The director presents the strategic report for the year ended 31 July 2023.
The results for the year and financial position of the group are shown in the attached financial statements.
As shown in the group's profit and loss account, the group's turnover has decreased by 18% to £36,450,509 (2022 - £44,517,431).
Turnover has been impacted by inflation and a market slowdown, the group continues to be focused on profitability.
Financial risks are considered low because of strong profitability, a cash generative base and because the group is able to insure against material financial risks.
Liquidity risk is mitigated due to the group's strong cash flow and a good earnings visibility ensures that its margins are sufficient to exceed operating costs. The group does not have any external bank borrowings or other external financing.
The group is reliant on its main suppliers to supply the business with products at a competitive price. As the group operates in a competitive market, it is also at risk from competitors reducing their selling prices. The group mitigates this risk by continuing to strengthen relationships with key suppliers and thus to maintain a good supply of products.
Direct sales from manufacturer to customer have increased which represents an ongoing threat to business as an appliance wholesaler. With the world's reliance on electronic communication and the associated constant threat of a cyber-attack, the group continues to invest in improving systems and processors to mitigate against this threat.
The group's main key performance indicator is retaining the level of gross margin versus sales price. In the current year, gross margin has remained fairly consistent at 25.2% (2022 - 26.5%).
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 July 2023.
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £4,505,000 (2022 - £6,015,000). The directors do 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:
UHY Hacker Young were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of BAW (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2022 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 a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and the industry in which it operates, we identified that the principal risks of non-compliance with laws and regulations related to the acts by the Company, which were contrary to applicable laws and regulations including fraud, and we considered the extent to which noncompliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to inflated revenue, understatement of the stock adjustment in respect of rebates and overstatement of accrued rebate income.
Audit procedures performed included:
review of the financial statement disclosures to underlying supporting documentation
evaluating whether journals posted gave indications of bias by the Directors, that represented a risk of material misstatement due to fraud
making enquiries of management on whether they had knowledge of any actual, suspected or alleged fraud
recalculation of the year end stock adjustment for rebates receivable
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud
gaining an understanding of the internal controls in place through performing walkthrough procedures;
comparing the prior year's estimated accrued income in respect of rebates with actuals for indications of management bias
There are inherent limitations in the audit procedures described above and the further removed noncompliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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 profit for the year was £0 (2022 - £0 profit).
BAW (Holdings) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Units 1 & 2, Bunny Trading Estate, Gotham Lane, Bunny, Nottingham, NG11 6QJ.
The group consists of BAW (Holdings) 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. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company BAW (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.
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.
At the time of approving the financial statements, the director has a reasonable expectation that the company 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 to the extent that it is probable that the economic benefits will flow to the group and the turnover can be reliably measured. Turnover is measured at fair value of the consideration received or receivable excluding discounts, rebates, VAT and other sales taxes.
Sales of goods
Turnover from the sale of goods is recognised when all of the following conditions are satisfied:
the group has transferred the significant risks and rewards of ownership to the buyer;
the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of turnover can be measured reliably;
it is probable that the group will receive the consideration due under the transaction; 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.
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 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).
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. Financial assets classified as receivable within one year are not amortised.
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, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price. Financial liabilities classified as payable within one year are not amortised.
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. Trade creditors are recognised initially at transaction price.
Share capital issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on share capital 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 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:
Carrying value of stocks
The directors review the finished goods costs on a quarterly basis. The stock is then revalued to ensure it is recorded in the financial statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of stocks. The directors use their knowledge of market conditions, historical experiences and estimates of future events to assess future demand for the group's products and achievable selling prices.
Provisions
A provision is recognised when the company present legal or constructive obligation as a result of past events for which it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably measured.
Whether a present obligation is probable or not requires judgment. The nature and type of risks for these provisions differ and the directors' judgment is applied regarding the nature and extent of obligations in deciding if an outflow of resources is probable or not. External advice is sought where appropriate.
Rebates receivable
The group enters various rebate agreements with suppliers. Supplier rebate income affects the recorded value of cost of sales, trade creditors and stock. The amounts receivable under rebate agreements are often subject to negotiation after the balance sheet date. A number of agreements are non-coterminous with the group's financial year, requiring judgment over the level of future purchases. At the balance sheet date, the directors make judgments on the amount of rebate that will become due to the group under these agreements based upon prices, volumes and product mix.
The whole of turnover is attributable to the group's principal activity.
All turnover arose within the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The remuneration of key management personnel is as follows.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 July 2023 are as follows:
Bunny Appliance Warehouse Ltd shares the same registered office as shown on the company information page.
The rights attaching to the preference shares are as follows:
These shares are redeemable on the option of the holders. Shares can be redeemed at any time providing notice of not less than 25 business days is given in writing.
Dividends are subject to the board recommending payment of any available profits which the company may determine to distribute in respect of any financial year.
On a return of assets on liquidation or otherwise the assets of the company remaining after the payment of its liabilities shall be applied first to repaying the holders of the redeemable preference shares an amount equal to the nominal value of the shares and a sum equal to any arrears of accrued dividends. If there is a short fall of assets remaining to satisfy such payments in full, the proceeds shall be distributed to the holders on a pro-rata basis, therefore the balance (if any) shall be distributed amongst the ordinary shareholders.
The redeemable preference shares shall not confer on the holders thereof any right to received notice of or to be present or to vote either in person or by proxy at a general meeting of the company.
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. Within other creditors, there is a defined pension scheme contribution due of £8,527 (2022 - £7,741).
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 company had no commitments under the non-cancellable operating leases as at the balance sheet date.
At the year end £33,018 (2022: £8,254) is included within other debtors and relates to costs paid by the company on behalf of the pension scheme, of which the directors of the company are trustees and beneficiaries. No interest is payable on this amount.
Pension expenses totalling £99,162 (2022: £97,226) were paid to directors in respect of the above pension scheme. This balance was repaid in full by the pension scheme.
At the year end £1,777 (2022: £nil) was owed to a company under common control. Rental costs paid to this company totalled £207,777 (2022: £174,013). Electricity recharges and service charge expenses of £44,821 (2022: £42,970) were also paid to this connected company in the year.
Payroll expenses totalling £80,560 (2022: £28,000) were paid to close family members of directors during the year.
Dividends of £4,500,000 (2022: £6,000,000) were paid to Bucks Investments Limited during the year.