The directors present the strategic report and financial statements for the year ended 31 January 2024.
The business activities of Leonhard Kurz (U.K.) Ltd comprise of the sales and marketing of hot and cold foil and stamping machines plus accessories in the UK.
During the year the company has seen a reduction in turnover and profitability. This has been mainly caused by the general economic downturn in the UK which has resulted in consumers choosing budget ranges which carry little or no embellishment. This has resulted in a reduced level of activity across most of our major customers.
Despite this downturn, the company is confident that as the economy recovers the demand for its core products will return to previous levels.
The company continues to place high importance on having the correct levels of stock to meet customer need whilst at the same time keeping stock levels under control. With the reduced demand this year, this has proved challenging, however the management are pleased with the work which has gone into achieving this this year.
Four years ago the company purchased a factory adjacent to its current site in order to future proof itself. During the years of COVID 19 the development of this unit was put on hold due to the general uncertainty in starting any building projects. In the year just gone refurbishment of this unit has commenced and it should be fully operational within the first few months of the new business year.
Staff numbers have remained broadly the same. Despite a difficult employment market, staff retention has been good. In its industry the company is seen as an employer that values its staff. The company will continue to recruit high quality staff and remain a rewarding place to work.
Despite the challenging marketplace outlined above, the company has, through its direct contact with Brand Owners continued to work to promote the benefits of its thin film technology to the market and remains optimistic that business will recover as the UK economy bounces back next year.
The company’s strategic direction regarding risk follows the principle of recognising and eliminating risks which could endanger the business, whilst at the same time working to maximise business opportunities as they arise.
The continued conflict in Ukraine, along with other global conflicts, could cause potential risks to the UK both in terms of the cost of its material as well as the effect this has on customer demand. The directors feel that the financial strength of the company will allow it to face most problems which may arise from this.
The directors monitor the cash flow of the company and are confident that with its own financial strength, along with the international resources of the Kurz Group, it will be well placed to meet any challenges which may arise.
Bad debt continues to be a risk. The company continues to work with established credit reference agencies to monitor the credit status of its customers. This along with an open relationship with clients allows us to make informed decisions regarding credit.
The position of the company is set out in the financial statements and notes that follow. At the year end the company reported a net current asset position of £5,742,611 (2023 - £7,133,007) including cash and equivalents of £2,231,532 (2023 - £3,240,794,) as shown on page 9 of the financial statements.
Given the positive net current asset and cash position of the business, and given due consideration to the principle risks and uncertainties, the directors believe the company is in a strong position and has adequate resources to continue in operational existence for the foreseeable future. As such the directors continue to adopt the going concern basis of preparation.
The company’s key financial performance indicators are revenue and operating profit. During the year the revenue of the company experienced a decrease of £1,648,337, while profit before tax decreased by £541,072 due to the general level of activity.
In the coming year, along with a forecasted upturn in business, some projects will commence which will substantially boost the sales for this and for coming years which will result in growth. The Kurz Group will continue to offer new innovations to the market which should also offer new opportunities. The directors feel that this will give the company a solid foundation for years to come.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 January 2024.
The results for the year are set out on page 8.
An ordinary interim dividend with value £874,000 was paid in respect of the year ended 31 January 2024 (2023 - £437,000). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Information about the use of financial instruments by the company is provided in notes 17, 18 and 19.
Saffery LLP have expressed their willingness to remain in office as auditor of the company.
We have audited the financial statements of Leonhard Kurz (U.K.) Limited (the 'company') for the year ended 31 January 2024 which comprise the income statement, the statement of financial position, 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 UK adopted international accounting standards.
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 directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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 the audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the 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:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the 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 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.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and 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. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council's website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
All comprehensive income for the period is attributable to the equity holders of Leonhard Kurz (U.K.) Limited.
Leonhard Kurz (U.K.) Limited is a private company limited by shares incorporated in England and Wales. The registered office is 71 Queen Victoria Street, London, EC4V 4BE. The company's principal activities and nature of its operations are disclosed in the directors' report.
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 £.
Contracts for the sale of goods are short term in nature, and the relevant performance obligation is satisfied when the customer takes control of the goods (usually on dispatch of the goods). Revenue is recognised when these performance obligations are met, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.
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 income statement.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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.
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.
Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The tax expense represents the sum of the tax currently payable and deferred tax.
At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
The company has adopted the amendments to “IAS 12 Income Taxes— International Tax Reform — Pillar Two Model Rules” for the first time in the current year.
The amendments introduce a temporary exception to the accounting requirements for deferred taxes in IAS 12, so that an entity would neither recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes, and associated disclosure requirements.
There are no other new standards impacting the company that have been adopted in the financial statements for the year ended 31 January 2024.
The directors have not identified any relevant standards that were in issue, but not yet effective, and not applied in these financial statements, that would be expected to have a material impact on the company in the current or future reporting periods.
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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
An analysis of the company's revenue is as follows:
The performance obligations of foil sales are typically satisfied on delivery. Certain foil sales are made by way of consignment stock arrangements. In these circumstances the performance obligations are considered satisfied, and revenue recognised, at the point the goods are sold to the end user.
Performance obligations for machinery sales are satisfied on installation. Deposits paid by customers in advance of installation are held as deferred income until such time as the performance obligations are satisfied.
For foil sales, payment is typically due within 30 days from the end of the month of delivery. For machinery sales, typically, a deposit of 40% is due upon order, 50% is due prior to delivery, with the balance due within 30 days of installation.
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 2 (2023 - 2).
The charge for the year can be reconciled to the profit per the income statement as follows:
As of 31 January 2024, the United Kingdom has substantively enacted Pillar Two tax legislation. The company is in scope of this legislation by virtue of its membership of an international group of sufficient size, headquartered in a territory where similar legislation is substantively enacted. The company pays Corporation Tax in the United Kingdom, and the directors do not anticipate any this legislation to have any financial impact on the company.
Property, plant and equipment includes right-of-use assets, as follows:
At 31 January 2024 the cost of assets which were fully depreciated amounted to £1,701,555 (2023 - £1,604,882).
Freehold property includes land with a cost of £1,400,000 (2023 - £1,400,000) which has not been depreciated.
The bank overdraft facility is secured by a fixed and floating charge over all assets of the company.
Inventories are held net of impairment at the year end of £174,293 (2023 - £191,646).
All trade and other receivables are measured at amortised cost.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
There are no significant amounts past due included in trade receivables as disclosed above and no significant receivable balances have been impaired at the reporting date.
The directors consider that the carrying amounts of financial liabilities carried at amortised cost in the financial statements approximate to their fair values.
The company is exposed to credit risk attributable to trade and other receivables. The maximum credit risk in respect of the financial assets at each period end is represented by the balance outstanding on trade and other receivables. The company has limited exposure to credit risk, as the majority of its trade and other receivables are due from large corporations.
The following table details the remaining contractual maturity for the company's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the company may be required to pay.
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as set out in note 20.
The company finances its operations from revenues generated by the business. The company seeks to manage liquidity risk to ensure sufficient funds are available to meet requirements.
The company invests its cash reserves in bank deposits as a liquid resource to fund its operations.
The company operates internationally and is exposed to foreign exchange risks arising from various currency exposures, primarily with respect to the US dollar and Euros. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities.
Where a significant transaction in a foreign currency is anticipated with a high degree of certainty, the company will engage in a forward exchange contract to mitigate the risk of currency fluctuation.
The carrying amounts of the company's foreign currency denominated monetary assets and liabilities at the reporting date are as follows:
A £3,100,000 bank loan was advanced to the company on 1 February 2019. The loan has a maturity date of 1 February 2027 and carries interest at a fixed rate of 2.5%. Collateral for the bank loan is provided by way of a corporate guarantee from Leonhard Kurz Stiftung & Co. KG, the company's ultimate parent.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The directors have assessed the effective borrowing rate of the leases and, on the understanding the financial effect of an applied borrowing rate would be negligible, have assumed this to be nil. On this basis, the interest expense relating to these lease liabilities for the year is £nil.
The expense relating to short term leases was £9,361 (2023 - £993).
The fair value of the company's lease obligations is approximately equal to their carrying amount.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so.
The company has one class of ordinary shares which carry full voting, dividend and capital distribution (including on winding up) rights. They do not confer any rights of redemption.
At 31 January 2024 the company had capital commitments as follows:
The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
Transactions with the parent company
Transactions with the ultimate controlling company, Leonhard Kurz Stiftung & Co. KG, included sales of £283,589 (2023 - £174,255) and purchases of £8,653,906 (2023 - £7,486,943). At the year end the company owed Leonhard Kurz Stiftung & Co. KG, £1,017,728 (2023 - £548,212).
Transactions with associated companies
At the year end the company owed several of its associated companies a total of £933,477 (2023 - £720,992) and was owed £2,462 (2023 - £104,375) with an overall net adjustment of £29,897 (2023 - £13,598) for exchange variances. Total sales to associated companies for the year amounted to £1,044,175 (2023 - £1,353,981) and purchases from associated companies totalled £3,961,468 (2023 - £6,026,724).
All of the above mentioned transactions were undertaken on normal commercial terms.