuring high standards of governance. The primary aim of the director is to promote the long-term sustainable success of the Group to generate benefit for the stakeholders.
On behalf of the board
The director presents his annual report and financial statements for the year ended 30 September 2023.
The results for the year are set out on page 15.
Ordinary dividends were paid amounting to £152,400. 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:
The director recognises that the future success of the business is highly dependent upon the loyalty, skills and motivation of group's employees and, therefore, encourages the supply of information on the progress of their business unit and the group as a whole. Employee participation in improving the efficiency of the business is actively sought at all levels through regular meetings. The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The Group will continue to strengthen the business through the development and evolution of high-quality core products focussed on our customers' needs. Investment will continue in equipment and technology at the primary packing site and a new egg processing facility.
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Utilities - invoices from electricity and gas suppliers were provided, with energy consumption expressed in kilowatt hours. Emissions were calculated using a representative average mix.
Use of fuel for transport - fuel consumption by Group owned and long-term hire vehicles is recorded by fuel cards and bunker drawings and is expressed in litres. One litre of diesel corresponds to 2.68kg of CO2. Short term hire vehicles are excluded.
Emissions from business travel in company cars and employee-owned vehicles – car mileage is recorded in employee expense claims. Petrol cars are assumed to average 36mpg, diesel, 43mpg and hybrid 59mpg. One litre of diesel corresponds to 2.68kg of CO2 and one litre of petrol corresponds to 2.31kgs of CO2.
The group also uses the following intensity measurement:
kWH per 100,000 eggs sold – 2,779 (2022: 2,552)
General
Whilst the figures disclosed above show increased energy consumption compared to the prior year, this reflects increased activity by the Group overall, and also the growth of processed egg operations. The Group has attempted to control such increases and minimise energy consumption as outlined below.
In 2016 the Group invested in renewable energy with the introduction of solar capture at its main site in Lacock and on one of our own farm sites. In 2021 Solar panels have also been installed at a further three of our own farm sites. This process continued in 2023 with further solar capture at its main site in Lacock in 2023.
Where electricity is required from external sources the Group buys 100% zero carbon electricity from
renewable generation.
Power saving remains a key part of our environmental strategy, from employee awareness and engagement to the type of equipment we purchase.
We monitor usage across all sites to allow us to better understand when and how power is being consumed.
Where we are purchasing new or replacement equipment, we focus on energy efficiency and sustainability.
Voltage optimisation helps protect equipment by reducing heat and vibration and allows demand to be better managed.
Transport Fuels
The Group continue to operate a fleet of Volvo Tractor and Rigid motive units, the Rigid fleet was replaced in 2023 and replacement tractor units are due for delivery in early 2024. The Volvo tractor and Rigid units were selected primarily for their good fuel economy and monitoring technology.
To further minimise fuel consumption the Group regularly reviews vehicle routing and utilisation, using forward forecasts of eggs available for collection from farms to optimise load fill. The Group actively reviews load fill and seeks to obtain back haul work to improve efficiency. Drivers are regularly monitored and assessed for their driving style to aid fuel economy and to reduce wear & tear on vehicles. The Group employ a driver trainer to facilitate continued driving style improvement.
The Group continues to operate a fleet of 12 Mercedes sprinter vans for customer deliveries in London and the surrounding areas. The group is reviewing this operation with third party distributors in order to reduce the environmental impact of these deliveries.
Staff and visitors to the Lacock site can take advantage of charging facilities for electric cars, HGV trailers and the current van fleet can also run box fridges on electric plug points.
Longer term, the Group are in collaboration with Volvo Head office to identify a gas or alternative fuel vehicle that can operate effectively for Stonegate operation. The vison is to operate a fleet of gas or alternative fuel vehicle by 2028.
Waste
The principal objective for waste management is to minimise the production of waste. However, where waste is created the Group ensures waste products are fully recycled where possible. The Group uses wastewater capture for vehicle washing.
Raw material waste is minimised through the efficient capture and processing of damaged items. Where damaged product cannot be used for human consumption, it is collected and sold for animal consumption or energy production.
In 2023 the Group started construction of on-site waste water treatment facilities at the disposal of the Group which when completed in 2024 will allow all the Group’s waste water to be treated on site and safely discharged to the water course in compliance with Environment Agency regulations. This will have the added benefit of removing the need for third party companies to come on site and remove waste water in tankers, thus reducing the number of miles on the road associated with the discharge of waste water by the business.
Farming
Stonegate’s farming estates comprise Group-owned and independent privately owned facilities; farms of different size and layout, some built recently, others as much as 25 years old. All our farms operate to the same high consumer expectation, which is to say that every animal under our umbrella, directly or indirectly, is expected to lead a good life, cared for by empathetic and responsible farmers.
The RSPCA Assured and Lion Code provide the backbone of farm assurance, covering aspects of bird welfare, traceability, food hygiene and good agricultural practice. Independent auditors assigned by these certifying bodies inspect farms each year, and issue conformity documents to allow farms to participate in our marketplace. 100% of Stonegate’s production is accredited to both RSPCA Assured and Lion Code of Practice. Every hen has access to a defined outdoor area every day, and the RSPCA’s five freedoms of good animal welfare are strictly observed: freedom from hunger and thirst, discomfort, pain or disease, fear and distress and free to express natural behaviour.
Stonegate have long served some of the nation’s most trusted and revered food retailers and, as such, go well beyond the industry-wide thresholds for farming standards. In addition to the annual inspections, Stonegate’s own team of qualified and experienced field staff support every farm in maintaining the highest standards, conducting physical inspections at least every quarter and provide technical advice to ensure welfare, food standards, environmental compliance and performance are maintained. We measure a huge amount of data from every farm and use performance benchmarking, via trade-specific software, to drive continuous improvement and competition, sharing best practice via social media and face to face engagement.
We have continued to conduct detailed carbon foot printing on our farms, identifying the range of emissions from the greatest contributing aspect of our total operations; egg production, defined within our Scope 3 emissions. This work has afforded us insight into the drivers of emissions in our whole supply chain and has informed the development, launch and continued growth of our Respectful brand of eggs.
Under the Respectful specification, imported soy is replaced with homegrown sources of protein, and in conjunction with other features of our supply farms, has delivered 50% reductions in CO2e/kg. According to the certifying body, Climate Partner GmbH, the production of eggs to the farm gate represents three quarters of all emissions in the product lifecycle, so a 50% reduction is significant. Respectful Eggs are the UK’s first carbon neutral eggs, with the remaining balance of emissions offset through high standard carbon credits, supporting several projects to protect the Amazon rainforest in Brazil.
Elsewhere, we have commissioned studies into animal behaviour and nutrition via both academia and trade. We’re sponsoring a PhD study at the renowned poultry behaviour faculty in Bristol University, and as part of our ongoing response to the environmental concerns reported in the Wye & Usk catchment area, we’re researching how phosphorus in manure can be reduced through changes in dietary protein with a leading feed manufacturer, with strong recommendations emerging.
We have audited the financial statements of Stonegate Food Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the 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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations;
Enquires with management about any known or suspected instances of fraud;
Review of minutes of meetings of management;
Examination of journal entries and other adjustments to test for appropriateness and identify any instances of management override of controls;
Review of legal and professional expenditure to identify any evidence of ongoing litigation or enquiries;
Auditing the risk of fraud in revenue, including through the testing of income cut off at the period end and through sales transaction testing to provide comfort that revenue is completely stated in the financial statements.
We identified the following areas as those most likely to have a material impact on the financial statements: employment law, health and safety legislation, food hygiene and safety regulations, and compliance with the UK Companies Act.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognize the non-compliance.
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.
The statement of comprehensive income 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 profit for the year was £152,400 (2022 - £152,400 profit).
Stonegate Food Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Lacock Green, Corsham Road, Lacock, Chippenham, SN15 2LZ.
The group consists of Stonegate Food Group Limited 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 investment properties at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
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’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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.
The consolidated financial statements incorporate those of Stonegate Food Group 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 30 September 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.
Inflationary pressures from the impact of political instability and regional conflicts had a significant impact on many businesses in 2022-23 with food producers no less severely impacted than other sectors. The director believes that the group is well placed to minimise any impact.
Management are continuously assessing the impact of inflationary pressures on customers and the supply chain with regular contact taking place throughout the supply chain to minimise any disruption. Where forward positions have been taken the group is protected from that cover in the short to medium term. Costs that are exposed to the current market volatility are being managed pro-actively through sympathetic engagement with our strategic suppliers and customers. The group remains confident of its ability to appropriately manage the short to medium term volatility being generated by these risks. Actions have also been taken in the past to enable the business to establish a strong financial platform, and this together with the current balance sheet strength positions the group well. Cash flow projections have been prepared for the group to cover at least twelve months following the approval of the financial statements, which indicate that the group will generate sufficient resources to meet their obligations as they fall due.
After considering the impact of the above, at the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues 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 the sale of eggs and related produce provided in the normal course of business, and is shown net of VAT. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
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 are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
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.
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 other borrowings 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.
All of the group's liabilities are basic financial instruments.
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. 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 the profit or loss account 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 the profit or loss account 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.
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.
The director has reviewed the categorisation of expenditure, and has decided to reclassify certain amounts to better reflect the activities of the group. The comparative figures have been restated to reflect this reclassification of costs, resulting in an increase in cost of sales of £9,243,056, a reduction in distribution costs of £2,537,127, and a reduction in administrative expenses of £6,705,929. There is no other effect on the figures previously reported.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
At each balance sheet date, management undertake an assessment of the recoverability of trade debtors based upon their knowledge of the customers, ageing of the balances outstanding and previous write off history. Where necessary, an impairment is recorded as a doubtful debt.
The actual level of debt collected may differ from the estimated level of recovery.
At each balance sheet date, management undertake an assessment of the carrying value of the tangible fixed assets to determine whether there is any indication that the value has been impaired. Where necessary, an impairment is recorded as an impairment loss.
At each balance sheet date after initial recognition, the parent shall, in the consolidated financial statements, measure both positive and negative goodwill acquired in a business combination at cost less accumulated amortisation and accumulated impairment losses.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
At each balance sheet date, management undertake an assessment of the costs which have not yet been invoiced based upon their contractual arrangements and include appropriate provisions for these costs.
The group has an obligation to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend upon a number of factors, including; Life expectancy, salary increases, asset valuations and inflation.
The director estimates these factors in determining the pension obligation at the balance sheet date. The assumptions reflect historic experience and current trends. Refer to the notes to the financial statements for disclosures relating to the defined benefit pension schemes.
In order to assist in adhering to the criteria of FRS102, section 28 'Employee benefits', the director uses the services of an independent external Actuary, who possess all relevant professional qualifications to deliver the calculations of the defined benefit schemes' balance as at the reporting date.
The director believes that this approach minimises any estimation uncertainty to an acceptable level.
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 addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Factors affecting future tax and charges
In March 2021 the Chancellor confirmed, in the budget, an increase in the corporation tax rate from 19% to 25%. The Finance Bill 2021 had its third reading on 24 May 2021 and became substantively enacted. There were announcements to the contrary in the mini-budget of October 2022, but these announcements have since been reversed and so the new rate of 25% remains substantively enacted. Therefore, the timing differences expected to reverse on or after 1 April 2023 have been accounted for at 25% and therefore deferred tax has been provided for at 25% (2022: 25%).
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
The fair value of the investment property has been arrived at on the basis of a valuation carried out at 30 September 2016 by Savills (UK) Limited Chartered Surveyors, who are not connected with the company. The valuation was made on a fair value basis.
At the year end, the director has reviewed the valuation, and believes that the valuation of the property in the accounts is a fair reflection of its current worth.
Details of the company's subsidiaries at 30 September 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The group meets its day-to-day working capital requirements through an invoice discounting facility (shown as other loans above), which is secured by a debenture over the assets of certain group companies. The invoice discounting facility is repayable on demand.
Finance lease payments represent rentals payable by group for certain items of plant and machinery held under hire purchase. 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 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The creditor is secured on the assets to which it relates.
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:
As at the signing date of these financial statements, the group has not finalised its capital expenditure programme for the forthcoming year, and therefore an assessment as to the likely movement of other related timing differences cannot be made.
Two of the companies in the group operate a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Further analysis for each scheme is provided below.
The company had no defined contribution scheme in the year ended 30 September 2023.
Stonegate Farmers Limited operates pension arrangements providing benefits based on final pensionable salary for its employees. There are two partly funded defined benefit schemes for which Stonegate Farmers Limited is responsible: the Stonegate Farmers Limited Scheme and the Thames Valley Eggs Limited Scheme. The assets in each of the schemes are held separately from those of the companies, being invested by professional investment managers.
The group has not recognised a pension scheme asset at the balance sheet date as it cannot demonstrate that it would likely benefit from either qualifying criteria as stated in FRS102 section 28.22, namely that it cannot recover the surplus either through reduced future contributions or through refunds from the defined pension plan. As a consequence a restriction on the scheme surplus of £410,000 has been recognised for the Stonegate Farmers Limited Scheme, and a restriction on the scheme surplus of £833,000 has been recognised for the Thames Valley Eggs Limited Scheme, such that each scheme surplus is recognised at a balance of £Nil within the balance sheet at 30 September 2023.
The total net pension liability at the year end is £nil (2022: £nil). This comprises a net liability of £nil (2022: £nil) for the Stonegate Farmers Limited Scheme and a net liability of £nil (2022: £nil) for the Thames Valley Eggs Limited Scheme. Further analysis for each scheme is provided below.
The Stonegate Farmers Limited Scheme was paid up with no further accrual of future benefits with effect from 30 September 2001.
An actuarial valuation of Stonegate Farmers Limited Scheme as at 1 October 2019 showed a funding shortfall of £472,000. To eliminate the shortfall the Trustees and the Employer agreed:
Annual contributions of £222,000 per annum from 1 October 2019 to 30 September 2020;
Annual contributions of £55,000 per annum from 1 October 2020 to 31 March 2024.
The last actuarial valuation of the Stonegate Farmers Limited Scheme was as at 1 October 2022. The report has been updated to take accounts of the requirements of FRS 102 in order to assess the scheme deficit at 30 September 2023.
The Thames Valley Eggs Limited Scheme was paid up with no further accrual of future benefits with effect from 1 October 2008.
An actuarial valuation of the Thames Valley Eggs Limited Scheme as at 1 October 2019 showed a funding shortfall of £1.008 million. To eliminate the shortfall the Trustees and the Employer agreed:
Annual contributions of £225,000 per annum from 1 October 2019 to 30 September 2020;
Annual contributions of £162,000 per annum from 1 October 2020 to 31 March 2025.
The last actuarial valuation of the Thames Valley Eggs Limited Scheme was as at 1 October 2022. The report has been updated to take accounts of the requirements of FRS 102 in order to assess the scheme deficit at 30 September 2023.
Assumed life expectations on retirement at age 65:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
Assumed life expectations on retirement at age 65:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
The amounts included in the balance sheet arising from obligations in respect of defined benefit plans are as follows:
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans which are wholly or partly funded.
Movements in the fair value of plan assets
Fair value of plan assets at the reporting period end
The pension plan assets do not include ordinary shares issued by the sponsoring employer nor do they include property occupied by the sponsoring employer.
The group is party to a cross guarantee in favour of HSBC UK Bank plc. As part of the cross composite guarantee between the companies under common control, a mortgage debenture exists which provides HSBC UK Bank plc with charges over all company assets, as security against its exposure to debt. The total liability under this guarantee across these companies at 2 October 2021 was £8,151,926. On 12 October 2021 the total liability under this guarantee across these companies was limited to £1,400,000.
The company is party to a cross guarantee in favour of HSBC UK Bank plc. As part of the cross composite guarantee between the group companies, an unlimited multilateral guarantee exists which provides HSBC UK Bank plc with charges over all company assets, as security against its exposure to debt. The total liability under this guarantee across these companies is £6,241,320 (2022: £11,743,300).
The company is party to a cross guarantee in favour of HSBC Equipment Finance (UK) Limited in relation to the financing arrangements for various assets in group companies. The total liability under this guarantee across these companies is £5,758,656 (2022: £5,037,757).
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 group has taken the exemption from disclosing key management personnel remuneration as the key management personnel is considered to be the director.
Included within other operating income is £100,000 (2022: £299,719) of management charges raised to a company with a common director.
During the year the group made purchases of £2,428,510 (2022: £2,132,132) from companies with a common director. At the year end a total of £1,273,447 (2022: £1,143,400) was due from companies with a common director, and a total of £nil (2022: £341,404) was due to companies with a common director.
As permitted by FRS 102 Section 33, transactions entered into between two or more members of the group are not disclosed, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
Dividends totalling £152,400 (2022 - £152,400) were paid in the year in respect of shares held by the company's director.
Advances or credits have been granted by the group to its director as follows:
The maximum amount owed to the company during the year was £78,593.
The ultimate controlling party is Mr A D Gott, who owns the entire share capital of the company.