Company registration number 01968900 (England and Wales)
THE TOOL CONNECTION LIMITED
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
THE TOOL CONNECTION LIMITED
COMPANY INFORMATION
Directors
Mr E G Altham
Mr M Blackbourn
Mr M A Bamford
Mr M Softley
Company number
01968900
Registered office
36 Lichfield Street
Walsall
West Midlands
UK
WS1 1TJ
Auditor
DKR Audit Services Ltd
36 Lichfield Street
Walsall
West Midlands
UK
WS1 1TJ
Business address
Unit 2
Kineton Road
Southam
Warwickshire
West Midlands
UK
CV47 0DR
Bankers
Bank of Scotland
Coventry Business Centre
22 High Street
Coventry
England
CV1 5QX
Solicitors
Wright Hassell LLP
Olympus Avenue
Leamington Spa
Warwickshire
England
CV34 6BF
THE TOOL CONNECTION LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2 - 3
Independent auditor's report
4 - 6
Profit and loss account
7
Group statement of comprehensive income
8
Group balance sheet
9
Company balance sheet
10
Group statement of changes in equity
11
Company statement of changes in equity
12
Group statement of cash flows
13
Notes to the financial statements
14 - 38
THE TOOL CONNECTION LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Review of the business

Following on from the challenges faced in 2022, the group has focused its aims and exceeded turnover during the year. Turnover has increased from £19.69m in 2022 to £21.74m in 2023, an increase of 10.40%. The group continues to support it’s expansion of its product range, and has seen an increase of 2.26% in export sales.

 

Overall turnover has increased, with pre-tax profits increasing from £1.57m in 2022 to £2.38m in 2023. Gross profit margin has increased from 54.73% in 2022 to 56.14% in 2023. The group continues to invest in the business and reduced levels of borrowing during the year. The balance sheet has continued to strengthen, with group net assets increasing from £27.23m to £28.84m.

 

The group's engineering sub-subsidiary continues to support the group, by designing and producing innovative tools and is a key part of the group's future plans. This year, the sub-subsidiary turnover increased by 13.14%.

 

The group has sought to mitigate risks by reviewing costs and overheads, taking a cautious and prudent approach to future growth and maintaining a strong balance sheet.

 

Overall, the year has reported a strong set of trading results considering the challenges faced in 2023. The group is expected to build on this into the future.

 

Principal risks and uncertainties

Risk management is overseen by the board of directors and is constantly reviewed to comply with statutory regulations and best practice.

 

The principal general economic risks include continuing rising costs, the stability of foreign exchange rates including the Euro and US Dollar, wages legislation and any changes in customs regulations. The principal IT risks include online presence and the impact of any major loss or corruption of data, relating to purchases, payroll, sales or stock control, resulting from operating in a highly computerised environment.

 

The directors believe that the group has little exposure in relation to cashflow and liquidity risk, but has some risk in relation to credit, should there continue to be any further increases to the Bank of England base rate. It shares similar competitive risks to other manufacturing industries, who suffer from fluctuations in global prices and demand, often stimulated by political and environmental issues.

Key performance indicators

The directors believe that the performance markers under the Review of Business above, provide a measure of how the group performed against its primary objectives.

 

The balance sheet has continued to strengthen with group net assets increasing from £27.23m to £28.84m, benefiting our stakeholders.

On behalf of the board

Mr E G Altham
Director
20 August 2024
THE TOOL CONNECTION LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company and group continued to be that of tool wholesalers, tool manufacturers and general engineering works.

Results and dividends

The results for the year are set out on page 7.

An interim dividend of £10.58 per share on the Ordinary £1 shares was paid during the year.

 

Total ordinary dividends were paid amounting to £200,000. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr E G Altham
Mr M T Smith
(Deceased 22 July 2024)
Mr M Blackbourn
Mr M A Bamford
Mr M Softley
Qualifying third party indemnity provisions

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.

Auditor

The auditor, DKR Audit Services Ltd, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of directors' responsibilities

The directors are responsible for preparing the Annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

THE TOOL CONNECTION LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

Medium-sized companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

On behalf of the board
Mr E G Altham
Director
20 August 2024
THE TOOL CONNECTION LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF THE TOOL CONNECTION LIMITED
- 4 -
Opinion

We have audited the financial statements of The Tool Connection Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

THE TOOL CONNECTION LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF THE TOOL CONNECTION LIMITED
- 5 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

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.

 

Based on our understanding of ·the company and its industry, we considered that non-compliance with the

following laws and regulations might have a material effect on the financial statements: employment regulation, health and safety regulation, anti-money laundering regulation.

 

To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:

 

THE TOOL CONNECTION LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF THE TOOL CONNECTION LIMITED
- 6 -

We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as: tax legislation, pension legislation, the Companies Act 2006.

 

In addition, we evaluated the directors' and management's incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to revenue recognition, which we pinpointed the cut-off assertion and significant one-off or unusual transactions.

Our audit procedures in relation to fraud included but were not limited to:

 

 

There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Babar Mahmood BA (Hons) ACA
For and on behalf of
20 August 2024
DKR Audit Services Ltd
Chartered Accountants
Statutory Auditor
36 Lichfield Street
Walsall
West Midlands
UK
WS1 1TJ
THE TOOL CONNECTION LIMITED
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
2023
2022
Notes
£
£
Turnover
3
21,740,590
19,692,649
Cost of sales
(9,534,826)
(8,914,068)
Gross profit
12,205,764
10,778,581
Administrative expenses
(10,092,945)
(9,211,646)
Other operating income
413,064
1,000
Exceptional item
4
(187,333)
-
0
Operating profit
5
2,338,550
1,567,935
Interest receivable and similar income
9
190,549
23,351
Interest payable and similar expenses
12
(146,060)
(25,336)
Profit before taxation
2,383,039
1,565,950
Tax on profit
10
(560,885)
(269,730)
Profit for the financial year
29
1,822,154
1,296,220
Profit for the financial year is all attributable to the owner of the parent company.
THE TOOL CONNECTION LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
£
£
Profit for the year
1,822,154
1,296,220
Other comprehensive income
Cash flow hedges gain arising in the year
-
0
-
0
Tax relating to other comprehensive income
(13,379)
-
0
Total comprehensive income for the year
1,808,775
1,296,220
Total comprehensive income for the year is all attributable to the owner of the parent company.
THE TOOL CONNECTION LIMITED
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
13
4,038
5,384
Tangible assets
14
7,308,833
6,792,889
7,312,871
6,798,273
Current assets
Stocks
17
11,384,279
10,625,882
Debtors
18
3,792,503
3,495,532
Cash at bank and in hand
9,466,771
9,413,066
24,643,553
23,534,480
Creditors: amounts falling due within one year
19
(2,241,336)
(2,181,437)
Net current assets
22,402,217
21,353,043
Total assets less current liabilities
29,715,088
28,151,316
Creditors: amounts falling due after more than one year
20
(505,676)
(657,194)
Provisions for liabilities
Deferred tax liability
24
372,706
266,191
(372,706)
(266,191)
Net assets
28,836,706
27,227,931
Capital and reserves
Called up share capital
26
18,910
18,910
Revaluation reserve
27
267,449
280,828
Capital redemption reserve
28
2,090
2,090
Profit and loss reserves
29
28,548,257
26,926,103
Total equity
28,836,706
27,227,931

These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.

The financial statements were approved by the board of directors and authorised for issue on 20 August 2024 and are signed on its behalf by:
20 August 2024
Mr E G Altham
Director
Company registration number 01968900 (England and Wales)
THE TOOL CONNECTION LIMITED
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
2023-12-31
- 10 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
14
5,705,736
5,406,673
Investments
15
300,104
300,104
6,005,840
5,706,777
Current assets
Stocks
17
10,675,132
9,947,352
Debtors
18
5,580,048
5,142,796
Cash at bank and in hand
9,425,956
9,350,123
25,681,136
24,440,271
Creditors: amounts falling due within one year
19
(1,876,935)
(1,861,194)
Net current assets
23,804,201
22,579,077
Total assets less current liabilities
29,810,041
28,285,854
Creditors: amounts falling due after more than one year
20
(448,352)
(538,738)
Provisions for liabilities
Deferred tax liability
24
150,616
141,926
(150,616)
(141,926)
Net assets
29,211,073
27,605,190
Capital and reserves
Called up share capital
26
18,910
18,910
Capital redemption reserve
28
2,090
2,090
Profit and loss reserves
29
29,190,073
27,584,190
Total equity
29,211,073
27,605,190

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,805,883 (2022 - £1,442,902 profit).

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

The financial statements were approved by the board of directors and authorised for issue on 20 August 2024 and are signed on its behalf by:
20 August 2024
Mr E G Altham
Director
Company registration number 01968900 (England and Wales)
THE TOOL CONNECTION LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
Share capital
Revaluation reserve
Capital redemption reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
Balance at 1 January 2022
18,910
280,828
2,090
25,829,883
26,131,711
Year ended 31 December 2022:
Profit and total comprehensive income
-
-
-
1,296,220
1,296,220
Dividends
11
-
-
-
(200,000)
(200,000)
Balance at 31 December 2022
18,910
280,828
2,090
26,926,103
27,227,931
Year ended 31 December 2023:
Profit for the year
-
-
-
1,822,154
1,822,154
Other comprehensive income:
Tax relating to other comprehensive income
-
(13,379)
-
-
0
(13,379)
Total comprehensive income
-
(13,379)
-
1,822,154
1,808,775
Dividends
11
-
-
-
(200,000)
(200,000)
Balance at 31 December 2023
18,910
267,449
2,090
28,548,257
28,836,706
THE TOOL CONNECTION LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
Share capital
Capital redemption reserve
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 January 2022
18,910
2,090
26,341,287
26,362,287
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
-
1,442,903
1,442,903
Dividends
11
-
-
(200,000)
(200,000)
Balance at 31 December 2022
18,910
2,090
27,584,190
27,605,190
Year ended 31 December 2023:
Profit and total comprehensive income
-
-
1,805,883
1,805,883
Dividends
11
-
-
(200,000)
(200,000)
Balance at 31 December 2023
18,910
2,090
29,190,073
29,211,073
THE TOOL CONNECTION LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
33
1,948,575
627,055
Interest paid
(146,060)
(25,336)
Income taxes paid
(482,132)
(285,000)
Net cash inflow from operating activities
1,320,383
316,719
Investing activities
Purchase of intangible assets
-
(6,730)
Purchase of tangible fixed assets
(1,126,352)
(602,735)
Proceeds from disposal of tangible fixed assets
220,483
79,150
Repayment of loans
-
131,014
Interest received
190,549
23,351
Net cash used in investing activities
(715,320)
(375,950)
Financing activities
Repayment of bank loans
(94,681)
(95,302)
Purchase of derivatives
(165,760)
141,518
Payment of finance leases obligations
(90,917)
(83,929)
Dividends paid to equity shareholders
(200,000)
(200,000)
Net cash used in financing activities
(551,358)
(237,713)
Net increase/(decrease) in cash and cash equivalents
53,705
(296,944)
Cash and cash equivalents at beginning of year
9,413,066
9,710,010
Cash and cash equivalents at end of year
9,466,771
9,413,066
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
1
Accounting policies
Company information

The Tool Connection Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 36 Lichfield Street, Walsall, West Midlands, UK, WS1 1TJ.

 

The principal place of business for the company is Kineton Road, Southam, Warwickshire, UK, CV47 0DR.

 

The group consists of The Tool Connection Limited and all of its subsidiaries.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets, measured at fair value. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

 

1.2
Business combinations

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

 

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company The Tool Connection Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

 

All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

1.4
Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.5
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

 

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

1.6
Intangible fixed assets - goodwill

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is five years.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
1.7
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Software
20% on cost
1.8
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Freehold land and buildings
2% on cost
Leasehold land and buildings
Straight line basis over the lease term
Plant and machinery
10% on cost
Warehouse equipment and fittings
10% on cost
Computers
33% on cost and 25% on cost
Motor vehicles
25% on reducing balance and 25% on cost
Office equipment
10% on cost

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the land and buildings is usually considered to be their market value.

 

Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and loss are recognised in profit or loss.

Although there is a policy of providing depreciation at 2% on cost to freehold property, depreciation has only been provided on one property in the year, whilst no depreciation has been provided on the other property, because the residual value is equivalent to the market value of the property. This policy will be reviewed each year and provision will be made should the amount be considered material.

 

The carrying amount of any replaced components is derecognised. Repairs and maintenance costs are expensed as incurred.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
1.9
Fixed asset investments

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

 

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

1.10
Impairment of fixed assets

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.11
Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

 

Stocks are valued using the average unit cost method where the stock is manufactured and on a first-in first-out basis where the stock is bought in as raw material or goods for resale. Net realisable value is the estimated selling price less further costs expected to be incurred to completion and disposal. Provision is made for slow moving, obsolete and defective items where appropriate.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss, with none made.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
1.12
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.13
Financial instruments

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

1.14
Derivatives

The group uses forward foreign currency contracts to reduce its exposure to risk arising from changes in foreign exchange values.

 

Derivative financial instruments are initially recognised at fair value on the date the contract is entered into. Such instruments are then subsequently measured at fair value with changes in fair value being recognised in the profit or loss within finance income or expense as appropriate. The company does not use hedge accounting for foreign exchange derivative financial instruments.

 

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

 

1.15
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 20 -
Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.16
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.17
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.18
Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

 

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 21 -
1.19
Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

 

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

1.20
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

1.21

Patents

Expenditure on registering patents is charged to the profit and loss account as incurred.

2
Judgements and key sources of estimation uncertainty

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 22 -
Key sources of estimation uncertainty

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.

Useful economic lives of tangible assets

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.

Stocks

The group makes an estimate of the provision for obsolete and slow moving items within total stocks. When assessing the value of the provision, management considers factors including the physical condition and age of stocks, the quantity of stocks held; the saleability of the stocks and historical experience of the warehouse staff.

Impairment of debtors

The group makes an estimate of the recoverable value of trade debtors. When assessing impairment of trade debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors, levels of sales rebates and historical experience.

Tax

The group makes an estimate of the provision for the research and development enhancement claim. This provision is estimated based on the amount received in the previous financial year.

3
Turnover and other revenue

The turnover and profit before taxation are attributable to the one principal activity of the group.

 

An analysis of the group's turnover is as follows:

2023
2022
£
£
Turnover analysed by class of business
Automotive sector tooling
21,740,590
19,692,649
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
16,787,551
14,871,000
Europe
4,672,885
4,547,680
Rest of World
280,154
273,969
21,740,590
19,692,649
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
3
Turnover and other revenue
(Continued)
- 23 -
2023
2022
£
£
Other revenue
Interest income
190,549
23,351
Grants received
-
1,000
4
Exceptional item
2023
2022
£
£
Income
Insurance income receivable
411,450
-
Expenditure
Profit or loss on disposal of tangible assets
187,333
-

During the year, the company's warehouse was damaged by a fire, resulting in machinery being destroyed, As a result, compensation of £411,450 was received from the insurers to enable two pieces of replacement machinery to be purchased.

 

Profit or loss on disposal of tangible assets amounting to £187,333 represents the net book value of the machinery that was destroyed.

 

The compensation and profit or loss on disposal of tangible assets have been included as exceptional items within the income statement.

5
Operating profit
2023
2022
£
£
Operating profit for the year is stated after charging/(crediting):
Exchange (gains)/losses
(240,772)
147,893
Government grants
-
(1,000)
Depreciation of owned tangible fixed assets
377,954
283,170
Depreciation of tangible fixed assets held under finance leases
13,101
47,118
Profit on disposal of tangible fixed assets
(1,130)
(28,521)
Amortisation of intangible assets
1,346
1,346
Operating lease charges
101,510
181,851
6
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
8,870
6,250
Audit of the financial statements of the company's subsidiaries
4,995
4,750
13,865
11,000
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
7
Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
Office and management staff
97
99
86
89
Warehouse staff
51
44
51
44
Production staff
22
20
-
-
Total
170
163
137
133

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£
£
£
£
Wages and salaries
4,945,291
4,648,340
4,067,167
3,824,184
Social security costs
532,529
471,231
457,391
394,845
Pension costs
245,774
225,244
205,692
189,010
5,723,594
5,344,815
4,730,250
4,408,039
8
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
593,331
559,949
Company pension contributions to defined contribution schemes
25,487
24,675
618,818
584,624

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2022 - 4).

Remuneration disclosed above includes the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
243,219
248,868
Company pension contributions to defined contribution schemes
12,913
13,252

It is considered that the directors are the key management personnel and accordingly the remuneration of key management personnel is the remuneration as disclosed for the directors.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
9
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
190,549
23,351
2023
2022
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
190,549
23,351
10
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
466,919
216,211
Deferred tax
Origination and reversal of timing differences
38,327
53,519
Changes in tax rates
55,639
-
0
Total deferred tax
93,966
53,519
Total tax charge
560,885
269,730

The actual 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:

2023
2022
£
£
Profit before taxation
2,383,039
1,565,950
Expected tax charge based on the standard rate of corporation tax in the UK of 23.38% (2022: 19.00%)
557,155
297,531
Tax effect of expenses that are not deductible in determining taxable profit
(448)
(1,767)
Effect of change in corporation tax rate
55,639
-
Group relief
(17,501)
-
0
Permanent capital allowances in excess of depreciation
(33,960)
(8,456)
Research and development tax credit
-
0
(17,578)
Taxation charge
560,885
269,730
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
10
Taxation
(Continued)
- 26 -

In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

2023
2022
£
£
Deferred tax arising on:
Revaluation of property
13,379
-
11
Dividends
2023
2022
Recognised as distributions to equity holders:
£
£
Interim paid
200,000
200,000
12
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
28,378
22,886
Fair value loss on financial instruments
110,291
(8,935)
138,669
13,951
Other finance costs:
Interest on finance leases and hire purchase contracts
7,391
10,474
Other interest
-
911
Total finance costs
146,060
25,336
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
13
Intangible fixed assets
Group
Goodwill
Software
Total
£
£
£
Cost
At 1 January 2023 and 31 December 2023
593,846
6,730
600,576
Amortisation and impairment
At 1 January 2023
593,846
1,346
595,192
Amortisation charged for the year
-
0
1,346
1,346
At 31 December 2023
593,846
2,692
596,538
Carrying amount
At 31 December 2023
-
0
4,038
4,038
At 31 December 2022
-
0
5,384
5,384
The company had no intangible fixed assets at 31 December 2023 or 31 December 2022.

The intangible assets detailed above represents computer software purchased by the subsidiary company, Eldon Tool and Engineering Limited, during 2022 and is being amortised over it's useful economic life of five years.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 28 -
14
Tangible fixed assets
Group
Freehold land and buildings
Leasehold land and buildings
Plant and machinery
Warehouse equipment and fittings
Computers
Motor vehicles
Office equipment
Total
£
£
£
£
£
£
£
£
Cost or valuation
At 1 January 2023
5,350,000
265,566
1,208,889
1,310,040
635,702
968,463
151,208
9,889,868
Additions
-
0
259,000
445,153
68,953
52,702
295,722
4,822
1,126,352
Disposals
-
0
-
0
(312,500)
-
0
-
0
(105,555)
-
0
(418,055)
At 31 December 2023
5,350,000
524,566
1,341,542
1,378,993
688,404
1,158,630
156,030
10,598,165
Depreciation and impairment
At 1 January 2023
13,999
14,856
811,087
830,495
576,871
712,378
137,293
3,096,979
Depreciation charged in the year
13,999
20,378
82,444
80,131
59,207
129,949
4,947
391,055
Eliminated in respect of disposals
-
0
-
0
(125,167)
-
0
-
0
(73,535)
-
0
(198,702)
At 31 December 2023
27,998
35,234
768,364
910,626
636,078
768,792
142,240
3,289,332
Carrying amount
At 31 December 2023
5,322,002
489,332
573,178
468,367
52,326
389,838
13,790
7,308,833
At 31 December 2022
5,336,001
250,710
397,802
479,545
58,831
256,085
13,915
6,792,889
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
14
Tangible fixed assets
(Continued)
- 29 -
Company
Freehold land and buildings
Leasehold land and buildings
Warehouse equipment and fittings
Computers
Motor vehicles
Office equipment
Total
£
£
£
£
£
£
£
Cost or valuation
At 1 January 2023
4,400,000
265,566
1,208,270
553,582
941,896
151,208
7,520,522
Additions
-
0
259,000
14,661
31,359
295,722
4,822
605,564
Disposals
-
0
-
0
-
0
-
0
(105,555)
-
0
(105,555)
At 31 December 2023
4,400,000
524,566
1,222,931
584,941
1,132,063
156,030
8,020,531
Depreciation and impairment
At 1 January 2023
-
0
14,856
778,771
497,118
685,811
137,293
2,113,849
Depreciation charged in the year
-
0
20,378
66,872
52,335
129,949
4,947
274,481
Eliminated in respect of disposals
-
0
-
0
-
0
-
0
(73,535)
-
0
(73,535)
At 31 December 2023
-
0
35,234
845,643
549,453
742,225
142,240
2,314,795
Carrying amount
At 31 December 2023
4,400,000
489,332
377,288
35,488
389,838
13,790
5,705,736
At 31 December 2022
4,400,000
250,710
429,499
56,464
256,085
13,915
5,406,673
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 30 -

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Group
Company
2023
2022
2023
2022
£
£
£
£
Plant and machinery
104,812
305,246
-
0
-
0

Freehold land and buildings in the company with a carrying amount of £4,400,000 (2022: £4,400,000) have been held as security for the bank loans by means of legal charges, and debentures securing fixed and floating charges - refer to note 22 for full details.

Freehold land and buildings in a subsidiary were revalued at 31 December 2021 by Fowler Sandford Chartered Surveyors, independent valuers not connected with the company on the basis of market value, at a value of £950,000. This valuation consisted of land at £250,000 and property of £700,000.

 

For the year-ending 31 December 2023, in the director's view the value of the property is not materially different to the value held in the accounts.

The revaluation surplus is disclosed in note 27.

If the revaluation model had not been used in previous years, then the historical cost of the freehold land and property in the group at 31 December 2022 would have been £4,890,186 (2021: £4,890,186).

15
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
16
-
0
-
0
300,104
300,104
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023 and 31 December 2023
300,104
Carrying amount
At 31 December 2023
300,104
At 31 December 2022
300,104
16
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
16
Subsidiaries
(Continued)
- 31 -
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Indirect
Eldon Tool Company Limited
United Kingdom
Investment
Ordinary
100.00
-
Power-Tec Automotive Equipment Ltd
United Kingdom
Tool wholesale
Ordinary
100.00
-
Eldon Engineering Co. Limited
United Kingdom
Dormant
Ordinary
100.00
-
Eldon Tool and Engineering Limited
United Kingdom
Engineering company
Ordinary - indirect holding
0
100.00
Eldon Flow Equipment Limited
United Kingdom
Dormant
Ordinary - indirect holding
0
100.00
Laser Tools Racing Ltd
United Kingdom
Dormant
Ordinary
100.00
-
The aggregate capital and reserves and the result for the year of the subsidiaries noted above was as follows:
Name of undertaking
Capital and Reserves
Profit/(Loss)
£
£
Eldon Tool Company Limited
333,117
-
0
Power-Tec Automotive Equipment Ltd
2
-
0
Eldon Engineering Co. Limited
2
-
0
Eldon Tool and Engineering Limited
249,184
4,666
Eldon Flow Equipment Limited
99
-
0
Laser Tools Racing Ltd
100
-
0

All of the above subsidiaries are included in the consolidation.

17
Stocks
Group
Company
2023
2022
2023
2022
£
£
£
£
Finished goods and goods for resale
11,384,279
10,625,882
10,675,132
9,947,352

There is no significant difference between the replacement cost of stock and its carrying value.

The amount of stock recognised as an expense in cost of sales during the year was £9,287,099 (2022: £8,782,749 ).

Stocks in the company of £10,675,132 (2022: £9,947,352 ) have been held as security for the bank loans by means of debentures securing fixed and floating charges - refer to note 22 for full details.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 32 -
18
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Trade debtors
3,217,403
3,228,192
3,174,430
3,127,183
Amounts owed by group undertakings
-
-
1,846,212
1,757,838
Other debtors
11,156
14,379
10,597
14,283
Prepayments and accrued income
557,562
245,748
548,809
243,492
3,786,121
3,488,319
5,580,048
5,142,796
Deferred tax asset (note 24)
6,382
7,213
-
0
-
0
3,792,503
3,495,532
5,580,048
5,142,796

Trade debtors in the company of £3,174,430 (2022: £3,127,184) have been held as security for the bank loans by means of debentures securing fixed and floating charges - refer to note 22 for full details.

 

Amounts owed by group undertakings are unsecured and repayable on demand. Interest is received from one of the group undertakings.

19
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Bank loans
22
92,732
97,027
92,732
97,027
Obligations under finance leases
23
23,238
53,023
-
0
-
0
Trade creditors
1,087,191
1,089,287
818,536
893,763
Amounts owed to group undertakings
-
0
-
0
4
4
Corporation tax payable
127,788
143,002
127,788
143,002
Other taxation and social security
350,295
157,749
309,945
108,177
Derivative financial instruments
-
0
165,760
-
0
165,760
Other creditors
368,943
309,634
360,615
301,014
Accruals and deferred income
191,149
165,955
167,315
152,447
2,241,336
2,181,437
1,876,935
1,861,194

At 31 December 2022, there were outstanding pension contributions of £37,448 (2022: £33,833) which were included within other creditors and paid by the relevant entities within the group in January 2023.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 33 -
20
Creditors: amounts falling due after more than one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Bank loans and overdrafts
22
448,352
538,738
448,352
538,738
Obligations under finance leases
23
57,324
118,456
-
0
-
0
505,676
657,194
448,352
538,738
Amounts included above which fall due after five years are as follows:
Payable by instalments
73,535
149,909
73,535
149,909
21
Financial instruments
Group
Company
2023
2022
2023
2022
£
£
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
3,228,559
3,239,623
5,006,155
4,896,356
Carrying amount of financial liabilities
Measured at fair value through profit or loss
- Other financial liabilities
-
165,760
-
165,760
Measured at amortised cost
2,268,929
2,372,120
1,862,470
1,982,993

The company and group gains and losses are recognised in the profit or loss in respect of financial instruments and are summarised as above, as liabilities measured at fair value.

 

Forward foreign currency contracts are valued using quoted forward exchange rates and yield curves which are derived from interest rates matching maturities of the contracts. There were no interest swaps in existence at the reporting date (2022: £Nil).

22
Loans and overdrafts
Group
Company
2023
2022
2023
2022
£
£
£
£
Bank loans
541,084
635,765
541,084
635,765
Payable within one year
92,732
97,027
92,732
97,027
Payable after one year
448,352
538,738
448,352
538,738
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
22
Loans and overdrafts
(Continued)
- 34 -

Bank loans

 

As at 31 December 2023, there are secured bank loan debts in the group of £541,084 (2022: £635,765). These are all held by the parent company.

 

The Bank of Scotland holds: a legal charge over the company's premises at Units 1 and 2 Bourne End, Kineton Road, Southam, Warwickshire; a legal charge over the company's premises at Units 1, 2 and 3 Gainsborough Trading Estate, Southam, Warwickshire; and a debenture over all sums over the undertaking and all property and assets.

 

Lloyds Bank Commercial Finance Limited holds: an all assets debenture over the undertaking and all property and assets; and a book debts debenture over the undertaking and all property and assets.

 

There is a ranking agreement in place between Bank of Scotland and Lloyds Bank Commercial Finance Limited.

Type of Loan

Maturity

Interest

 

2023

 

2022

 

 

Date

Rate

 

£

 

£

 

 

 

 

 

 

 

 

 

Bank loan - variable 1.45% over base

2026

4.95%

 

92,018

 

120,912

 

Bank loan - variable 1.45% over base

2029

4.95%

 

140,470

 

159,971

 

Bank loan - fixed rate

2029

3.77%

 

308,596

 

354,883

 

 

 

 

 

 

 

 

 

23
Finance lease obligations
Group
Company
2023
2022
2023
2022
£
£
£
£
Future minimum lease payments due under finance leases:
Within one year
23,238
53,023
-
0
-
0
In two to five years
57,324
118,456
-
0
-
0
80,562
171,479
-
-

Finance lease payments represent rentals payable by the group for two items of plant and machinery, under hire purchase contracts in a subsidiary company. The amounts are secured debts, secured against the assets purchased.

 

There are no hire purchase contracts held within the company.

 

The net book value of the secured items in plant and machinery as of 31 December 2023 is £117,913 (2022: £235,163).

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 35 -
24
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Group
£
£
£
£
Accelerated capital allowances
316,960
223,824
-
-
Revaluations
55,746
42,367
-
-
Intercompany unrealised profits
-
-
6,382
7,213
372,706
266,191
6,382
7,213
Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Company
£
£
£
£
Accelerated capital allowances
150,616
141,926
-
-
Group
Company
2023
2023
Movements in the year:
£
£
Liability at 1 January 2023
258,978
141,926
Charge/(credit) to profit or loss
38,328
(21,086)
Effect of change in tax rate - profit or loss
55,639
29,776
Effect of change in tax rate - other comprehensive income
13,379
-
Liability at 31 December 2023
366,324
150,616

The deferred tax asset set out above is expected to reverse within 12 months and relates to unrealised profits on trading within the group.

25
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
245,774
225,244

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 36 -
26
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
18,910
18,910
18,910
18,910
27
Revaluation reserve
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning of the year
280,828
280,828
-
0
-
0
Deferred tax on revaluation of tangible assets
(13,379)
-
-
-
At the end of the year
267,449
280,828
-
0
-
28
Capital redemption reserve
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning and end of the year
2,090
2,090
2,090
2,090
29
Profit and loss reserves
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning of the year
26,926,103
25,829,883
27,584,190
26,341,287
Profit for the year
1,822,154
1,296,220
1,805,883
1,442,903
Dividends
(200,000)
(200,000)
(200,000)
(200,000)
At the end of the year
28,548,257
26,926,103
29,190,073
27,584,190
THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 37 -
30
Operating lease commitments
Lessee

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Group
Company
2023
2022
2023
2022
£
£
£
£
Within one year
168,692
168,037
168,692
168,037
Between two and five years
197,056
305,752
197,056
305,752
365,748
473,789
365,748
473,789

Of the total operating lease commitments, £357,500 (2022: £467,500) relates to the rental of Units 4, 5 and 6 Gainsborough Trading Estate, leased on a 5-year basis from 2021 onwards. Of this, £110,000 relates to amounts due within one year, and £247,500 due between two and five years.

31
Directors' transactions

Dividends totalling £200,000 (2022: £200,000) were paid in the year in respect of shares held by the company's directors.

The director, M T Smith is also a trustee of The Tool Connection Limited Executive Pension Scheme. The company has paid a rent of £110,000 (2022: £110,000) to the pension scheme during the year.

 

At 31 December 2023, there was a loan outstanding by the director M T Smith, to the company of £302,267 (2022: £272,861). The loan is repayable on demand and no interest is payable. M T Smith has also assigned a Scottish Amicable Life Policy as security to the Bank of Scotland.

32
Controlling party

The ultimate controlling party is M T Smith (deceased 22 July 2024) by virtue of the shares held in the company.

THE TOOL CONNECTION LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 38 -
33
Cash generated from group operations
2023
2022
£
£
Profit for the year after tax
1,822,154
1,296,220
Adjustments for:
Taxation charged
560,885
269,730
Finance costs
146,060
25,336
Investment income
(190,549)
(23,351)
Gain on disposal of tangible fixed assets
(1,130)
(28,521)
Amortisation and impairment of intangible assets
1,346
1,346
Depreciation and impairment of tangible fixed assets
391,055
330,288
Movements in working capital:
Increase in stocks
(758,397)
(751,311)
(Increase)/decrease in debtors
(297,802)
696,837
Increase/(decrease) in creditors
274,953
(1,189,519)
Cash generated from operations
1,948,575
627,055
34
Analysis of changes in net funds - group
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
9,413,066
53,705
9,466,771
Borrowings excluding overdrafts
(635,765)
94,681
(541,084)
Obligations under finance leases
(171,479)
90,917
(80,562)
8,605,822
239,303
8,845,125
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