This strategic report provides an overview of LFF Holdings audited consolidated accounts for the fiscal year ending December 31, 2023. The directors are very pleased with the company's performance, marked by significant increases in turnover and pre-tax profits compared to the previous year. Key drivers of this success include advancements in international supply chain capabilities, the development of new markets, a heightened focus on energy security, and initiatives in green energy projects. The directors extend their gratitude to all staff and stakeholders for their invaluable contributions.
The report underscores the company's commitment to ethical trading, rigorous risk management, and achievement of key performance indicators (KPIs). It also details how the directors have fulfilled their responsibilities under the Companies Act 2006 to promote the company's success.
In 2023, LFF Holdings achieved substantial growth with turnover rising from £198,622,266 in 2022 to £245,091,182. Similarly, pre-tax profits increased from £7,324,898 to £10,663,111, demonstrating the company's adeptness in seizing new opportunities and navigating evolving market dynamics.
Key Success Factors
LFF Holdings attributes its success to strategic international supply chain enhancements that bolstered operational efficiency and resilience. Additionally, seizing opportunities in green energy projects, including carbon capture and hydrogen transmission, has aligned the company with growing market demands.
Recognizing the importance of risk management, LFF Holdings has implemented robust measures to mitigate various risks. Regular performance reviews and comprehensive risk assessments guide decision-making to safeguard long-term interests.
Ethical Practices and UN Global Compact
LFF Holdings remains steadfast in ethical trading practices and upholds the principles of the United Nations Global Compact. The company prioritizes human rights, labour standards, environmental sustainability, and anti-corruption efforts. Its adherence to ISO certifications such as ISO 45001 for workplace safety and ISO 14001 for environmental management underscores its commitment to excellence.
Stakeholder Engagement
In fulfilling their duty to promote company success, the directors prioritize stakeholder interests. Employee welfare and career development are pivotal, supported by regular communication and development opportunities. Strong relationships with customers, suppliers, and other stakeholders are integral to sustained success.
LFF Holdings acknowledges its responsibility to minimize environmental impact, maintaining ISO 14001 accreditation. The company actively supports charitable causes aligned with its values and contributes positively to the community.
Business Conduct Standards
The company maintains a reputation for high ethical standards, participating in the UN Global Compact Program and ensuring transparency in business practices. Details can be found on the company's website and the UN Global Compact portal.
The directors uphold their duty to ensure fairness among shareholders, avoiding favouritism and safeguarding equitable treatment and shareholder interests.
LFF Holdings has achieved significant growth in 2023, underpinned by strategic initiatives in supply chain enhancement, market development, and green energy. The company remains committed to ethical practices, stakeholder engagement, rigorous risk management, and high business conduct standards. With a solid foundation and strategic outlook, LFF Holdings anticipates a profitable 2024. The directors extend their appreciation to the board, staff, and stakeholders for their integral roles in the company's achievements.
This section describes how the directors have had regard to the matters set out in section 172(1)(a) to (f) Companies Act 2006 in exercising their duty to promote the success of the Company for the benefit of its members as a whole and in doing so have regard, amongst other matters, to:
(a) The likely consequences of any decision in the long term:
The Group leadership team sets a 3-year strategy, the details and performance are reviewed monthly to ensure decisions are taken for the long-term benefit.
(b) The interests of the company’s employees:
The Group leadership team recognises that their employees are fundamental to the success of the business and in turn their career development is vital. Significant effort is made through frequent physical and digital meetings to keep the employees informed and engaged. Career development is actively promoted to encourage personal development. The Group ensures a safe working environment as indicated by our ongoing accreditation to ISO4500.
(c) The need to foster the company’s business relationships with suppliers, customers and others:
The Group considers its customers and suppliers as an active extension of LFF. The success of each is interdependent, therefore building relationships is a fundamental part of our business strategy.
(d) The impact of the company’s operations on the community and the environment:
The Group takes its responsibility in the community seriously, as evidenced by the continued accreditation of its Environmental Management Systems to ISO 14001. Donations to charities are encouraged where the company believes in the campaign or cause.
(e) The desirability of the company maintaining a reputation for high standards of business conduct:
The Group considers maintaining the highest standards of ethics and general business conduct as a core value of the business. We continue to subscribe to the UN Global Compact Programme in the areas of human rights, labour, the environment and anti-corruption. Our latest Communication on Progress can be found on the UN Global Compact website and at www.LFFGroup.com
(f) The need to act fairly as between members of the company.
The Directors are mindful of and ensure compliance with their duty to act fairly between shareholders and not to act in any way that would favour or prejudice particular members.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £2,500,000. The directors do not recommend payment of a further dividend.
The Group transacts some of its business in US Dollars and EUROs. Exposure to these foreign currencies is managed using spot or forward trades.
The Group continues to evaluate its accounts receivable for potential collection risks and has made provision for amounts where collection is considered to be doubtful.
Whilst the overall group has consumed more than 40,000 kWh of energy in this reporting period, none of the individual subsidiaries are large as defined by the Companies Act 2006. In preparing this group Director’s Report, we have taken advantage of the option to exclude any energy and carbon information relating to those subsidiaries.
As the parent entity has no trading activity, there is no energy and carbon information to be reported in respect of the parent entity.
The auditor, Silver Levene (UK) Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of LFF Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 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, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' 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 directors 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 directors are 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 directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Discussions were held with, and enquiries made of, management and those charged with governance with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity.
The following laws and regulations were identified as being of significance to the entity:
Laws and regulations considered to have a direct effect on the financial statements include UK Financial reporting Standards, Companies Acts, Tax Legislation, and Distributable Profits Legislation.
Laws and regulations considered to have an indirect effect on the financial statements include; Health and Safety Legislation, General Data Protection Regulation.
Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: inquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; inspection of relevant legal correspondence; review of board minutes; testing the appropriateness of entries in the nominal ledger, including journal entries; reviewing transactions around the end of the reporting period; and the performance of analytical procedures to identify unexpected movements in account balances which may be indicative of fraud.
No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).
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 profit and loss accounts 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 £3,377,369 (2022 - £155,789 profit).
LFF Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Level 5A, Maple House, 149 Tottenham Court Road, London, W1T 7NF.
The group consists of LFF Holdings Limited and all of its subsidiaries.
These consolidated and separate financial statements are prepared on a going concern basis, under the historical convention, as modified by the recognition of certain financial assets and liabilities measured at fair value.
The principal accounting policies applied in the preparation of these consolidated and separate financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group and Company accounting policies. These areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The consolidated financial statements incorporate those of LFF Holdings Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
Where the Group owns less than 50% of the voting powers of an entity but controls the entity by virtue of an agreement with other investors which give it control of the financial and operating policies of the entity it accounts for the entity as subsidiary.
All financial statements are made up to 31 December 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.
Any subsidiary undertakings or associates sold or acquired during the year are included up to, or from, the dates of change of control or change of significant influence respectively.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
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 inspected 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.
Revenue from orders is recognised by reference to the stage of completion of order when the stage of completion of order, costs incurred and costs to complete can be estimated reliably. The stage of completion of order is calculated by comparing order fulfilled as a proportion of total orders. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The company operates a number of defined contribution scheme for the benefit of its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations. Contributions payable are charged to the profit and loss account in the year they are payable. The assets of the plan are held separately from the Group in independent administered funds.
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 directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
Impairment of stock
Stocks are valued at lower of cost and estimated selling price in the ordinary course of business, less estimated costs of selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of changes in customer demand and competitor actions.
Typical practice for the group is to provide for slow moving stock even though they are not perishable and may be sold in the future depending on the project work undertaken and demand for certain specific parts. Hence most prudent course of action is to write-down stock as timing and certainty of future sale is very much unknown.
Impairment of debtors
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtors, the ageing profile of debtors and historical experience.
Useful economic lives of tangible assets
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect the current estimates, based on technological advancement, future investments, economic utilisation, intention usage of the tangible assets and the physical conditions of the assets.
The Group is engaged in supply of pipeline equipment to various industries and in the opinion of the directors, it does not carry on classes of business substantially different from each other, therefore only a geographical analysis of the business is included in the financial statements.
The company agreed to final settlement in relation to all matters arising out of the Notice of Claim to pay the total sum of USD$ 1,300,000.
Other operating income includes Government Grants of £687 (2022: £8,230) received by overseas subsidiaries.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
During the year, the corporation tax rate increased from current 19% to 25%, starting from 1 April 2023 for companies with profits over £250,000. Therefore, the effective tax rate is 23.52%. For the purposes of deferred tax, this has been provided at the standard corporation tax rate of 25%.
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:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Land and buildings with a carrying amount of £8,243,379 owned by subsidiaries were revalued in December 2023 by Lambert Smith Hampton, Glenny LLP and Graham & Sibbald, independent valuers who are not connected with the group. The valuations were made on an open market value and fair value basis by reference to market evidence of transactions prices for similar properties.
Details of the company's subsidiaries at 31 December 2023 are as follows:
* Held by subsidiary undertakings.
The group enters into forward foreign currency contracts to mitigate the exchange rate risk for certain receivables and payables. As at 31 December 2023, the outstanding contracts all mature within 6 months of the year end. The group is committed to buy €8,037,210 (2022: €18,983,000), CNY¥ Nil (2022: CNY¥44,821,000) and US$1,479,803 (2022: US$1,906.000) and pay a fixed sterling amount. The fair value of the buying forward foreign currency contracts is £6,965,258 (2022: £17,195,012), £Nil (2022: £6,497,680) and £1,160,902 (2022: £1,583,188) respectively. The group is also committed to sell €2,250,000 (2022: €575,000) and US$7,098,748 (2022: US$10,745,000) and receive a fixed sterling amount. The fair value of the selling forward foreign currency contracts is £1,949,909 (2022: £509,887) and £5,568,956 ( 2022: £8,925,160) respectively.
Stocks are stated after impairment of £962,321 (2022: £733,366).
Trade debtors are stated after provision for bad debts of £621,963 (2022: £53,478).
Included in other debtors, £83,250 is due from a director. The full amount will be repaid within 9 months of the year end date.
Obligations under finance leases are secured on the assets concerned.
The long-term loans are secured by first legal charge over the freehold property known as Unit 4 Domino Court, Warrington Road, Manor Park, Runcorn, WA7 1SN and Christy Way, Southfields Industrial Estate, Basildon, Essex SS15 6TE.
The bank also holds a debenture incorporating a fixed and floating charge over all the current and future assets of the group.
Details of bank loans are as follow:
Loan at Christy Way
Monthly repayments of capital and interest. The loan carries 2.2% interest charged per annum over the Base Rate.
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 4 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 on the assets concerned.
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:
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses and reversal of timing differences against future expected profits of the same period. The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
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.
All classes of shares rank pari passu in all respects.
Profit and loss reserves represent amounts attributable to controlling interest.
The group has a multilateral guarantee between LFF Holdings Limited, London Fittings and Flanges Limited, Valvenco Limited, LFF Scotland Holdings Limited, LFF(Scotland) Limited, LFF Glamal Holdings Limited, LFF Glamal Limited and LFF Properties Limited supported by debentures.
The company's bankers have provided group facilities of £27,410,000 (2022: £39,410,000) in respect of foreign exchange commitments, letter of credits and guarantees of which £10,869,656 (2022: £25,698,919) have been utilised.
The operating leases represent rentals payable by the group to third parties. The leases are negotiated for an average term of 20 years and rentals are fixed for 5 years with an option to extend when the lease expired at the prevailing market rate.
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 group sold goods to the value of £728,382 (2022: £1,042,131) and purchased goods to the value of £80,567 (2022: £158,025) with subsidiaries of FIAL International Trading Spa, companies in which the close family of A Galperti, who has an interest in the ultimate parent company.