The directors present the strategic report for the year ended 31 December 2023.
The financial year 2023 showed the business back to its pre covid performance levels but also reflected a year of consolidation and investing in internal systems and processes needed to take the next growth steps in future years. Macro storms of high container costs, a weak GBP and high raw material costs did not pull performance down as has been the case in previous years. Despite wider issues of the Ukraine and the Middle East effecting our markets it was a year of relative stability and business normality. Continued investment and diversification in our manufacturing facilities in Vietnam particularly helped growth in US and RoW whilst the UK remained steady. The business also continued to invest in stock availability in UK & European markets, notably opening a new 3PL warehouse in Dublin, driving profitability and ensuring a continued robust business model.
Revenue growth overall for the year was a modest 3% taking group revenues to £84.4m. Underlying this was UK/Europe steady revenue growth of 5%, Go-Pak Paper Products Vietnam Company Limited (GPPVN) growth of 39% but reduced revenues at Go-Pak Vietnam Limited (GPVN) of 53% as the business transitions away from single use plastic cutlery and focuses on a transition to fibre products. Encouragingly, as planned, sales to USA and RoW destinations increased, product portfolios broadened, and internal processes became more robust. Products sourced from parent company, SCGP, also increased in line with investment programmes in Thailand, Vietnam and Malaysia.
Gross margins for the full year were 22.2% of revenue, a full 15.9pps ahead of the previous year reflecting progress made in the business but also a more benign macro environment. EBITDA for the full year was £11.7m (13.9% of revenue) representing a £9.2m increase on prior year. Encouragingly all 3 businesses, including Vietnam Plastic (GPVN) posted profit performances well ahead of prior year reflecting the hard work done in the year and less inclement trading conditions.
The Directors look forward to a period of continued success for the business and are very optimistic regarding the future outlook and opportunities to grow and develop further.
The Group is faced with a variety of different risks and uncertainties and actively monitors these with a view to mitigating potentially negative impacts. While these risks and uncertainties can never be completely eliminated, the Directors are confident that all appropriate measures are taken to manage these risks in an effective way.
Freight Risk
The business spent £11.6m on container freight charges in 2022, at an average cost of $9,000 per container. As was the case in 2021, the average container rate in 2022 was far in excess of what are deemed to be normalised rates of circa $2,000 per container. Business profitability was directly impacted by these excessive costs in 2021 and 2022 but by mid-2023 had returned to more normalised rates. Following the escalation of the Red Sea crisis in late 2023 average container rates began to rise again, reaching a peak of circa $6,000 per container. The business continues to closely monitor container rates and manage our response to ensure continued profitability.
Sustainability
The business continues to keep ahead of the sustainability agenda and has transitioned products in the UK to de-risk any effect of the Single Use Plastic Directive. Go-Pak’s leading sustainability brand, Edenware, continues to grow with more products being added to this brand. Sustainability remains a core part of business strategy reflected by a target that by 2025, 80% of its sales will be in paper, compostable or highly recyclable substrates. As part of a vertically integrated supply chain group sustainability is achieved through the manufacturing process with the use of some raw materials from SCGP operating in line with their “No Gross Deforestation”. SCGP remains firmly committed to its 2050 Net Zero emission goal by prioritizing clean energy sourcing to substitute fossil fuels, develop energy efficiency technology, reduce GHG emissions while implementing a climate resilience strategy.
The business contracts outbound distribution to 3rd party suppliers with commitment to attaining ISO 14001 Environmental Management System (EMS) addressing carbon reduction through the whole supply chain.
Raw Material Risk
The Directors are fully aware of the risks associated with the type of business Go-Pak is engaged in and they regularly monitor the potential changes in market environments and have a range of strategies and procedures in place to ensure the group is protected accordingly. Go-Pak being part of the SCG Group has also significantly widened raw material sourcing options so decreasing risk in this area.
Inventory Risk
The key asset to the trading business is the investment in Inventory carried to assist strong service levels and sales to customers. The market price of this Inventory can be affected by a number of factors outside of the group’s control. The Directors monitor prices regularly to ensure the group is not exposed to financial risk should market prices fall. The Directors have a number of strategies and procedures in place to react to price change to ensure risk is minimal; it is also worth pointing out that none of Go-Pak products are perishable and are suitable for sale after extended storage periods.
Credit Risk
There is risk to all businesses of Bad Debt from Customers. The directors have procedures to minimise this risk. All credit-based trading is subject to credit verification procedures and debtors are monitored daily to ensure the best possible cash flow for the business. Credit insurance was introduced in 2023, reducing the credit risk to the business.
Forex Risk
The company has foreign exchange exposure in relation to the US Dollar, Vietnamese Dong and, to a limited extent, the Euro and Thai Baht. The majority of purchases of goods are made in US Dollars with a significant proportion of consolidated turnover being sales to the UK in GBP.
Liquidity Risk
The company has a healthy cash flow and the directors are confident that the funding structure is sufficient to meet all the liabilities now and in the forthcoming period.
The Directors monitor the business through a mixture of financial and non-financial key performance indicators. The shareholders consider that key performance indicators to be financial with the emphasis on EBITDA which allows ongoing investment in people, technology and growth both organically and through acquisition.
The last 2 years trading demonstrates the growth in revenue and rapid margin improvement delivered with stable container costs. This performance represents a sustainable platform for stability and future investment.
|
| 2023 | 2022 |
Revenue (£m) |
|
84.4 |
81.8 |
|
|
|
|
Gross Margin % |
|
22.2% |
6.3% |
|
|
|
|
EBITDA (£m)
EBITDA %
Net Assets (£m) |
| 10.1
12.0%
33.899 | 0.9
1.1%
27.992 |
|
|
|
|
EBITDA is calculated as operating profit/(loss) plus the amortisation and depreciation charges for the year.
The directors have reviewed the financial risk management objectives and policies of the group. They do not believe there to be significant risks in this area.
As at the balance sheet date the Group is self-funding from cash generation and currently has no external funding.
The Group enters into derivatives, principally for hedging foreign exchange risk; however hedge accounting is not applied.
The success of our business relies heavily on strong relationships with all of our stakeholders, both internal and external. A continuous focus on maintaining and developing these relationships ensures that we continue to succeed as a business and have a high reputation for quality, transparency and integrity. Our ethos is to be a business that our employees enjoy working for and our customers and suppliers enjoy engaging with. We endeavour to do this while doing all we can to protect the environment and operate in a responsible way.
Shareholders
The Go-Pak business was acquired by SCGP, the largest vertically integrated packaging company in Asia, in 2021 and the business takes a great sense of pride and responsibility in being part of such a prestigious group. All our business decision-making is made with the best interests of SCGP in mind and our Senior Management Team has a constant dialogue with colleagues from our SCGP head office in Thailand. Monthly performance review meetings are held with head office where commercial, operational and financial results are presented and discussed in detail.
Our People
Our people are key to the success of our business and we are continually focussed on maintaining a happy and motivated team of employees who enjoy working for Go-Pak. We keep our people informed on latest developments through weekly team briefings and quarterly newsletters. Engagement surveys are an important source for gaining employee feedback and we focus on taking improvement initiatives based on this feedback. The Health and Safety of our employees is critical to our business and we encourage near-miss reporting as well as conducting regular senior manager safety audits of our operational facilities. We have an annual staff performance appraisal process where we recap on the previous year’s performance and align objectives for the coming year. Staff retention and development is of high importance and we ensure the business is competitively positioned in terms of remuneration packages offered to its employees and is committed to investing in training and developing its people.
Customers
We have long-standing relationships with a high number of our customers, forged on trust and integrity. Our focus is on delivering high-quality products with competitive pricing and lead times, as well as maintaining a regular dialogue with our customers. We have a dedicated field sales team that are always available for our customers to contact, along with an energetic and engaging customer services team. We have quality control teams in place at our Vietnam manufacturing facilities and our UK warehouse to ensure all products produced are of the highest quality. Customer goodwill is critical to the success of our business and we continually focus on ensuring that good, open relationships are maintained.
Suppliers
We recognise the great importance of engaging with reliable, high-quality suppliers within our supply chain. As well as producing our own product internally within our Vietnam facilities, a significant proportion of product is sourced from 3rd party manufacturers. In addition to this, we engage with a large number of non-product suppliers to run our general operations.
We engage with key third party suppliers via regular meetings and visits to their facilities. Discussions on pricing is only one part of our negotiations with suppliers; of equal importance is quality and reliability. An unreliable supplier can adversely impact on our supply chain, which in turn can impact our customers. We seek to avoid this situation through regular supplier dialogue and internally measuring their performance to ensure they meet Go-Pak’s high standards.
We recognise the importance of supporting our suppliers through the timely payment of invoices. We perform weekly supplier payment runs and put great importance on paying all our suppliers within the agreed payment terms.
Communities
We endeavour to operate in a socially responsible way and consciously focus on reducing our carbon footprint. Within our business, the paper-based proportion of our product portfolio continues to grow as global markets trend away from plastic-based products and towards paper-based products. We dispose of our waste product and packaging in a responsible way and always look for opportunities to reduce our usage of non-recyclable materials.
Within our community, we make local donations and sponsorships. We co-ordinate and encourage our staff to participate in give-back opportunities such as community outreach projects and support for homeless charities.
Government and regulators
We ensure that we stay updated on legal and regulatory developments within our industry and for more general compliance matters. We commit to adhering to all regulatory filing deadlines and for making payments of our tax obligations on time and in full.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 16.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
Given the easing macroeconomic challenges faced in 2023, the business successfully continued to focus on delivering high quality products with competitive lead times and pricing. Ensuring business processes were fit for future growth was a key strategic objective in this period, alongside a commitment to develop our people and a return to expected profitability. The business recruited key personnel across various functional areas during 2023 and these people will play an important part in delivering further growth and success in future years.
At the time of approving these financial statements, there are various macroeconomic uncertainties affecting our UK and wider markets. Following Russia’s invasion of Ukraine in February 2022, global energy prices continue to put pressure on households faced with higher utility bills and inflation has significantly reduced consumers real purchasing power, albeit now at much reduced levels; the hope now is that interest rates will follow this reduction giving back the purchasing power to the consumer that the economy needs to grow as these rates find their way into reduced household mortgage costs. More recent concerns relate to the instability in the Middle East and specifically the Red Sea that has caused, and is causing, supply chain disruptions as container freight is redirected around the horn of Africa, a longer and more expensive route.
Despite these pressures, the business is anticipating a successful financial & operational performance in 2024. We believe demand for our products is robust despite the financial pressures on households we have many opportunities to further grow market share in our core geographical markets. Container freight, a significant element of our costs of sales normalised in much of 2023 with recent increases due to challenges in the Red Sea being manageable. Raw materials and exchange rates, in previous years a challenge, are showing stability. Our financial performance to date in 2024 has shown a healthy improvement year-on-year and we expect this to continue.
The economic environment remains challenging; however, the business is well set to weather any such storms and perform strongly in 2024 and beyond.
KPMG LLP was appointed as auditor during the year. Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.
This is the third year that the company has been required to report under these regulations. The UK company only is included in this report.
The boundaries of this report are based on operational control. We report our emissions with reference to the latest Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (GHG Protocol). In accordance with the 2018 Regulations, the energy use and associated greenhouse gas emissions are for those within the UK only that come under the operational control boundary. The 2021 UK Government GHG Conversion Factors for Company Reporting published by the UK Department for Environment Food & Rural Affairs (DEFRA) are used to convert energy use in our operations to emissions of CO2e. Carbon emission factors for purchased electricity calculated according to the ‘location-based grid average’ method. This reflects the average emission of the grid where the energy consumption occurs. Data sources include billing, invoices and the Group’s internal systems. For transport data where actual usage data (e.g. litres) was unavailable conversions were made using average fuel consumption factors to estimate the usage.
We have chosen to report our gross emissions against employee number. The value for the intensity ratio was 0.9 (2022: 1.0) tCO2e per employee.
Go-Pak UK Ltd have undertaken the following energy efficiency actions during the reporting period:
• Continued to switch vehicles in the company car fleet away from fossil fuel vehicles to hybrid vehicles
• Moved into an office with an EPC grade of A, which has light sensors installed
• Continued to install low energy, sensor controlled lights in the warehouse
We have audited the financial statements of Go-Pak UK Limited (“the Company”) for the year ended 31 December 2023 which comprise the Group Profit and Loss Account, Group Statement of Comprehensive Income, Group Balance Sheet, Company Balance Sheet, Group Statement of Changes in Equity, Company Statement of Changes in Equity, Group Statement of Cashflow and related notes, including the accounting policies in note 1.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Going Concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
In our evaluation of the directors’ conclusions, we considered the inherent risks to the Group’s business model and analysed how those risks might affect the Group and Company’s financial resources or ability to continue operations over the going concern period.
Our conclusions based on this work:
we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group or the Company's ability to continue as a going concern for the going concern period.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
Enquiring of directors and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.
Reading Board minutes.
Considering remuneration incentive schemes and performance targets for management and directors.
Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group audit team to full scope component audit teams of relevant fraud risks identified at the Group level and request to full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the Group level.
As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular:
the risk that Group and component management may be in a position to make inappropriate accounting entries; and
the risk that turnover is overstated or understated through recording revenues in the wrong period or fictitiously recorded.
We did not identify any additional fraud risks.
In determining the audit procedures we took into account the results of our evaluation of the Group-wide fraud risk management controls.
We also performed procedures including:
Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included those posted to unusual accounts combinations.
Assessing, for a selection of revenue recorded around the year end, if it is recorded in the correct period based on the revenue recognition criteria
Identifying and responding to risks of material misstatement related to compliance with laws and regulations
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, through discussion with the directors and others management (as required by auditing standards) and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety legislation, data protection laws, anti-bribery, employment law, environmental legislation, export control, applicable packaging and product safety standard and certain aspects of company legislation recognising the nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
Strategic report and directors’ report
The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.
Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:
we have not identified material misstatements in the strategic report and the directors’ report;
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects.
As explained more fully in their statement set out on page 10, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and 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 they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe our responsibilities
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss accounts and related notes. The company's profit for the period was £3,833,000 (2022 - £257,000 loss).
Go-Pak UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Drumcoo House, 1 Hawkesworth Road, Yate, Bristol, BS37 5NW.
The group consists of Go-Pak UK Limited and all of its subsidiaries.
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 parent company. Monetary amounts in these financial statements are rounded to the nearest £1,000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The parent company is included in the consolidated financial statements, and is considered to be a qualifying entity under FRS 102 paragraphs 1.8 to 1.12. The following exemptions available under FRS 102 in respect of certain disclosures for the parent company financial statements have been applied:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
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’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Go-Pak UK Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The Directors have considered the group’s business activities and risks in adopting the going concern basis of preparation for the financial statements. The going concern basis is considered to be appropriate for the following reasons.
The Directors have a reasonable expectation that the group and the company will have sufficient resources to continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of approving these financial statements. The Directors have made this assessment on the basis of the current cash position, cash flow forecasts that show the group meets its day to day working capital requirements from operational cash flows and has no external funding.
As part of their going concern assessment, the Directors have modelled severe but plausible downside scenarios including a reduction in revenue and increase in costs across the group. The Directors believe that the group is able to manage its business risks despite ongoing economic uncertainty. The group has modelled a cautious yet realistic base case considering the level of trading to date. The Directors have stress-tested these assumptions and have prepared a reasonably plausible downside scenario allowing for lower than expected trade and increased costs driven by inflationary and other pressures.
Consequently, the Directors are confident that the group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch or delivery of the goods depending on agreed terms), 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.
Research expenditure is written off against profits in the year in which it is incurred.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial 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 that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss, 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.
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.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
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.
In the course of preparing the financial statements, no judgements have been made in the process of applying the group's accounting policies, other than those involving estimations (which are dealt with separately below), that have had a significant effect on the amounts recognised in the financial statements.
The group does not have any key assumptions concerning the future, or other key sources of estimation uncertainty in the reporting period that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Notwithstanding this, as significant balances relate to the group’s inventory and debtors, management undertakes regular reviews to identify the occurrence of events or changes in circumstances that indicate the carrying amount of inventory and debtors may not be recoverable.
Inventories are valued at the lower of cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires estimation to be made, which include forecast consumer demand, the promotional, competitive, and economic environment and inventory loss trends.
Management maintains an allowance for the provision of bad debts to account for estimated losses resulting from the inability of customers to make required payments. When evaluating the adequacy of an allowance for bad debts, management bases its estimates on the ageing accounts receivable balances and historical write off experience, customer credit worthiness and changes in customer payment terms.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2).
Key management personnel
Key management personnel includes the directors as recorded on the 'Company Information' page and local senior management. The compensation recognised in the Income Statement for key management employee services is £971,973 (2022: £717,421). Employee service is defined as basic salary, employers' national insurance contributions, bonus entitlements and holiday pay entitlements.
Total amounts paid into money purchase pension schemes on behalf of key management personnel, including directors as recorded on the 'Company Information' page were £31,079 (2022: £20,179).
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
The main rate of corporation tax increased to 25% from 1 April 2023. This will increase the company's future current tax charge accordingly. The main rate of corporation tax for the current financial year is 23.5% (19% until 31 March 2023, 25% from 1 April 2023). Deferred tax balances at 31 December 2023 have been calculated based on 25% (2022: 25%) reflecting the timing of the expected reversal of the related timing differences.
The tax rate applicable in foreign jurisdictions is 20% (2022: 20%).
Details of the company's subsidiaries at 31 December 2023 are as follows:
Amounts owed by group undertakings to the company comprise of multiple short and long term loans repayable within 1 to 35 years. Interest of 1%-6.50% is charged on those loans.
The £1.5m loan is a short term loan, matured on 23 January 2023. The loan was repaid in full during the financial year ended 31 December 2023. The interest rate applied to the loan is Sonia rate + 1.8% margin.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
The share capital carries equal voting rights although separate dividends can be declared in relation to A and B shares. All shares will participate equally in distribution on winding up and no shares are liable to be redeemed.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The company enters into derivatives, principally for hedging foreign exchange risk. Hedge accounting is not applied to the derivatives. At the year end there was $8,250,000 in hedged contracts with a sterling value of £6,521,317. These contracts mature by 13/03/2024.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.