The directors present the strategic report for the year ended 31 December 2023 in respect of U-POL Limited ("the company").
The principal activity of the company in the year under review was as a specialist supplier for the automotive repair industry supplying Bodyshop’s directly and through our Channel Partners and a supplier of protective coatings used in a wide variety of applications through trade and retail outlets. The company has and will continue to invest in the development of its employees.
The principal business objective is to maximise longer term shareholder value. Our key strategies for achieving this are i) to be safety focused by conducting our global operations in the safest possible manner ii) by being marketing and technology driven, listening to our customers and delivering solutions for them iii) by investing in new product development to anticipate and exceed our customers’ expectations iv) to be uncompromising on quality and integrity v) by recruiting and retaining employees of the highest calibre enabling them to work in an inclusive and empowered environment and vi) by being performance orientated across the organisation.
Markets
Export accounts for 82% of total business (2022: 75%).
Results and review of the business
The profit and loss account is set out on page 14 and shows the company generated sales of £105.7 million (2022: 77.8 million ), an increase of 36% and profit before tax of £18.1 million (2022: 17.3 million ), an increase of 5%. At 31 December 2023, net assets were £205.9m (2022: £187.0m).
In order to support the directors' role to promote its long term success, the business at every level is operated under prudent and tightly managed controls. All costs and processes are under constant review and we look for efficiencies and savings wherever possible. Costs are analysed and reported monthly to keep overheads under control and protect margins.
2023 saw an increase in sales of 36% – mainly due to the increase of sales for the NAM market (Intercompany). Following the investment at the factory to supply the Retail market, external sales in that region increased by 18% in U-POL US. The Middle East and Africa markets also saw significant sales growth. We will continue to invest in our sales structure across the World, with future growth coming in particular from increasing our Market share in Retail Customers in North America. Further investment is planned in new products plus continual investment in our key facilities, equipment and in our employees to support this targeted growth. A new aerosol line was installed during 2022 which enabled us to further increase our sales in that category and continue in to 2023. Our net assets position remains strong year on year with significant working capital and liquidity.
Key performance indicators
The key financial performance indicators for the company, considered by the board, are turnover, profit before tax and net assets which have been discussed within the above section.
In addition to key financial performance indicators, the company also monitors a number of key non-financial performance indicators. As health and safety is considered paramount, the number of reported accidents is monitored across the year. During the period there were 21 reported accidents (2022: 15). Management's focus is on reducing health and safety incidents with a focus on staff training whilst also clearly emphasising to stakeholders within the business the importance of health and safety. The company also aims to maintain high service levels to customers. The target remains to achieve 97% on time in full delivery to customers during multiple periods.
Going concern
The financial statements have been prepared on a going concern basis which the directors consider to be appropriate. The directors have prepared forecasts for an appropriate look-forward period. In preparing those forecasts they have considered a plausible downside scenario in which, trading will continue at similar levels to that achieved during the year ended 31 December 2023 and have accordingly not incorporated expected sales growth. The directors also note that the company has positive cash, significant net current assets and net assets position as at the balance sheet date and as at the date of approving these financial statements. Consequently, the directors are confident that the company is in a robust financial position and 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.
The directors are of the opinion that the company has adopted a thorough risk management process that involves the formal review off all the risks identified below. The board monitors and reviews on a regular basis, in order to mitigate each risk area.
Market risk
The company operates in a competitive market where continuing growth is dependent upon consolidating on existing customer relationships and developing new income streams. U-POL has built strong customer relationships with key distributors in the most important markets in which we trade (UK, US, France, Australia, Poland, Middle East & Africa). Our key account management and marketing efforts within these markets ensures that our brands are an important part of our distribution partners offer in the automotive aftermarket space. U-POL’s heritage is in Automotive Body Filler’s but we have continued to deepen our relationships and partnerships with key customers by widening our offer and increasing our share of wallet through innovation. Predominantly this is through growing in the Paint aerosols category, and in Textured Protective Coatings with our RAPTOR brand.
How we grow the business is primarily through two key avenues. U-POL's historical strength is in the breadth of distribution partnerships in the ‘professional automotive aftermarket space’. In recent years, we have grown considerably in the ‘Retail automotive aftermarket’ space and this additional channel penetration will be a continued engine of growth over the next 3 to 4 years. Additionally, with the acquisition of U-POL by Axalta Coating Systems, we are able to leverage Axalta’s end-user (body-shop) relationships to drive more specification of U-POL’s products, which in turn will create more ‘pull’ of our product line through our traditional distribution partners. These are the two key strategic thrusts which will continue to deliver growth to U-POL over the next 3-4 years’
Economic downturn
The success of the business is reliant on consumer spending and an economic downturn, resulting in a reduction of consumer spending power, may have a direct impact on the income achieved by the company. In response to this risk, the company supplies into different jurisdictions so as to avoid reliance on any one location as far as possible.
Management also monitor economic conditions at national and global levels.
Raw material input costs and inflation
Commodity costs forming the company’s raw material inputs into products can fluctuate dependent upon global events. Management continually monitor input costs and seek to minimise the impact by forward purchasing and trading in multiple currencies. Where appropriate, product cost increases will be based onto the company’s customer base. To try and mitigate general inflationary pressures, the company looks to achieve economies of scale as far as possible, as a member of the Axalta Coating Systems Ltd international group through central procurement.
COVID-19
While the current financial year has been post-pandemic and largely unaffected, management continued to apply strong working capital practices in order to maximise operational cash flow. The directors continue to be confident in the ability of the company and the management team to navigate the uncertainties created by COVID-19, coupled with the financial strength and support that comes with the company being part of a significant, multi-national group, in Axalta Coating Systems Ltd.
Russia and Ukraine conflict
On 24 February 2022 Russian Forces entered Ukraine, resulting in western nation reactions including the announcement of sanctions against Russia and Russian interests worldwide and an economic ripple effect on the global economy. The directors have carried out an assessment of the potential impact on the business, including the risk of breaching any sanctions and have concluded that the greatest impact continues to be from the economic ripple effect on the global economy. Since the sanctions have been implemented, there has been limited activity with the company’s subsidiary investment, U-POL Russia LLC and always in accordance with sanction legislation.
Financial risk management objectives and policies
The company’s activities expose it to a number of financial risks including cash flow, credit and liquidity risks. These specific risks, their impact on the company and how these risks are mitigated are dealt with below. The company currently does not use derivatives to manage financial risk.
Cash flow risk
The company’s activities expose it to the financial risk of changes in foreign currency exchange rates. The company may consider the use foreign exchange forward contracts to hedge its exposures where appropriate, but have not adopted this in either the current or prior year, seeking to naturally hedge through the matching of the same foreign currency receipts and payments.
Credit risk
The company’s principal financial assets are bank balances, trade and other debtors and amounts due from group undertakings. Its credit risk is primarily attributable to its trade debtors. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The company maintains strong relationships with its customer base and has no significant concentration of credit risk, with exposure spread over a large number of customers.
The credit risk in liquid funds is limited because the counterparties are banks with credit ratings assigned by international credit ratings agencies.
Liquidity risk
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the company monitors the timing of cash flows and aligns this with its strategic planning. Forecasts are produced to assist management in identifying liquidity requirements and maintaining adequate resources. The company’s primary source of finance is the operating cash flow it generates.
Future developments
Given the development of the business during the year and its position within the marketplace, the directors believe the company is in a strong position to further develop its business and customer base, with the support and assistance of the Axalta Coating Systems Ltd group.
Environment
The company is committed to reducing the quantity of waste through its production process and has invested in capital equipment and revised processes in order to achieve this.
Streamlined Energy and Carbon Report (SECR)
UK energy use and associated greenhouse gas emissions
The company is pleased to report its current and historic UK based annual energy usage and associated annual greenhouse gas emissions pursuant to the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (“the 2018 Regulations”).
Organisational boundary
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. Therefore, energy use and emissions are aligned with financial reporting for the UK subsidiaries and exclude the non-UK based subsidiaries that would not qualify under the 2018 Regulations in their own right.
Reporting period
The annual reporting period is 1 January to 31 December each year and the emissions and energy reporting are aligned to this period.
Quantification and reporting methodology
This report was compiled independently by energy consultants LG Energy Group. The 2019 UK Government Environmental Reporting Guidelines and the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) were followed to ensure the Streamlined Energy and Carbon Reporting (“SECR”) requirements were met and exceeded where possible.
Electricity and gas consumption were based on invoice records, while mileage was used to calculate energy and emissions from fleet vehicles and grey fleet. Gross calorific values were used except for mileage energy calculations as per Government GHG Conversion Factors.
The emissions are divided into mandatory and voluntary emissions according to the 2018 Regulations, then further divided into the direct combustion of fuels and the operation of facilities (scope 1), indirect emissions from purchased electricity (scope 2) and further indirect emissions that occur as a consequence of company activities but occur from sources not owned or controlled by the organisation (scope 3).
Estimations
Estimates have been used where landlord and supplier invoices have not been available, but this is not expected to make a material impact. Where we occupy serviced office spaces, benchmarks have been used to estimate energy consumption due to the lack of metering or invoicing.
Breakdown of energy consumption used to calculate emissions (kWh): | Year ended 31 December 2023 | Year ended 31 December 2022 |
Gas | 1,511,060 | 1,170,992 |
LPG | 299,944 | - |
Electricity (grid) | 2,465,070 | 1,527,571 |
Transport fuel | 250,947 | 359,077 |
Total gross energy consumed | 4,527,021 | 3,057,541 |
Breakdown of emissions associated with the reported energy use (tCO₂e)
Breakdown of emissions associated with the reported energy use (tCO₂e) | Year ended 31 December 2023 | Year ended 31 December 2022 |
Scope 1 |
|
|
Gas | 276.4 | 223.0 |
LPG | 64.3 | - |
Company-owned vehicles | 45.7 | 57.8 |
Total Scope 1 | 386.4 | 280.8 |
Scope 2 |
|
|
Electricity (grid) | 510.5 | 295.4 |
Total Scope 2 | 510.5 | 295.4 |
Scope 3 |
|
|
Employee-owned vehicles where company purchases the fuel | 15.2 | 30.8 |
Total Scope 3 | 15.2 | 30.8 |
Total gross emissions | 912.0 | 607.0 |
In comparison to the previous financial period the company's total energy consumption has increased by 1,469.48 MWh or 48.1%, and our total greenhouse gas emissions have increased by 305.0 tCO2e or 50.2%. This is due to additional activity which has increased our turnover . However, the intensity ratio of million pounds of turnover has reduced by 9.6% which indicative good control over energy usage.
During this period, we have conducted energy surveys as part of our ESOS compliance with the aim of identifying energy conservation measures to be implemented in future financial periods.
Due to the differing manufacturing processes and mix of products, and the way in which manufacturing throughput is measured, we have chosen an intensity ratio of total gross emissions in metric tonnes CO2e per million pounds of turnover (tCO2e / £m).
This year, a secondary intensity ratio of total gross emissions in metric tonnes CO2e per square meter floor area was also included. We believe that these two metrics are considered the most relevant to the Company’s energy consuming activities and provides a good comparison of performance over time and across different organisations and sectors.
Intensity ratio
| Year ended 31 December 2023 | Year ended 31 December 2022 |
Tonnes of CO2e per £m | 7.05 | 7.80 |
Tonnes of CO2e per square meter floor area | 0.10 | 0.065 |
Utilities
Energy consumption expressed in kilowatt-hours has been taken from suppliers' invoices for electricity and natural gas. Location based kgCO2e/kWh conversion factors for the average UK grid supply have been used to calculate greenhouse gas emissions from electricity and natural gas consumption.
Transport
For company vehicles the mileage is recorded along with the engine size and fuel type. Staff also drive personal vehicles and are reimbursed through mileage claims. The engine size and fuel type of personal vehicles is not recorded. The kWh/mile and kgCO2e/mile conversion factors from the category "Cars (by size)" have been used to calculate greenhouse gas emissions and underlying energy use.
Other Fuels & Emissions:
LPG has been used in FLT during 2023. Maintenance records did not contain any instances of refrigerant leaks during the reference period. No other fugitive emissions have been identified.
The directors are aware of their duty under s.172 of the Companies Act 2006 to act in the way which they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and, in doing so, to have regard (amongst other matters) to:
The likely consequences of any decision in the long term;
The interests of the company’s employees;
The need to foster the company’s relationships with suppliers, customers and others;
The impact of the company’s operations on the community and the environment; and
The desirability of the company maintaining a reputation for high standards of business conduct.
The directors work to promote the success of the company, by considering the impact that their decisions may have on the company, along with the company’s stakeholders. The issues and factors which have guided the directors’ decisions are outlined in the ‘review of business’ and the ‘principal risks and uncertainties’ sections within this report.
Reputation is of key importance to the company and the directors who always consider reputational impact in taking decisions and encourages high standards of business conduct.
The company’s key stakeholders include, but are not limited to:
Employees;
Customers;
Suppliers; and
Local communities and environment in which the company is based
The directors of the company promote good governance, which is key to drive the success of the company. The directors also aim to achieve the overall strategic objectives of the U-POL group, as well as continuing good relationships with all key stakeholders who are critical to the long-term success of the company.
Having regard to employees’ interests
The board attaches great importance to the skills and experience of the management and employees of the company. Its aim is to retain the best talent and believes that they will benefit from the opportunities within the company. Opportunities for further professional and career development are on offer for employees through relevant training courses and qualifications.
The board is committed to consulting, as appropriate, with relevant employees and employee representatives on a regular basis and has worked hard to ensure effective communication with all employees during the year.
The company has a number of initiatives including a commitment to create a working environment where everyone has the opportunity to learn, develop and contribute to the success of the company, whilst working within a common set of values. Regular updates on business performance KPIs through various channels are provided and an element of employee reviews is linked to the financial success of the company, amongst other appraisal criteria. In addition, appropriate whistleblowing procedures are available that employees are comfortable using.
Further information on the company’s employee policies is contained within the directors’ report.
Fostering business relationships
The company aims to be to the first choice for customers’ needs, enabling them to enjoy the full value of their relationship with the business. The company builds long term customer relationships by providing unrivalled levels of service and an offering which is unmatched in its flexibility. We maintain strong relationships across our supply chain through regular contact and meetings with our suppliers. We encourage our customers and suppliers to raise any issues or concerns they have over their relationship with the company, incorporating all aspects (legal, commercial, operational etc.) and offering dedicated points of contact within our team to provide the building of long-term business relationships.
These relationships contribute to the company’s competitive advantage. They not only enable us to execute our strategy efficiently, but also help customers and suppliers plan their business, managing cash flow and production. The company also engages actively with suppliers to make sure they fully comply with our code of conduct for suppliers and partners, which includes provisions on human rights and environmental standards.
Impact on community and environment
The company values the communities in which it operates, and its aim is for its business activities to have a positive impact on them.
The company will continue to promote green technology and initiatives to protect our environment, as well as being a contributor to the economies it operates in. We continue to seek to reduce the environmental impact of our business. The business is committed to delivering a corporate social responsibility strategy that sets the overall aim to be environmentally responsible, a good neighbour and a great place to work
Maintaining high standards of business conduct
The directors are committed to operating the company in a responsible manner, operating with high standards of business conduct and good governance.
Research and development
The company purses a programme for the development of new products and enhancements of existing products. Costs incurred during the year were £1.5 million (2022: £1.4 million) and have been charged against profits.
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 14.
No ordinary dividends were paid (2022: nil). The directors do not recommend payment of a final dividend (2022: nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Future developments, research and development activities, engagement with suppliers, customers and others, financial risk management objectives and policies and disclosures concerning energy and carbon
The above items have been provided within the strategic report and form part of this report through cross-reference.
Overseas branches
The company has a South African branch.
Basis for 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
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 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.
As explained more fully in statement of directors' responsibilities, 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
UK Generally Accepted Accounting Practice
Companies Act 2006
Tax legislation (UK)
Health and safety legislation
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls
Revenue recognition
In addition to the above, the following procedures were performed to provide reasonable assurance that financial statements were free of material fraud or error:
Making enquiries of those charged with governance for reference to: breaches of law and regulations or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level and reasoning behind the company's procurement of legal and professional services;
Review of key documentation confirming ongoing compliance with health, safety and environmental requirements;
Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Performing audit work procedures confirming the completeness of revenue recognised within the financial statements, including tracing a sample of sales from the point of initiation through to the sales ledger, ensuring sales have been accurately recorded, and performing appropriate cut-off procedures at the year end;
Completion of appropriate checklists and use of our experience to assess the company's compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that 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 intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed 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 are to become aware of it.
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 profit and loss account has been prepared on the basis that all operations are continuing operations.
There are no recognised gains and losses in the current or prior year other than as included in the profit and loss account. Accordingly, no statement of other comprehensive income is presented.
U-POL Limited ("the company") is a private company limited by shares incorporated in England and Wales. The registered office is U-Pol Tech Centre Denington Road, Denington Industrial Estate, Wellingborough, Northamptonshire, United Kingdom, NN8 2QH. The principal activities of the company and the nature of its operations are set out in the strategic report on page 1.
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 £'000.
As a qualifying entity. the company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
The requirements of Section 7 Statement of Cash Flows and paragraph 3.17(d) in respect of presenting a statement of cash flows;
The requirements of paragraphs 11.42, 11.44. 11.45, 11.47. 11.48(a)(iii). 11.48(a)(iv), 11.48(b) and 11.48(c) in respect of certain basic financial instrument requirements; and
The requirements of paragraph 33.7 in respect of key management personnel compensation.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss. Land is not depreciated.
Basic financial assets, which include trade and other debtors, amounts owed by group undertakings 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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including trade and other creditors and amounts owed to group undertakings, 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. 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 company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs.
Interest receivable
Interest receivable is recognised in profit or loss using the effective interest method.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:
Management estimation is required to determine the appropriate asset lives over which to depreciate the company’s tangible fixed assets, in light of ongoing technological development and the company’s strategic plans. The depreciation policy is detailed in note 1.5, and the depreciation charged in the year is shown in note 12.
There are no other key judgements or sources of estimation in these financial statements.
The turnover of the company for the year has been achieved from its principal activity and single class of turnover, being product sales.
Other operating expenses of £829k (2022: Other operating income of £11,690k) relate to intercompany management service expenses/income.
The company pays the audit fees for all companies within the U-POL group as well as itself.
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 (2022: 1).
The actual (credit)/charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
For information on the prior year restatement please see note 2.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses:
Amounts due from group undertakings include a loan of £8,000,000 (2022: £8,000,000) on which accrues interest at 5.75% per annum. This loan is repayable on demand and unsecured.
The remaining amounts due from group undertakings are unsecured, interest free and repayable on demand.
Amounts owed to group undertakings include a loan of £300,000 (2022: £300,000) on which interest accrues at a rate of 5.7%. This loan is repayable on demand and unsecured.
The remaining amounts owed to group undertakings are unsecured, interest free and repayable on demand.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund. At 31 December 2023 there was no amounts outstanding in respect of this (2022: nil).
Profit and loss reserves
Profit and loss reserves represent cumulated retained profits and losses less cumulative dividends.
Foreign exchange reserve
The foreign exchange reserve represents cumulative translation differences in respect of aggregating the company's South Africa branch.
The other reserve represents the residual revaluation reserve on freehold property, crystallised on the company's transition to FRS 102. This reserve will be realised on disposal of the freehold property.
The company forms part of the UK group security arrangement under its intermediate parent company, Axalta Coating Systems UK Holding Limited, whereby the company's share capital and assets are secured in respect of UK financing from HSBC Bank PLC and Barclays Bank PLC.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
The company has taken advantage of the exemption available in accordance with Section 33 of FRS 102 ‘Related party disclosures’ not to disclose transactions entered into between two or more members of the group, as the company is a wholly owned subsidiary undertaking of the group which is party to the transaction.