The directors present the strategic report for the period ended 31 October 2023.
The accounting results for the period are set out in the attached statements.
The results this year were extraordinary compared to recent years and especially in relation to the previous year. We believe this year was a result of the internal improvements we made following 2022 and delayed price increases that we received due to commodities rising in the previous accounting period.
Following the previous accounting period we closely examined all areas of the business to identify any areas we could change, improve or cut back. Some of the results included changes to some working patterns and staffing, pushing back expenditure where possible and empowering department heads to implement cost savings across their departments in all areas of the business.
Trading in the early part of 2023 was still very difficult with sales volumes a little lower in the festive period and lead up to it and negotiations over price increases still taking place.
As the year progressed the impact of internal improvements, price increases and an increase in sales volume slowly all came through and the results started to improve. We also benefitted from some very big one-off orders from a number of customers both overseas and in the UK. Finally, very late in the year we started to see some relief from packing costs and some ingredient costs which all flowed through to the bottom line.
An exciting development this accounting period was the full acquisition of Nibnibs, previously a 75% subsidiary. This is a part of our plan for future growth so we acquired their trade and assets with a view to offering their existing customers a new range of products and expanding their market share. We have invested significant time and resource into finding the right mix of products to take to market and rebranding the business to take it forward.
NibNibs Ltd was subsequently placed into administration in the period and is no longer a subsidiary of the group.
The main uncertainties in the business are relatively unchanged. The nature of our business is that we don’t have visibility over the long term prices of commodities and as such, they remain a long term uncertainty.
When reviewing the 2022 results we wanted to focus on increasing revenue and improving the gross profit margin. We moved into new markets and worked with customers to provide the products they wanted. As a result, sales volumes are up significantly from 2022 and the resulting turnover has increased by over 20% to over £43m.
We spent a lot of time focusing on process improvements in the bakery to ensure we were streamlined with the result being an improvement in the gross profit margin by 13%.
This focus on improving the gross margin enabled us to absorb the 29% increase in overheads from £3.05m to £3.96m. We saw a continued rise in energy costs which increased by over 128% from the previous year. We also took the opportunity to strengthen our teams and increase wages to enable our staff to combat some of the cost of living increases seen across society.
On behalf of the board
The directors present their annual report and financial statements for the period ended 31 October 2023.
The results for the period are set out on page 7.
Ordinary dividends were paid amounting to £375,000. The directors do not recommend payment of a further dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Hart Shaw LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006. Subsequently, the auditor is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Haywood and Padgett Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 October 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the 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 period 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 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 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.
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:
At the planning stage we identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the directors and other management, as required by auditing standards. The potential effect of any laws and regulation on the financial statements can vary considerably. There are laws and regulations that directly affect the financial statements (e.g. the Companies Act) as well as many other operational laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements. Owing to the size, nature and complexity of the organisation and the applicable laws and regulations to which it must adhere, the risk of material misstatement was deemed to be low, therefore the procedures performed by the audit team were limited to:
Communicating identified laws and regulations at planning throughout the audit team to remain alert to any indications of non-compliance throughout the audit.
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as non-compliance with laws and regulations.
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
Reviewing inspection documents from health and safety visits and food standard visits.
We have assessed the overall susceptibility of the financial statements to material misstatement due to fraud. Management override is the most likely way in which fraud might present itself and as such is inherently high risk on any audit. Management override, which may cause there to be a material misstatement within the financial statements, may present itself in a number of ways, for example:
Override of internal controls (e.g. segregation of duties)
Entering into transactions outside the normal course of business, especially with related parties
Fraudulent revenue recognition, including fictitious sales and sales being recorded in the wrong period.
Presenting bias in accounting judgements and estimates, particularly ones that are key to the business.
In order to reduce the risk of material misstatement to an acceptable level, numerous audit procedures were performed including:
Enquiries of management as to whether they had any knowledge of any actual or suspected fraud
Review of material journal entries made throughout the year as well as those made to prepare the financial statements
Reviewing the underlying rationale behind transactions in order to assess whether they were outside the normal course of business.
Increased revenue substantive testing across all material income streams.
Assessing whether management’s judgements and estimates indicated potential bias
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected material misstatements in the financial statements, even though we have performed our audit in accordance with auditing standards. Furthermore, as with all audits, there is a higher risk of irregularities (especially those relating to fraud) being undetected, as these may involve the override of internal controls, collusion, intentional omissions and misrepresentations etc. We are not responsible for preventing non-compliance or fraud and therefore cannot be expected to detect all instances of such. Our audit was not designed to identify misstatements or other irregularities that would not be considered to be material to the financial statements. The further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
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 notes on pages 14 to 30 form part of these financial statements.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
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 8 month period to 31 October 2023 was £517,195 (Feb 2023 - £0 profit).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
Haywood and Padgett Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is The Bakery, Shawfield Road, Carlton Industrial Estate, Barnsley, S71 3HS.
The group consists of Haywood and Padgett Holdings Limited and all of its subsidiaries.
The reporting period for the parent company is a short period, being 28 February 2023 to 31 October 2023, this was to bring the parent company accounts in line with the trading members of the group.
As described in the basis of consolidation accounting policy, the directors have chose to prepare the group accounts using merger accounting, as permitted under FRS102. Therefore the group financial statements have been prepared covering a 12 month period, as a continuation of, and in line with the reported results in the previous group's financial statements, which covered the year to 31 October 2023. Therefore, subject to changes in the equity structure to reflect the new parent company, the group financial statements should be comparable with the previous year.
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. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 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.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. A presentational adjustment was made between cost of sales and administrative expenses, with amounts reported in the 2022 financial statements being £29,726,467 and £4,843,457 respectively. Furthermore certain aspects of equity have been restated, as discussed in the business combinations accounting policy.
The consolidated group financial statements consist of the financial statements of the parent company Haywood and Padgett Holdings Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 October 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.
The current group structure was formed following a group reorganisation, that has been accounted for using merger accounting as permitted under FRS102 19.27. As a result the consolidated financial statements contain a merger reserve which is the difference between the nominal value of the shares issued plus the fair value of any other consideration given, and the nominal value of the shares received in exchange.
See the business combinations accounting policy for more details.
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 provided in the normal course of business, and is shown net of VAT and other sales related taxes.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Freehold land and buildings are held at deemed cost on transition to FRS102.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset.
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.
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.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
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 directors are of the opinion that there are no key estimates or judgements which have a significant risk of causing a material misstatement.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The UK corporation tax rate during the year was 22.52%. The rate of 19% was applicable to 31 March 2023, with 25% being applicable after this date.
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
Plant and machinery with a cost totalling £1,253,057 (2022: £1,253,057) and a net book value of £719,883 (2022: £845,189) are held under asset finance agreements. The finance is secured on the asset to which it relates.
Freehold land and buildings held at deemed cost on transition for FR102 are held based on the directors valuation at the date of transition.
The following assets are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:
The investment properties were last valued by the directors in the year ended 31 October 2021. The directors are of the opinion that the fair value of the properties have not materially altered since that date.
Details of the company's subsidiaries at 31 October 2023 are as follows:
Amounts owed to group undertakings are unsecured and repayable on demand. No interest is charged on this balance.
Obligations under finance leases are secured on the assets in which they relate.
Obligations under finance leases are secured on the assets in which they relate.
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. The average lease term is 7 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability recognised represents timing differences between accelerated capital allowances and the depreciation charge on fixed assets. The deferred tax liability will reverse over the period the assets are depreciated for.
Deferred income is included in the financial statements as follows:
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.
Company
At 27 February 2023 the company had 1 Ordinary share of £1. On 28 February 2023, 21,998 shares were issued in the parent company as part of a share for share exchange for the subsidiary's shares.
Under merger accounting, prior periods have been restated as though the share capital has always existed, see accounting policies for more detail.
The different share classes of the company rank pari passu, but have separate rights to dividends.
Includes all historic revaluations and subsequent depreciation.
The merger reserve represents the difference between the nominal value of the shares issued plus the fair value of any other consideration, and the nominal value of shares received in exchange.
Includes all current and prior period retained profits.
On 24 May 2023 the group disposed of its 75% holding in NibNibs Ltd, as a result of its loss in control of the subsidiary due to it entering administration. Included in these financial statements are profits of £76,886 arising from the group's interests in NibNibs Ltd up to the date of its disposal.
After NibNibs Ltd entered administration, on 21 September 2023, Haywood and Padgett Limited agreed to purchase the trade, fixed assets and stock of NibNibs Ltd for £208,760.
At the year end, the group was committed to purchasing plant and machinery costing €2,400,000, of which€1,200,000 was unpaid at the year end.
The remuneration of key management personnel is as follows.
During the period the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
On 28 February 2023, the company acquired all the share capital of Haywood & Padgett Limited, a company under common control of the directors and shareholders of this company. The consideration for the transaction was in both cash £3,413,160 and the issue of 21,998 shares in the company. The cash required was provided by Haywood & Padgett Limited by way of a group loan that was unsecured, interest free and with no set repayment terms. At the balance sheet date £3,413,610 was outstanding on the loan.
Subsequently, the companies were part of a wholly owned group and therefore the disclosure exemption in FRS 102 33.1A regarding transaction with wholly owned group members has been used.