Company Registration No. 02010112 (England and Wales)
NECESSITY SUPPLIES LIMITED
ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2023
NECESSITY SUPPLIES LIMITED
COMPANY INFORMATION
Directors
Mr. K. Mehta
Mr. B. Mehta
Company number
02010112
Registered office
Unit 4/5 Northolt Trading Estate
Belvue Road
Northolt
UB5 5QS
Auditor
Hindocha & Co Limited
Chartered Accountants and Statutory Auditors
34 Queensbury Station Parade
Edgware
Middlesex
HA8 5NN
Bankers
National Westminster Bank Plc
Reading Oracle Branch
Unit L11, The Oracle Shopping Centre
Reading
RG1 2AG
Solicitors
R. R. Sanghvi & Co
Sherwood House
176 Northolt Road
South Harrow
Middlesex, HA2 0NP
NECESSITY SUPPLIES LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 25
NECESSITY SUPPLIES LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 1 -

The directors present the strategic report for the year ended 31 October 2023.

Principal activities
The principal activity of the company continued to be that of importers, exporters and wholesalers of pharmaceutical products.
Review of the business

During this financial year, the company experienced a reduction in turnover compared to the previous year. This decline can be attributed to various factors, including economic uncertainties, shifting market dynamics, and competition.

 

We report a gross profit margin for 2023 of £500,931 (3.68%), compared to £2,146,084 (11.52%) in 2022. The reduction in gross profit margin is attributed to stock write offs and price competition.

 

Looking ahead, we anticipate that economic conditions will remain challenging as market pressures persist. However, we are confident in our ability to navigate these headwinds by continuing to focus on cost management, operational excellence, and innovation. Our commitment to delivering high-quality products and services to our customers remains unwavering, and we are determined to achieve sustainable growth and profitability.

 

Principal risks and uncertainties

Description of principal risks and uncertainties:

The directors review the principal risks and uncertainties on a regular basis. The principal risks and uncertainties affecting the company are as follows:

 

Currency risk

The company is not exposed to currency risks on its sales as this is mainly conducted in UK sterling. The company purchases goods from Europe and the main currency transacted is in Euros and is therefore exposed to currency risk, however, keen monitoring of exchange rate has managed to minimise such risks.

 

Liquidity risk

The directors are actively involved on an ongoing basis to ensure systems are in place to have sufficient liquidity available to meet on going working capital requirement on a short, medium and long term basis.

 

Credit risk

Credit risk is mainly on credit sales to customers. This risk is managed by setting limits for customers based on combination of payment history, credit references and published financial information. Credit limits are reviewed by the financial controller on a regular basis. The company also holds a credit insurance policy as a safeguard. The company funds its working capital requirement mainly from retained profits.

Key performance indicators

The directors' use a number of key performance indicators to measure the profitability and working capital on an ongoing basis as set out below:

 

Indicator 2023 2022 Measure

Revenue (£m) 13.63 18.64

 

Profitability ratios

Gross profit margin 3.68% 11.52% Gross profit as % of revenue

EBITDA -10.06% 0.82% Profit before depreciation, amortisation,                          interest and tax as % of revenue

 

Other indicators

Sales per day (£k) 51 70 Net sales each working day

Debtors days 152 136 Year end trade debtors divided by                          revenue multiplied by 365 days.

NECESSITY SUPPLIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 2 -

On behalf of the board

Mr. K. Mehta
Director
31 July 2024
NECESSITY SUPPLIES LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 3 -

The directors present their annual report and financial statements for the year ended 31 October 2023.

Results and dividends

The results for the year are set out on page 8.

The directors do not recommend payment of an ordinary dividend.
Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr. K. Mehta
Mr. B. Mehta
Auditor

The auditor, Hindocha & Co Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Regulations
The company/group has employed qualified persons to monitor and maintain all aspects of regulatory matters and compliance with statutory obligations.
Medium-sized companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

NECESSITY SUPPLIES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 4 -
On behalf of the board
Mr. K. Mehta
Director
31 July 2024
NECESSITY SUPPLIES LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF NECESSITY SUPPLIES LIMITED
- 5 -
Opinion

We have audited the financial statements of NECESSITY SUPPLIES LIMITED (the 'company') for the year ended 31 October 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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).

In our opinion the financial statements:

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 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 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:

NECESSITY SUPPLIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF NECESSITY SUPPLIES LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its 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:

Responsibilities of directors

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 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 company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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.

 

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

 

NECESSITY SUPPLIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF NECESSITY SUPPLIES LIMITED
- 7 -

We assessed the susceptibility of the company’s financial statements to material misstatement including obtaining an understanding of how fraud might occur, by:

 

 

To address the risk of fraud through management bias and override of controls, we:

 

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

 

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment, collusion, omission or misrepresentation.

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.

Yashlal Hindocha BA,FCA (Senior Statutory Auditor)
For and on behalf of Hindocha & Co Limited
31 July 2024
Chartered Accountants and Statutory Auditors
34 Queensbury Station Parade
Edgware
Middlesex
HA8 5NN
NECESSITY SUPPLIES LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
13,630,386
18,635,385
Cost of sales
(13,129,455)
(16,489,301)
Gross profit
500,931
2,146,084
Administrative expenses
(2,079,101)
(2,355,026)
Other operating income
183,250
291,220
Operating (loss)/profit
4
(1,394,920)
82,278
Interest receivable and similar income
7
15,239
1,481
Interest payable and similar expenses
8
-
0
(238)
Amounts written off investments
9
(71,298)
-
(Loss)/profit before taxation
(1,450,979)
83,521
Tax on (loss)/profit
10
496,784
(17,529)
(Loss)/profit for the financial year
(954,195)
65,992

The profit and loss account has been prepared on the basis that all operations are continuing operations.

NECESSITY SUPPLIES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2023
- 9 -
2023
2022
£
£
(Loss)/profit for the year
(954,195)
65,992
Other comprehensive income
-
-
Total comprehensive income/(loss) for the year
(954,195)
65,992
NECESSITY SUPPLIES LIMITED
BALANCE SHEET
AS AT
31 OCTOBER 2023
31 October 2023
- 10 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
11
275,353
208,203
Investment property
12
830,000
830,000
1,105,353
1,038,203
Current assets
Stocks
13
2,629,648
4,071,104
Debtors - deferred tax
16
1,156,878
602,329
Debtors - other
14
7,199,607
9,086,709
Cash at bank and in hand
2,112,858
979,893
13,098,991
14,740,035
Creditors: amounts falling due within one year
15
(7,220,763)
(7,898,227)
Net current assets
5,878,228
6,841,808
Total assets less current liabilities
6,983,581
7,880,011
Provisions for liabilities
Deferred tax liability
16
182,642
124,877
(182,642)
(124,877)
Net assets
6,800,939
7,755,134
Capital and reserves
Called up share capital
18
50,000
50,000
Profit and loss reserves
19
6,750,939
7,705,134
Total equity
6,800,939
7,755,134

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

The financial statements were approved by the board of directors and authorised for issue on 31 July 2024 and are signed on its behalf by:
Mr. K. Mehta
Director
Company registration number 02010112 (England and Wales)
NECESSITY SUPPLIES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2023
- 11 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 November 2021
50,000
7,639,142
7,689,142
Year ended 31 October 2022:
Profit and total comprehensive income
-
65,992
65,992
Balance at 31 October 2022
50,000
7,705,134
7,755,134
Year ended 31 October 2023:
Loss and total comprehensive income
-
(954,195)
(954,195)
Balance at 31 October 2023
50,000
6,750,939
6,800,939
NECESSITY SUPPLIES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 OCTOBER 2023
- 12 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
22
1,508,388
(661,589)
Interest paid
-
0
(238)
Net cash inflow/(outflow) from operating activities
1,508,388
(661,827)
Investing activities
Purchase of tangible fixed assets
(150,630)
(100,920)
Proceeds from disposal of tangible fixed assets
3,316
-
0
Repayment of loans
(71,298)
-
0
Interest received
15,051
1,481
Dividends received
188
-
0
Net cash used in investing activities
(203,373)
(99,439)
Financing activities
Payment of finance leases obligations
-
0
(13,610)
Net cash used in financing activities
-
(13,610)
Net increase/(decrease) in cash and cash equivalents
1,305,015
(774,876)
Cash and cash equivalents at beginning of year
336,823
1,111,699
Cash and cash equivalents at end of year
1,641,838
336,823
Relating to:
Cash at bank and in hand
2,112,858
979,893
Bank overdrafts included in creditors payable within one year
(471,020)
(643,070)
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2023
- 13 -
1
Accounting policies
Company information

NECESSITY SUPPLIES LIMITED is a private company limited by shares incorporated in England and Wales. The registered office is Unit 4/5 Northolt Trading Estate, Belvue Road, Northolt, UB5 5QS.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value.

1.2
Going concern

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The directors continue to adopt the going concern basis on the basis that they will continue financial support.

 

1.3
Turnover
Turnover represents amounts receivable for goods and services net of VAT and trade discounts.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

1.4
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Leasehold improvements
over the life of the lease
Plant and machinery
20% to 25% p.a. on a reducing balance basis
Fixtures, fittings & equipment
25% p.a. on a reducing balance basis
Computer equipment
50% p.a. on a straight line basis and 25% p.a. on reducing balance basis
Motor vehicles
25% p.a. on a reducing balance basis

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.

1.5
Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 14 -
1.6
Impairment of fixed assets

At each reporting period end date, the company 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). 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.

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.

1.7
Stocks

Stock is valued at the lower of cost and net realisable value. Cost is determined on a first in first out basis. Net realisable value represents estimated selling price less costs to complete and sell. Provision is made for slow moving and obsolete stock where the net realisable value is less than cost.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

1.8
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.9
Financial instruments

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with 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.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 15 -
Basic financial assets

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

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.

Impairment of financial assets

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.

Derecognition of financial assets

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.

Classification of financial liabilities

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

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.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 16 -
Other financial liabilities

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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.10
Equity instruments

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.

1.11
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

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 when the company has 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.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 17 -
1.12
Employee benefits

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.

1.13
Retirement benefits
The company operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to the profit and loss account in the year they are payable.
1.14
Leases
Rentals payable under operating leases are charged against income on a straight line basis over the lease term.
1.15
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling on the date of the transaction. All exchange differences are taken to profit and loss account.
2
Judgements and key sources of estimation uncertainty

In the application of the company’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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Inventories are valued at the lower cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Valuation of land and buildings

As described in note 11 to the financial statements, investment properties are valued by the directors on an open market value basis by reference to market evidence of transaction prices for similar properties.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 18 -
3
Turnover and other revenue

An analysis of the company's turnover is as follows:

2023
2022
£
£
Turnover analysed by class of business
13,630,386
18,635,385
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
13,226,047
18,266,001
European Union
404,339
369,384
13,630,386
18,635,385
2023
2022
£
£
Other revenue
Interest income
15,051
1,481
Dividends received
188
-
Rental income arising from investment properties
83,000
84,293
4
Operating (loss)/profit
2023
2022
Operating (loss)/profit for the year is stated after charging/(crediting):
£
£
Exchange differences apart from those arising on financial instruments measured at fair value through profit or loss
(111,327)
(104,837)
Fees payable to the company's auditor for the audit of the company's financial statements
16,250
16,250
Depreciation of owned tangible fixed assets
83,200
69,399
Profit on disposal of tangible fixed assets
(3,036)
-
Cost of stocks recognised as an expense
13,240,782
16,589,258
5
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Administration and office
20
21
Warehouse and distribution
11
8
Total
31
29
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
5
Employees
(Continued)
- 19 -

Their aggregate remuneration including directors remuneration comprised:

2023
2022
£
£
Wages and salaries
948,081
877,909
Social security costs
92,244
83,476
Pension costs
10,112
8,774
1,050,437
970,159
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
120,000
120,000
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
15,051
1,481
Other income from investments
Dividends received
188
-
0
Total income
15,239
1,481

Investment income includes the following:

Interest on financial assets measured at fair value through profit or loss
15,051
1,481
Dividends from financial assets measured at fair value through profit or loss
188
-
0
8
Interest payable and similar expenses
2023
2022
£
£
Other finance costs:
Interest on finance leases and hire purchase contracts
-
238
9
Amounts written off investments
2023
2022
£
£
Amounts written off current loans
(71,298)
-
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 20 -
10
Taxation
2023
2022
£
£
Deferred tax
Origination and reversal of timing differences
(496,784)
17,529

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
(Loss)/profit before taxation
(1,450,979)
83,521
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 25.00% (2022: 19.00%)
(362,745)
15,869
Tax effect of expenses that are not deductible in determining taxable profit
17,066
7,413
Unutilised tax losses carried forward
364,340
(10,770)
Change in unrecognised deferred tax assets
(346,009)
17,526
Permanent capital allowances in excess of depreciation
(39,414)
(25,695)
Depreciation on assets not qualifying for tax allowances
20,800
13,186
Dividend income
(47)
-
0
Tax rate change effect
(150,775)
-
0
Taxation (credit)/charge for the year
(496,784)
17,529

The company has estimated losses of £4,627,514 (2022 - £3,170,155) available for carry forward.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 21 -
11
Tangible fixed assets
Leasehold improvements
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 November 2022
2,222,688
51,422
522,685
435,470
117,093
3,349,358
Additions
-
0
112,919
13,328
24,383
-
0
150,630
Disposals
-
0
-
0
-
0
-
0
(24,300)
(24,300)
At 31 October 2023
2,222,688
164,341
536,013
459,853
92,793
3,475,688
Depreciation and impairment
At 1 November 2022
2,222,688
35,590
439,696
348,819
94,362
3,141,155
Depreciation charged in the year
-
0
25,750
24,079
27,758
5,613
83,200
Eliminated in respect of disposals
-
0
-
0
-
0
-
0
(24,020)
(24,020)
At 31 October 2023
2,222,688
61,340
463,775
376,577
75,955
3,200,335
Carrying amount
At 31 October 2023
-
0
103,001
72,238
83,276
16,838
275,353
At 31 October 2022
-
0
15,832
82,989
86,651
22,731
208,203
12
Investment property
2023
£
Fair value
At 1 November 2022 and 31 October 2023
830,000

Investment properties are valued by the directors on at fair value by reference to market evidence of transaction prices for similar properties. (see accounting policy note 1 ).

 

Historical cost of above Investment Properties is £348,016 (2022 - £348,016).

 

 

13
Stocks
2023
2022
£
£
Finished goods and goods for resale
2,629,648
4,071,104
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 22 -
14
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
6,101,941
7,043,124
Corporation tax recoverable
205,166
205,166
Amounts owed by group undertakings
395,986
463,380
Other debtors
178,063
1,080,028
Prepayments and accrued income
318,451
295,011
7,199,607
9,086,709
Deferred tax asset (note 16)
1,156,878
602,329
8,356,485
9,689,038
15
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans and overdrafts
471,020
643,070
Trade creditors
1,153,220
1,515,209
Taxation and social security
199,050
401,510
Other creditors
4,977,688
5,303,689
Accruals and deferred income
419,785
34,749
7,220,763
7,898,227
16
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Balances:
£
£
£
£
Accelerated capital allowances
62,147
33,298
-
-
Tax losses
-
-
1,156,878
602,329
Investment property
120,495
91,579
-
-
182,642
124,877
1,156,878
602,329
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
16
Deferred taxation
(Continued)
- 23 -
2023
Movements in the year:
£
Asset at 1 November 2022
(477,452)
Credit to profit or loss
(496,784)
Asset at 31 October 2023
(974,236)

 

17
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
10,112
8,774

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.

18
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
50,000
50,000
50,000
50,000
19
Profit and loss reserves
2023
2022
£
£
At the beginning of the year
7,705,134
7,639,142
(Loss)/profit for the year
(954,195)
65,992
At the end of the year
6,750,939
7,705,134

Included within profit and loss reserves are non-distributable profits, as set out below:

2023
2022
£
£
Non-distributable profits included above
At the beginning of the year
390,406
390,406
Non distributable profits in the year
(28,919)
-
At the end of the year
361,487
390,406
Distributable profits
6,389,452
7,314,728
NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 24 -
20
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel is as follows.

2023
2022
£
£
Aggregate compensation
120,000
120,000
Transactions with related parties

 

The company has taken advantage of the exemption provided in FRS 102 "Related Party Disclosures", as the consolidated financial statements of the ultimate parent company are publicly available.

Other information

During the year the company sold goods amounting to £404,339 (2022 - £369,384) to Merit Pharmaceuticals Limited, a business in which Mr K Mehta has a participating interest by virtue of his shareholding.

 

The company charged management fees amounting to £100,000 (2022 - £200,000) and purchased, which included licence fees, amounting to £1,695,674 (2022 - £1,294,144) to/from Suerte Pharma Limited, a business controlled and owned by Mr K Mehta’s family.

 

The company premises at Unit 4/5 Northolt Trading Estate are owned by the directors Mr K Mehta and Mr B Mehta and are currently used rent-free by the group.

 

All transactions were conducted on a normal trading basis.

 

The company’s directors are controlling shareholders of the group. The directors are also directors in NSL Group Limited and Primecrown Limited and as such the directors control the following activities through Necessity Supplies Limited:

 

- Management services and directors' emoluments of £120,000 (2022 - £120,000) are paid through Necessity Supplies Limited.

 

At the balance sheet date the amounts outstanding were as follows:

 

Included in creditors:

 

Directors' current account - £4,963,900 (2022 – £5,290,343)

 

Included in debtors:

 

Merit Pharmaceuticals Limited - £2,958,776 (2022 - £3,190,367)

Suerte Pharma Limited - £820,224 (2022 - £870,846)

21
Ultimate controlling party

The company is under the common control of the directors, who are also the controlling shareholders and directors of the ultimate parent company NSL (Holdings) Limited, a company registered in England and Wales.

 

NSL Group Limited, the parent company is a wholly owned subsidiary of NSL (Holdings) Limited. NSL (Holdings) Limited prepares group financial statements, copies of which can be obtained from Unit 4/5 Northolt Trading Estate, Belvue Road, Northolt, Middlesex, UB5 5QS.

NECESSITY SUPPLIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 25 -
22
Cash generated from/(absorbed by) operations
2023
2022
£
£
(Loss)/profit for the year after tax
(954,195)
65,992
Adjustments for:
Taxation (credited)/charged
(496,784)
17,529
Finance costs
-
0
238
Investment income
(15,239)
(1,481)
Gain on disposal of tangible fixed assets
(3,036)
-
Depreciation and impairment of tangible fixed assets
83,200
69,399
Other gains and losses
71,298
-
Movements in working capital:
Decrease/(increase) in stocks
1,441,456
(256,062)
Decrease in debtors
1,887,102
526,476
Decrease in creditors
(505,414)
(1,083,680)
Cash generated from/(absorbed by) operations
1,508,388
(661,589)
23
Analysis of changes in net funds
1 November 2022
Cash flows
31 October 2023
£
£
£
Cash at bank and in hand
979,893
1,132,965
2,112,858
Bank overdrafts
(643,070)
172,050
(471,020)
336,823
1,305,015
1,641,838
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