Registered number: 01904504
DAY LEWIS MEDICAL LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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DAY LEWIS MEDICAL LIMITED
COMPANY INFORMATION
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Statutory Auditor & Chartered Accountants
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DAY LEWIS MEDICAL LIMITED
CONTENTS
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Independent Auditor's Report to the Members of Day Lewis Medical Limited
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Statement of Changes in Equity
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Notes to the Financial Statements
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DAY LEWIS MEDICAL LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2024
Day Lewis is the UK’s second largest independent pharmacy chain, with 255 pharmacies owned or managed (at 31 March 2024) across England.
The Group was founded in 1975 and remains a family owned entity, now managed in the second generation by Kirit Patel Jnr (Jay), Rupa Patel and Jayanti Patel Jnr (Sam). Day Lewis has developed strong relationships across the market and has unique insight and influence on factors affecting the pharmacy sector.
Day Lewis has developed two distinct, sustainable sides to its business; retail and distribution. Day Lewis Medical Limited's focus is on distribution.
Distribution
Day Lewis’s distribution business is a core part of the Group, delivering an alternative income stream to supplement the retail pharmacies.
The Group maximises margin by focussing heavily on its pharmaceutical distribution operations. Day Lewis holds all relevant MHRA Wholesaler Dealer Authorisations in order to distribute both prescription and over the counter medicines. The Group purchases from multiple pharmaceutical manufacturers and self distributes to its pharmacies in order to maximise margin wherever possible. In addition, Day Lewis distributes medicines in further external channels including the supply of generics to associated pharmacy retail groups and the global supply of medicines to offshore energy businesses, maritime, cruise and ambulance services.
In addition to the significant buying benefits delivered, the distribution business brings other significant benefits to the wider Group including:
• Security of drug supply
• Flexibility – the direct channel to end users allows Day Lewis to quickly move stock and react to market change • Share of profit further up the supply chain
• Access to overseas markets
Due to its position in the marketplace, long trading history and strength of relationships, Day Lewis has unique access to a wide range of drugs across Europe that it purchases for redistribution.
The Day Lewis Procurement and Distribution teams are highly experienced and knowledgeable providing the Group with an in depth understanding of market dynamics.
The Group's long term objectives are:
Driving growth
• To be the pharmacy destination of choice locally for prescriptions and services.
• To maintain a high-quality estate of community pharmacies.
• To grow the business in international markets.
• To diversify investment into other pharmacy related sectors.
Enhancing margins
• To improve purchasing mix of medicines between generic and branded products.
• To maintain efficient stock control and overall cost control.
• To increase professional services income.
Page 1
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DAY LEWIS MEDICAL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Principal risks and uncertainties
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Principal risks and uncertainties and risk management objectives and policies are managed by the Group.
Price risk
The Company, through its investments, is exposed to the inherent risks of economic and financial market developments, including recession, inflation, availability of affordable credit and currency fluctuations that could lower revenues.
Liquidity risk
The Company had cash of £17.4m (2023 - £2.9m) at the year end.
In September 2020, the Group entered into a long-term financing agreement with its banks. A Revolving Credit Facility (RCF) of £125m was agreed until at least 2023, which was subsequently extended to December 2025. The facility was voluntarily reduced to £110m in September 2021.
The Directors believe the Group has sufficient current and future cash reserves and facilities available to meet its liabilities and financing obligations for at least twelve months.
There is significant headroom in the banking covenants at 31 March 2024. At the year-end £100m (2023 - £95m) of the £110m facility was drawn down and additionally there were cash balances in the Group of £38.3m (2023 - £26m).
The Directors' assessment of the Group's and the Company's ability to adopt the going concern basis of accounting is set out in note 2.
Interest rate risk
The interest rate risk is significantly mitigated by an interest rate swap arrangement that was entered into in September 2020. Under this agreement interest is fixed at a rate of 0.088% for £40m of debt. The swap instrument is in place until September 2025. The balance of debt (£60m at 31 March 2024) is exposed to movements in SONIA.
Macroeconomic and political risk
The Group could be adversely affected by the impact of the current macroeconomic and political environment on key suppliers and customer groups.
The Group notes that the 5-year pharmacy funding deal expired on the 31st March 2024, and although no formal contract has been agreed beyond 31st March 2024 - discussions are ongoing, Day Lewis continues to be funded on broadly the same basis as 2023/24. Day Lewis expects the contract negotiations to conclude within the next few months following the conclusion of the recent General Election.
Over the past few years, the Group and industry has lobbied for additional funding to recognise the recent impact of inflation on operating costs. In May 2023 as part of the Primary Car Recovery Plan, the Government noted the critical role of Community Pharmacies and announced that they will be providing a further £645m additional funding to Community Pharmacy over the next 2 years. From 2023/2024 pharmacies have been providing prescription medications for those with common conditions and rolling out a contraception service to ease the burden on GP practices.
Page 2
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DAY LEWIS MEDICAL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Cash Flow Risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses interest rate swap contracts to hedge interest rate exposures. Foreign currency rates risk is mitigated by buying currency at spot and one month forward rate.
Where possible, interest bearing assets and liabilities are held at fixed rate to ensure certainty of cash flows.
Credit risk
The Group's principal financial assets are bank balances and cash, trade and other receivables. The credit risk on trade and other receivables is limited as the majority of the Group's retail exposure is with the Department of Health. Exposure to credit risk on wholesale customers is mitigated through credit insurance taken out on the wholesales debtor book. The amounts presented in the Balance Sheet are net of allowances for doubtful receivables. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
Financial key performance indicators
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Turnover in the year increased by £15.3m to £280.8m (2023 - £265.5m) with Gross Profit increasing by £9.2m to £35.1m (2023 - £25.9m) resulting in the gross margin to increase by 2.7% to 12.5%.
Total administrative costs have increased by £1.3m to £19.9m (2023 - £18.6m). A key driver for this has been the rise in headline inflation rates which has driven increases in staff costs, rent & rates and controllable costs.
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DAY LEWIS MEDICAL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Directors' statement of compliance with their duty to promote the success of the Company
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Section 172 of the Companies Act 2006 requires the Directors of the Company to act in the way that they consider, in good faith, would most likely promote the success of the Company for the benefit of its owners and stakeholders.
In doing so, section 172 requires a Director to have regard (amongst other matters) to:
a) The likely consequences of any decisions in the long-term.
b) The interests of the Company’s employees.
c) The need to foster the Company’s business relationships with suppliers, customers and others.
d) The impact of the Company’s operations on the community and the environment.
e) The desirability of the Company maintaining a reputation for high standards of business conduct.
f) The need to act fairly as between members of the Company.
Since the passing of Kirit Patel MBE in 2016, the business is led by Jay, Rupa, and Sam as joint Executive Directors. JC Patel Snr is still involved in an advisory role. Day Lewis remains a family owned entity with no plans to change this structure in the short or longer terms.
As with any other large organisation, the Executive Directors of Day Lewis delegate authority for the day to day management of the Group to the Senior Management Team and then engage management in setting, approving and overseeing execution of the business strategy and related policies.
The Executive Directors are also supported by a group of senior advisors with expertise in Finance, Banking, Commercial, HR, IT and Legal giving a wide range of insight experience. Day Lewis employs one non-executive Director.
The Wates Principles provides a framework for the Group to demonstrate how the Directors make decisions for the long-term success of the business and also how the Group comply with the requirements of Section 172 of the Companies Act.
The Executive Directors and the Senior Management Team provide supervision and guidance to the wider teams, making decisions concerning operational planning, evaluating performance, workforce planning, remuneration, and assessing pharmacy and business acquisitions and international expansion plans.
The Day Lewis Group runs monthly board meetings on all separate areas of the business, and also runs four sub-board committees specifically looking at People, Finance, IT and Risk Management Oversight.
Examples of actions taken in these board meetings are reviewing and making decisions on Pharmacy and Business acquisitions, reviewing historical investment plans, oversight on workplace H&S, patient safety, remuneration and bonus plans for operational staff, and carbon emission.
The Core Purpose of the Company is ‘to help people in the community stay healthy and feel better’. This is driven by the core values:
• To keep our caring family culture.
• To look after our customers.
• To be disciplined and professional.
• To be different through innovation.
• To reward, recognise and empower.
• To have fun.
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DAY LEWIS MEDICAL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Directors' statement of compliance with their duty to promote the success of the Company (continued)
Day Lewis is regularly recognised as a good place to work and during the year our pharmacy colleagues were recognised for many national awards. In recent years the Executive Directors have been presented with an Entrepreneurship Award at the European Pharmacists Forum, the Day Lewis Group was ranked 49th on the Sunday Times and Grant Thornton Top Track 250 List and individuals have been recognised within the industry for Team Innovation, Healthy Living Advice and a Public Health Pharmacist Award.
Relationships with universities have also developed further with the appointment of Teacher Practitioners at Bath, Reading, UCL, UEA and Sussex. Day Lewis are also supporting the development of a new pharmacy school in Plymouth. Day Lewis clearly recognises the importance of education for the next generation of pharmacists and healthcare leaders.
As part of Day Lewis' commitment to the community, pharmacies are encouraged to support local charities and sponsor local events and causes. Every year to mark the first day of Kirit & JC buying their first pharmacy, the support office, warehouses, and pharmacies across the country take part in the annual charity fun day, in which all teams are invited to participate. All teams participate in raising money for a local registered charity of their choice, to ensure that the Company as a whole is able to support as many charities as possible. Pharmacy teams and the support office raise money through fund-raising activities such as cake sales, raffles and recently throwing pies at directors. Over the last 5 years Day Lewis has donated over £500,000 to various charities.
The KCJC Foundation was set up by the Patel family in memory of the late Kirit Patel MBE. The foundation matches funds raised across the business, pound for pound.
In 2019 Day Lewis became founder patrons of 'Legacy', an OnSide Youth Zone providing a 21st century youth club in Croydon. Legacy provides a safe environment where young people can come and enjoy themselves and will enable young people to raise their aspirations and confidence to create a happier and healthier generation. During the current financial year many events have taken place in order to support this charity such as a Golf Day.
Greenhouse gas emissions, energy consumption and energy efficiency action
The Company is exempt from the Companies Act requirements of the Streamlined Energy and Carbon Reporting (SECR) on the basis that the Company's parent undertaking, Day Lewis Plc, has reported on behalf of the wider group.
The group accounts of Day Lewis Plc are available at Day Lewis House, 2 Peterwood Way, Croydon, Surrey CR0 4UQ.
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This report was approved by the board and signed on its behalf.
Mr J C Patel Snr
Director
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DAY LEWIS MEDICAL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The Directors present their report and the financial statements for the year ended 31 March 2024.
Directors' responsibilities statement
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The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The principal activity of the Company in the year under review continued to be that of distribution of pharmaceutical supplies.
The profit for the year, after taxation, amounted to £14m (2023 - £6.5m).
The Directors do not recommend the payment of a dividend for the year (2023 - £nil).
The Directors who served during the year were:
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DAY LEWIS MEDICAL LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Disclosure of information to auditor
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Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
∙the Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The auditor, KPMG LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
Mr J C Patel Snr
Director
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Page 7
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DAY LEWIS MEDICAL LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAY LEWIS MEDICAL LIMITED
Opinion
We have audited the financial statements of Day Lewis Medical Limited (“the Company”) for the year ended 31 March 2024 which comprise the Profit and Loss Account, Balance Sheet, Statement of Changes in Equity and related notes, including the accounting policies in note 2.
In our opinion the financial statements:
∙give a true and fair view of the state of the Company’s affairs as at 31 March 2024 and of its profit for the year then ended;
∙have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
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 Company 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 Company or to cease its operations, and as they have concluded that 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 its 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 Company’s business model and analysed how those risks might affect the 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 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 Company will continue in operation.
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DAY LEWIS MEDICAL LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAY LEWIS MEDICAL LIMITED
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 management as to the Company’s high-level policies and procedures to prevent and detect fraud, and the Company’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.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that Company management may be in a position to make inappropriate accounting entries.
On this audit we do not believe there is a fraud risk related to revenue recognition because:
∙Revenue is made up of high volume, low value transactions; and
∙There is minimal judgement for revenue recognition.
We did not identify any additional fraud risks.
We performed procedures including:
∙Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation. These included unexpected pairings with cash accounts and revenue accounts.
Identifying and responding to risks of material misstatement due to non-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, and through discussion with the Directors and other 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.
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DAY LEWIS MEDICAL LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAY LEWIS MEDICAL LIMITED
Firstly, the Company 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 Company 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 or the loss of the Company’s license to operate We identified the following areas as those most likely to have such an effect: Medicines and Healthcare Products Regulatory Agency (MHRA) legislation, General Pharmaceutical Council (GPhC) legislation, health and safety, data protection laws, anti-bribery, employment law, and certain aspects of company legislation recognising the financial and regulated nature of the Company’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 these 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.
Matters on which we are required to report by exception
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects.
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DAY LEWIS MEDICAL LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAY LEWIS MEDICAL LIMITED
Directors' responsibilities
As explained more fully in their statement set out on page 6, 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 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 Company or to cease operations, or have no realistic alternative but to do so.
Auditors' responsibilities
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.
Mark Sheppard (Senior statutory auditor)
for and on behalf of
KPMG LLP, Statutory Auditor
Chartered Accountants
Global House
High Street
Crawley
RH10 1DQ
9 August 2024
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DAY LEWIS MEDICAL LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2024
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Interest payable and similar expenses
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Profit for the financial year
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The notes on pages 15 to 28 form part of these financial statements.
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Page 12
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DAY LEWIS MEDICAL LIMITED
REGISTERED NUMBER: 01904504
BALANCE SHEET
AS AT 31 MARCH 2024
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Provisions for liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 15 to 28 form part of these financial statements.
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DAY LEWIS MEDICAL LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
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Comprehensive income for the year
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Total comprehensive income for the year
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
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Comprehensive income for the year
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Total comprehensive income for the year
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The notes on pages 15 to 28 form part of these financial statements.
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Page 14
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
Day Lewis Medical Limited (the “Company”) is a private Company limited by shares and incorporated, domiciled and registered in England in the United Kingdom. The address of the registered office is given on the Company Information page. The nature of the Company's operations and its principal activities are set out in the Strategic Report.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland, and the Companies Act 2006.
The functional currency of the Company is considered to be pounds sterling because that is the currency of the primary economic environment in which the Company operates. The financial statements are also presented in pounds sterling and are rounded to the nearest £000.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
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Financial Reporting Standard 102 - reduced disclosure exemptions
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The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102:
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and 26.23; and
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Day Lewis Plc, the immediate parent company, as at 31 March 2024 and these financial statements may be obtained from 2 Peterwood Way, Croydon, Surrey, CR0 4UQ.
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
In assessing the validity of the going concern basis, and taking account of reasonably plausible downsides, covering a period of at least 12 months from the date of approval of these financial statements, the Directors have considered the cash flow forecasts they have prepared for the period until December 2025. In doing so they have considered the level of bank facilities available to the parent company and the Group, and its compliance with bank covenant tests both during the period and for the period ahead. In July 2024, the parent company extended its existing £110m RCF finance facility with 4 banks until December 2025. The Company is a party as an obligor to the cross guarantees with respect of the Group facilities.
Having considered the Company’s financial forecasts and investment and financing commitments (including the downside scenario, increase in cost and interest rates), the Directors believe the Company has sufficient current and future cash reserves and facilities available for it to meet its liabilities, including financing obligations, for at least twelve months from the date of signing of these financial statements.
Having considered the above, the Directors conclude that it is appropriate to adopt the going concern basis of accounting because there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Turnover comprises revenue recognised by the Company in respect of goods and services supplied during the year, exclusive of Value Added Tax and trade discounts.
Sales to third parties are recognised as turnover when goods are dispatched, exclusive of Value Added Tax.
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Operating leases: the Company as lessor
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Rental income from operating leases is credited to the Profit and Loss Account on a straight-line basis over the lease term.
Amounts paid and payable as an incentive to sign an operating lease are recognised as a reduction to income over the lease term on a straight-line basis, unless another systematic basis is representative of the time pattern over which the lessor's benefit from the leased asset is diminished.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to the Profit and Loss Account on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Page 16
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Finance costs are charged to the Profit and Loss Account over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except:
∙The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date in the countries where the Company operates and generates income.
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Company can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Page 17
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
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Tangible fixed assets (continued)
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Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following basis:
Leasehold property - over period of lease
Plant and machinery - 10 - 33.3% straight-line
Motor Vehicles - 25% per annum on reducing balance
Fixtures and fittings - 15% per annum on reducing balance
The assets' residual values, useful lives and depreciation methods are reviewed and adjusted prospectively, if appropriate, if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Profit and Loss Account.
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a weighted average basis. Work in progress and finished goods include labour and attributable overheads.
At each Balance Sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in the Profit and Loss Account.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Page 18
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
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Provisions for liabilities
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Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the Profit and Loss Account in the year that the Company becomes aware of the obligation and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance Sheet.
Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
Increases in provisions are generally charged as an expense to profit or loss.
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a Director in the case of a small company, or a public benefit entity concessionary loan.
Investments in non-derivative instruments that are equity to the issuer are measured:
∙at fair value with changes recognised in the Profit and Loss Account if the shares are publicly traded or their fair value can otherwise be measured reliably;
∙at cost less impairment for all other investments.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Profit and Loss Account.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the
Page 19
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
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Financial instruments (continued)
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difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the Balance Sheet date.
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an 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.
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In the application of the Company's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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.
There are no critical judgements and estimations that the Directors have made in the process of applying the Company's accounting policies that have had a significant effect on the amounts recognised in the financial statements.
The whole of the turnover is attributable to distribution of pharmaceutical supplies.
Analysis of turnover by country of destination:
Page 20
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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The operating profit is stated after charging:
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Other operating lease rentals
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The audit fee was borne by the parent company, Day Lewis Plc, for the year ended 31 March 2024 and the prior year.
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Staff costs were as follows:
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Cost of defined contribution scheme
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The Company does not have any of its own employees by virtue of the fact that contracts of employment for employees within the Group are in the name of the parent company, Day Lewis Plc. Day Lewis Plc makes a recharge to the Company for the proportion of staff costs relating to time spent by Day Lewis Plc staff on the Company’s affairs. These staff costs are disclosed above.
Furthermore, all pension arrangements are operated by Day Lewis Plc, hence the company itself does not have any pension commitments.
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Page 21
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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Interest payable and similar expenses
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Other loan interest payable
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Origination and reversal of timing differences
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Page 22
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
10.Taxation (continued)
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Factors affecting tax charge for the year
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The tax assessed for the year is lower than (2023 - lower than) the standard rate of corporation tax in the UK of 25% (2023 - 19%). The differences are explained below:
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Profit multiplied by standard rate of corporation tax in the UK of 25% (2023 - 19%)
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Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
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Super deduction capital allowances
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Adjustments to tax charge in respect of prior periods
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Deferred tax prior year charge/(credit)
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Total tax charge for the year
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Factors that affected the tax charges
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An increase in the UK corporation tax rate from 19% to 25% was enacted, effective from 1 April 2023.
The UK deferred tax asset/(liability) as at 31 March 2024 was calculated at 25% (2023 - 25%).
Page 23
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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Charge for the year on owned assets
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Page 24
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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Finished goods and goods for resale
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Stock recognised as an expense in cost of sales during the year was £245,660k (2023 - £239,524k).
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Amounts owed by group undertakings
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Prepayments and accrued income
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The balances owed by group undertakings are repayable on demand.
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Cash and cash equivalents
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Page 25
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Accruals and deferred income
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The balances owed to group undertakings are repayable on demand.
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Financial assets measured at fair value
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Financial assets measured at amortised cost
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Financial liabilities measured at amortised cost
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Charged to the Profit and Loss Account
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Page 26
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
17.Deferred taxation (continued)
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The provision for deferred taxation is made up as follows:
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Accelerated capital allowances
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Allotted, called up and fully paid
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50,000 (2023 - 50,000) Ordinary shares of £1 each
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Profit and loss account
The Profit and Loss Account reserve represents cumulative profits or losses, net of dividends paid and other adjustments.
The Company is a party to intra-group cross guarantees in respect of bank borrowing within the Group, including providing unlimited inter-company guarantees supported by legal charges over various properties and other respective associated assets. The total value of bank borrowings in the Group was £103,847k (2023 - £99,109k) at the year end.
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Commitments under operating leases
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At 31 March 2024, the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Page 27
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DAY LEWIS MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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Related party transactions
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The Company has taken advantage of the exemption in section 33 of FRS102 from the requirement to disclose transactions with Group companies on the grounds that consolidated financial statements are prepared by the immediate parent company.
During the year, the Company purchased goods totalling £330,720 (2023 - £82,083) from Quadrant Pharmaceuticals Limited. The executors of the Kirit Patel Estate have a material interest in this company. At the year end the balance outstanding from Quadrant Pharmaceuticals Limited was £41,601 (2023 - £17,430).
During the year, the Company sold goods totalling £2,280,618 (2023 - £2,332,830) to Health Counter Limited, a company under common control. The Company recharged expenses of £218,974 (2023 - £296,675) paid on behalf of Health Counter Limited. Included in other creditors as an amount owed by the Company is £14,014 (2023 - £15,131). Included in trade debtors as an amount owed to the Company is £127,102 (2023 - £233,793).
During the year, the Company purchased goods totalling £2,561,238 (2023 - £1,893,387) from Maxearn Limited. The executors of the Kirit Patel Estate have a material interest in this company. At the year end the balance owed to Maxearn Limited was £93,255 (2023 - £57,009).
During the year the Company paid rent totalling £958,291 (2023 - £586,247) to QH Estates Limited, a company in which the executors of the Kirit Patel Estate, K C Patel Jnr and J C Patel Jnr have an interest. At the year end the Company owed £265,823 (2023 - £175,901) to QH Estates Limited.
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The Company's immediate parent company is Day Lewis Plc, a company registered in England and Wales. It prepares group financial statements which are available at Day Lewis House, 2 Peterwood Way, Croydon, Surrey CR0 4UQ.
The smallest and largest group in which the results of the Company and its group are consolidated in publicly available group financial statements is that headed by Day Lewis Plc, Day Lewis House, 2 Peterwood Way, Croydon, Surrey, CR0 4UQ.
The ultimate parent company is Day Lewis Holdings Limited, a company registered in Cyprus and controlled by the KCTP Will Trust.
Copies of the ultimate parent's financial statements are not publicly available.
Page 28
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