The director presents the strategic report for the year ended 31 October 2023.
Having previously navigated our way through the pandemic, container shipping challenges, as well as unusually high levels of geographical and economic uncertainty, trading proved difficult in 2023 as the world adjusted to the new normal. Nonetheless 2023 was a productive year for Robert Lee Distribution Ltd delivering turnover for the year of £41 million and a loss for the year before taxation of £2,302,050 (The Profit and Loss Account is set out on page 12). Turnover has decreased by 14.8% on the prior year and the gross profit percentage has increased by 1.5% to 23.8%.
The further decrease in turnover and profitability was due to the effect of higher interest rates and its consequent effect on home-related expenditure. The marketplace entered a highly competitive chapter as participants jockeyed for position and market share.
We enter 2024 with confidence in the outlook for our business by virtue of a change in ownership and management that occurred in January 2024, coupled with the existing brand recognition and out ability to continue its successful evolution. We remain mindful of macroeconomic and geopolitical risks, but our renewed focus on our people, processes and systems will facilitate continued resilience.
Restoring demand for our product offering remains the biggest issue.
The Company continues to operate in a mature market, and its performance is directly related to the UK economy generally. The Company seeks to manage the risk of losing customers to key competitors by providing a streamlined set of products to customers, including extended hours of trade and reducing slow-moving items from our inventory which occupies time and resource to manage.
The Company's credit risk is primarily attributable to its trade debtors. Credit risk is managed by running credit checks on new customers and by monitoring payments against contractual agreements. This means credit risk is increasing tied to customers' potential inability to pay.
In respect of interest rate risk, the Company has changed the profile after the year-end by repaying the group overdraft facilities with NatWest (until repayment, still at a daily rate of 2% over the bank's base rate) with an invoice discounting facility with Secure Trust Bank (STB). This has facilitated business growth, and the Company monitors cash flow as part of its day-to-day control procedures.
A number of key performance indicators are used to monitor the business. Management aim to achieve a gross profit margin of 22% which is monitored on a regular basis. Sales are analysed by product and by customer and corrective action is taken should variances to budgets occur. Product mix is recognised as key to achieving the Company's desired profit margin.
The Board regularly reviews the financial requirements of the Company and the risks associated therewith. Company operations are primarily financed from retained earnings, inter-company loans and bank borrowings (including the invoice discounting facility).
Failure to continuously adapt to the increasingly broad, stringent and fast-evolving regulatory framework applicable to the operations of the company could results in significant financial penalties and reputational damage. Key risk and controls performance indicators are managed through a series of operation meeting and reported to the board.
I cannot report on the resilience of the business over the last year without mentioning the extraordinary effort and dedication of colleagues across the business. From warehouse, logistics, through our head offices departments, contact centres to our sourcing department; people have worked tirelessly to support the business in the face of unprecedented challenges.
We are immensely proud to see how everyone within the business has embraced our challenges, opportunities and ambitions. We would like to thank them for this, and for the continued commitment that they have shown over the past few years whilst having to deal with disruption to both their work and personal lives due to the pandemic.
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.
Our stakeholders
The directors consider that the following groups are the Company's key stakeholders. The Board seeks to understand the respective interests of such stakeholder groups so they can be carefully considered in the Board's decisions. We do this through various methods, including direct engagement by Board members; receiving reports and updates from members of management who engage with such groups; and coverage in our Board papers of relevant stakeholder interests with regard to proposed courses of action.
Having regard to the likely consequences of any decision in the long term
The Board remains mindful that its strategic decisions can have long-term implications for the business and its stakeholders, and these implications are carefully assessed. The most prevalent example of this is in the Board's decisions with regard to capital allocation. During the year, in approving the Company's budget the Board balanced:
the need for capital expenditure on additional racking, premises enhancements and upgraded systems to support operational performance; with
a desire to remain resilient to risks, attract and retain long term customers by expanding our product offering from key suppliers.
Having regard to the interests of the Company's employees
The Board takes active steps to ensure that the suggestions, views and interests of the workforce are captured and considered in our decision-making.
Robert Lee Distribution Ltd benefits from having a Chief Executive and other directors who have served with the Company as employees and directors. They all therefore perform a high degree of personal oversight and engagement in the Company’s affairs. This knowledge of the business and active style of engagement means our directors maintain an exceptionally acute insight into the mood, culture and views of the workforce, which they are then able to report on to the wider Board.
Employee engagement
Robert Lee Distribution Ltd has a number of effective workforce engagement mechanisms in place across the Group:
Employees are kept informed of performance and strategy through regular presentations and updates from members of the Board
The Directors attend key business meetings throughout the year, including monthly weekly trading and capex meetings, monthly sales meetings, and presenting financial results to Head Office employees.
Employee engagement surveys are undertaken covering the vast majority of the workforce, and the results are reported to the Board.
The Directors attend meetings with employees, including:
Product Training Days and visits to showrooms and warehouses as a Board as well as individual director visits.
Branch visits which allows effective engagement and open discussion on the key business issues, policies and the working environment in different parts of the business, with actions agreed on issues raised
The Group HR Director attends certain meetings of the Board to brief on employee-related matters, including workforce demographics, engagement activities, the results of employee opinion surveys, staff retention rates, diversity, numbers and nature of whistleblowing, disciplinary and grievance procedures, learning and development activity, pay and reward including gender pay gap and HR initiatives.
The Board considers that, taken together, these arrangements deliver an effective means of ensuring the Board
stays alert to the views of the workforce.
With regard to health, safety and wellbeing, during the year the Board received an update from the Group Health and Safety Manager including on safety performance, safety risk management and mental health wellbeing initiatives.
Suppliers
Throughout the year, the Board was briefed on contract renegotiations and strategy with regard to key suppliers, including the Company’s providers of freight forwarding services. The Board seeks to balance the benefits of maintaining strong partnering relationships with key suppliers alongside the need to obtain value for money and the desired quality and service levels for our customers.
Customers
As a large business, the sentiment of customers can be seen in the Company's underlying sales performance figures, which the Board reviews regularly. The directors provide updates to the Board on their perceptions of consumer sentiment and the market view. The interests of customers are considered in key decisions e.g. relating to product portfolio changes; selection of product lines including third-party brands; selection and monitoring of suppliers to ensure quality and safety standards are met; freight and logistics arrangements to maximise efficiencies from order to delivery.
With the interests of customers in mind, during the year the Board reviewed proposals in respect of new brands available, discontinuing brands; capital expenditure on warehouses; freight forwarding and parcel delivery contracts.
Debt capital/credit facility providers and credit reference agencies
The Finance Director is responsible for managing the relationships with our bank syndicates and credit rating agencies, and for the Company’s cash/debt management and financing activities. The Finance Director provides regular reports to the Board on these activities including the Company's plans to ensure appropriate access to debt capital, monitoring the headroom and maturity schedules of our primary credit facilities.
Having regard to the impact of the Company's operations on the community and the environment
The Board supports the Company's goals and initiatives with regard to reducing adverse impacts on the environment and supporting the communities that it touches. The Board intends to give further consideration in 2023/24 to the Company's approach to climate change and further measures we can take to contribute to the reduction of our impact on the environment.
Corporate governance
The Board recognises the importance of operating a robust corporate governance framework.
Ethical trading and responsible sourcing
The Board exercises strong oversight over the Company’s activities in these areas including reviewing the work of the team, and reports to the Board on such topics as appropriate. During the year, the Board approved the Group's fourth Modern Slavery Transparency Statement, published at http://www.rlee.co.uk.
Political donations
No donations were made for political purposes (2022: £nil).
Having regard to the need to act fairly as between members of the Company
The Company has just one class of share in issue, and so all shareholders benefit from the same rights, as set out in the Company's articles of association and the Companies Act 2006. The Board recognises its legal and regulatory duties, and does not take any decisions or actions, such as selectively disclosing confidential or inside information, which would provide any shareholder with any unfair advantage or position compared to the shareholders as a whole.
Shareholder engagement
During the year, the Chief Executive and Finance Director regularly held one-to-one meetings. The Chairman and Directors also engaged with by way of meetings and calls. There is also regular communication with the Chairman and the shareholders.
During 2023, we have engaged with shareholders on a range of topics, including:
Governance including Board composition
Human rights and ethical trading
The environment, sustainability and responsible sourcing
Company performance against its strategy
The Board receives regular information on shareholder views through a number of different channels:
The Company's shareholders are invited to the quarterly results presentations, at which directors and non
executive directors are present.
All shareholders have an opportunity to ask questions or represent their views formally to the Board at the AGM, or with directors after the meeting.
The interests of shareholders were considered as part of the Board's decisions throughout the year including with regard to dividends.
On behalf of the board
The director presents her annual report and financial statements for the year ended 31 October 2023.
The results for the year are set out on page 12.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
Our people
Our workforce is integral to achieving our business objective. We aim to attract, retain and develop the best talent at every level throughout the organization and believe an engaged workforce is vital to achieving our aims. We strive to create a workforce in which everyone is safe; supported and respected; treating fairly and taken care of; listened to; and motivated to achieve full potential. Our colleagues rely on us to provide stable employment and opportunities to realise their potential in a working environment where they can be at their best. We are committed to achieving excellence in the area of health and safety, well-being and the protection of our workforce in their working environment.
Our Suppliers
It is a key priority of the group to ensure we trade ethically, taking all reasonable and practical steps to ensure we source product that is made by workers who are treated honestly and fairly for the work they undertake and whose safety, human rights and well-being are respected. We work with suppliers to address and resolve issues within our supply chain and to raise standard generally.
The Group recognises that the goodwill of its suppliers is important to its success and seeks to build and maintain this goodwill through fair dealings. The Group agrees terms of payment with suppliers at the start of business and then makes payments in accordance with contractual and other legal obligations. The Group has a prompt payment policy and seeks to settle all agreed liabilities within the agreed trading terms of its suppliers.
Our Customers
Our customers are the reason we exist. The group is committed to offering exciting, excellent quality products that are well made, functional, safe and responsibly sourced and which provide outstanding value to meet or exceed our customer's expectation. The group endeavours to provide high quality service to its customers. Our customer service teams respond to a wide range of customer enquiries and issues. Customer feedback is gathered from a variety of different sources, findings are reviewed, and the information is used by relevant business areas to ascertain how products or services can be improved.
Our clients are the backbone of our business. Our continued growth and strong income performance would not have been possible without giving consideration to our clients' needs. We understand our clients' needs and put great emphasis on client satisfaction in order to drive the growth of our business.
Our Community
Communities and the wider public expect us to act as a responsible company and neighbour, and to minimize and adverse Impact we might have on local communities and environment. The group recognises that its activities have an impact upon communities local to where we operate and also on the wider environment. We seek to minimize any adverse impact as far as possible to engage and support our communities in a positive manner. The group supports a range of charities and organisations, the donations provided can be seen in the financial statements.
Our environment
The group remains committed to minimizing our environmental impact by reducing bath the carbon intensity of our activities and the natural; resources we use, through the development and operation of good business practices to manage and resource more efficiently throughout their lifecycle. We recognize that risks and opportunities can arise from the physical impacts of climate change and also form regulatory, technological or market trends as society transitions to a low carbon economy. The use of climate scenario analysis will enable us to test the resilience of our business and we will continue to identify transitionary and physical risks and opportunities to help determine what our management response should be.
On 18 January 2024, the entire share capital of Robert Lee Distribution Limited was sold to Aqua Brands Distribution Holdings Limited. There have been no other significant events affecting the Company since the year end.
The Company is investing time and resources into expanding the range of own brand products and continuing to upgrade the IT system.
Bache Brown & Co Limited were appointed as auditor to the company 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.
The company emitted 293 tonnes of carbon (or 1.54 tonnes per employee) during the financial year, consisting of 154 tonnes related to its fleet (scope 1), 138 tonnes on electricity and 2 tonnes on gas (scope 2). This was calculated from a review of fleet fuel and other expenditure, as well as usage of electricity and gas at the company's sites during the year. The company has sought to reduce emissions further by looking into electrifying the fleet as much as practicable, as this is the single largest contributor to its emissions.
Basis for 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 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
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.
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 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 company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assess the risk of material misstatement in respect of fraud by meeting with management to understand where it considered there was susceptibility to fraud.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant reporting frameworks which are likely to affect the company include FRS102, the Companies Act 2006 and the relevant tax laws. In addition we determined that there were no significant laws and regulations which have a direct effect on the amounts and disclosures in the financial statements.
We considered the risk of fraud through management override on controls. We also considered how management bias may impact upon performance targets.
In response we performed audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of any significant transactions outside the normal course of business, reviewing accounting estimates for management bias.
Based on the results of our risk assessment we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved enquiries with management around actual and potential claims. Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
The income statement has been prepared on the basis that all operations are continuing operations.
Robert Lee Distribution Limited is a private company limited by shares incorporated in England and Wales. The registered office is c/o Gssl, The Mill Lane, Glenfield, Leicester, LE3 8DX.
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 £.
This 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:
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: Interest income/expense and net gains/losses for financial instruments not measured at fair value; 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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of New River Holdings Limited. These consolidated financial statements are available from Companies House.
Forecasts have been prepared for a period of more than 12 months from the date of approval of these financial statements. The forecast indicates that, whilst taking into account reasonable downsides, sufficient funds are expected to be generated within the Company so as to meet the liabilities of the Company as they fall due.
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 credited or charged to profit or loss.
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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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 company 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 company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company 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 company.
In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the 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 - 2).
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
The company has tax losses of £3,404,852 (2022: £1,126,150) available to carry forward against future taxable profits.
Details of the company's subsidiaries at 31 October 2023 are as follows:
The bank overdraft is secured by fixed charges over assets of the company. The charge was satisfied on 25 March 2024, with the balance being repaid.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the company entered into the following transactions with related parties: