The director presents the strategic report for the year ended 31 August 2023.
The company realised a pre-tax profit of £299,730 (2022 - £3,381,251). The fall in the profit is mainly due to purchase and sale of an investment property and dividends received from subsidiaries of £1,935,750 during the prior year. The board recognises that the commercial property market in Aberdeenshire has weakened as a consequence of the challenges faced by both the energy sector and the impact of Covid-19 and thus is satisfied that the total rental income has remained fairly consistent.
The company's cash position remains robust, with adequate cash reserves available to meet all known outgoings. Having made due enquiry, the board is satisfied that the level and type of gearing is the most appropriate means of financing the business, mainly due to the long term nature of the portfolio.
The company's subsidiary is engaged in two principal business activities, the first being the operation of a garden centre with machinery department and restaurant, the second is commercial property development in the North East of Scotland. The level of activity has been satisfactory given prevailing economic conditions. The board remains alert to all opportunities to increase sales and reduce costs, whilst maintaining a robust business platform.
Commercial property market
The company is exposed to the risk of loss of rental income and a potential fall in the value of investment properties held.
The prominence of the energy industry in the North East of Scotland means the local economy is influenced heavily by the fortunes of that sector. The company's exposure to this risk is high due to the nature of the commercial properties held and the business carried on by its tenants.
The board takes all reasonable steps to ensure that fit and proper tenants occupy the investment properties under suitable lease arrangements. Such approach is designed to minimise the risk of rent loss, and provide sufficient cash flow to meet working capital requirements.
Investment properties are held on a long term basis and the board anticipate that they will appreciate in value over time such that any short term decline in value is temporary.
Seasonality
Due to the seasonal nature of the majority of products offered by the garden centre, sales levels are affected by changes in external influences such as the weather.
The board mitigates this risk by operating a just in time system for large items of machinery which enables the business to supply items of equipment suitable to the prevailing season without allocating significant amounts of capital into stock and avoiding obsolescence.
In addition, the company seeks to maintain minimum levels of seasonal stock and a varied product mix without compromising customer choice.
The group enjoys a robust balance sheet with strong reserves.
Despite the current economic conditions in the North East business activity and resultant profits have not been adversely affected.
The board is content that a strong investment property portfolio has been established over the years. The commercial portfolio comprises of seven properties which are let under commercial leases.
Turnover for the garden centre has increased by approximately 9% from £3,173,377 in 2022 to £3,445,146 in 2023 and gross profit percentage in respect of the garden centre trade has remained fairly consistent at around 50%. The board remains vigilant to competitor activity and customer preferences in order to maintain both volume and margin.
The rental income yield remained consistent in 2023 at 5% (2022: 5%) of the carrying value of investment properties. This is even with the sales of the property at Kirkhill Commercial Park, Aberdeen and purchase of the Building 6 Westpoint.
Turnover from regular trading activities decreased in 2023 to £280,020, which is a 45% fall from the 2022 figure of £510,446. When the gain on sale of the properties in both years is ignored, administration costs remain consistent.
The board's core plan is to maintain the yield generated by the investment properties, whilst seeking further opportunities to add to the portfolio and consolidate the garden centre business.
The company’s principal tenants are primarily large entities with respectable covenants which should offer comfort and, while current economic conditions may result in rental negotiations in order to assist some tenants in the short term, the board anticipates that the overall effect on the company’s rental income will be manageable.
The board acknowledges that the audit report has been qualified by virtue of failing to get an independent valuation undertaken in respect of the trading premises of its subsidiary.
The board is aware of the need to service the existing bank loan and considers that the company enjoys sufficient cash reserves to do so.
On behalf of the board
The director presents his report and audited financial statements for the year ended 31 August 2023.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The results for the year are set out on page 8.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
Information on future developments is included with the Strategic report on page 1.
Hall Morrice LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of FWM Investments Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 August 2023 which comprise 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).
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 director's 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 director 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 director is 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 information given in the Strategic report and the Director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
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 director's report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the director's responsibilities statement, as set out in the Director's report, the director is 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 director determines 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 director is 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 director either intends to liquidate the parent company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In identifying and assessing the risk of material misstatement due to non-compliance with laws and regulations we
have:
Ensured that the engagement team had the appropriate competence, capabilities and skills to identify or recognise non-compliance with laws and regulations;
Identified the laws and regulations applicable to the entity through discussions with directors and management and through our own knowledge of the sector;
Focused on the specific laws and regulations we consider may have a direct effect on the financial statements, including FRS 102, the Companies Act 2006 and tax compliance regulations;
Focused on the specific laws and regulations we consider may have an indirect effect on the financial statements that are central to the entity's ability to trade including those relating to health, safety, consumer law, food hygiene and the environment;
Reviewed the financial statement disclosures and tested to supporting documentation to assess compliance with applicable laws and regulations;
Made enquiries of management and inspected legal correspondence;
Ensured the engagement team remained alert to instances of non-compliance throughout the audit.
In identifying and assessing the risk of material misstatement due to irregularities, including fraud and how it may occur, and the potential for management bias and the override of controls we have:
Obtained an understanding of the entity's operations, including the nature of its revenue sources and of its objectives and strategies, to understand the classes of transactions, account balances, expected financial disclosures and business risks that may result in risk of material misstatement;
Obtained an understanding of the internal controls in place to mitigate risks of irregularities, including fraud;
Vouched balances and reconciling items in key control account reconciliations to supporting documentation;
Carried out detailed testing, on a sample basis, to verify the completeness, occurrence, existence and
accuracy of transactions and balances;
Carried out detailed testing to verify the completeness, occurrence, validity, existence and accuracy of income including cut-off testing and ensuring income recognition is in line with stated accounting policies;
Made enquiries of management as to where they consider there was a susceptibility to fraud, and their knowledge of any actual, suspected or alleged fraud;
Tested journal entries to identify any unusual transactions;
Performed analytical procedures to identify any significant or unusual transactions;
Investigated the business rationale behind any significant or unusual transactions; and
Evaluated the appropriateness of accounting policies and the reasonableness of accounting estimates.
We did not identify any matters relating to non-compliance with laws and regulations, or relating to fraud.
Because of the inherent limitations of an audit, there is an unavoidable risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. The risk of not detecting a material misstatement due to fraud is inherently more difficult than detecting those that result from error as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. In addition, the further removed any non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
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 group’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 group’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 group and the group’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £374,658 (2022 - £3,200,724 profit).
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 company is a qualifying entity for the purposes of FRS 102, being the parent of a group that 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:
Section 4 'Statement of Financial Position' - Reconciliation of the opening and closing number of shares;
Section 7 'Statement of Cash Flows' - Presentation of a statement of cash flow and related notes and disclosures;
Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Instrument Issues' - Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
The consolidated group financial statements consist of the financial statements of the parent company FWM Investments 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 August 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.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch 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.
Revenue for the provision of services is recognised by reference to the date on which services were rendered.
Interest income is recognised when it is probable that the economic benefits will flow to the company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
The directors have reviewed the expected residual value of the freehold, property and expect the residual value of the freehold property in 20 years, based on current market conditions, to be at least the carrying value of the property. the freehold property is expected to have an economic useful life of 20 years an thus, no deprecation has been charged on it.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial 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.
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, 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.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. 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.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
In the application of the group’s accounting policies, the director is 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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Stock held for resale is valued at the lower of cost and net realisable value. Realisable value includes, where necessary, a provision for slow moving and obsolete stock. Calculation of provision requires judgements to be made, which include forecast consumer demand, the economic environment in which the company operate, and stock shrinkage trends.
On an annual basis the directors review the carrying value of the freehold property and investment properties for evidence of impairments and fair value fluctuations respectively. The directors have experience in commercial properties in the local area and have a good understanding of the commercial property market in the North East of Scotland. Various factors are considered by the directors whilst carrying out their review, such as the properties' current state of repair, the commercial property market in the North East of Scotland and general market conditions in the local area.
Where the directors believe the value of the freehold property is less than its carrying value an impairment charge will be recognised in the accounts. Where the directors believe the fair value of the investment property is less than the carrying value, a fair value adjustments will be recognised in the accounts.
The group has entered into commercial property leases as a lessor on its investment property portfolio. The classification of such leases as operating or finance lease requires the group to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains or acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position.
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.
The annual amortisation charge for intangible assets is sensitive to changes in the estimated useful 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 and economic utilisation. See note 12 for the carrying amount of each asset and note 1.7 for the useful economic lives for each class of asset.
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful 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. See note 13 for the carrying amount of each asset and note 1.8 for the useful economic lives for each class of asset.
The Group carries its investment properties at fair value, with changes in fair value being recognised in profit or loss. The fair value at each reporting date is normally determined by the directors at estimated market value. Annual professional valuations are not obtained due to the cost involved and the fact that the directors have no intention to sell the investment properties in the medium to long term. Periodic professional valuations are obtained when there is considered to have been a material change in the economic environment. See note 14 for the carrying amount of the investment properties.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
Investment income includes the following:
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2023 (on 10 January 2023). These changes included an increase in the main rate to 25% from April 2023. Deferred taxes at the balance sheet date, in relation to UK companies, are measured using tax rates enacted as at the balance sheet date (25%).
The actual (credit)/charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Valuations of four of the companies investment properties were undertaken in February 2022 by J&E Shepard, chartered surveyors. The carrying value of such properties has been adjusted to reflect the market value as at 20 February 2022.
There are three other properties held by the business, one of which was purchased by the company in April 2022 so the consideration paid is reflective of the current, market value of the priority. The remaining two properties wee subject to revaluation 9 February 2019. base don upon the directors' knowledge of the local commercial property market as at 31 August 2023, the board considers the carrying value of those investment properties to be reflected in the financial statements at a fair value.
Details of the company's subsidiaries at 31 August 2023 are as follows:
Bank loans
The long-term loans are secured by fixed charges over the freehold property and investment properties held by the group, and floating charges over the assets of the group.
FWM Investments Limited has provided security to the bank in respect of the bank loan held by FWM Limited, by way of a standard security over its investment properties and a floating charge over the company's assets.
The group has long term bank loans with the Royal Bank of Scotland. These loans are secured and interest is charged at 2.15% - 2.75% over LIBOR. The term of the loans vary from 1 to 5 years.
Preference Shares
The preference shares are non-voting and rank pari-passu in all other aspects with the ordinary shares. Such shares have been classified as long term liabilities. Preference shareholders are entitled to an annual fixed dividend.
The preference shares are redeemable either in full, or in tranches of not less than 8,900 shares, at the option of the company. The preference shareholders have the option of seeking redemption in tranches of not less than 4,450 shares and not more than 8,900 shares in any 12 month period. The amount payable on redemption is £38.20 per share, representing the par value of £1 together with a premium of £37.20.
Included in current liabilities is the maximum liability relating to the redemption of these shares that could be initiated by the preference shareholders in the next 12 months. The remaining redemption liability has been included in long term liabilities.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The board does not have any plans to dispose of either the freehold or investment properties in the coming year. Therefore the movement in the deferred tax liability in the next 12 months is expected to be minimal.
The portion of the deferred tax liability above which relates to accelerated capital allowances is expected to reverse:
over the useful life of an asset, where that asset has qualified for annual investment allowance at a rate of 100% in the year of purchase; or
over the period which would allow relevant tax writing down allowances to reduce the tax written down to £nil, for pooled assets.
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.
This reserve records the accumulated distributable profits made by the company net of distributions to shareholders.
The operating leases represent leases of commercial properties to third parties. The leases are negotiated over terms of 5 to 15 years. The majority of leases include a provision for five-yearly upward rent reviews according to prevailing market conditions.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Dividends totalling £0 (2022 - £500,000) were paid in the year in respect of shares held by the company's directors.
As at 31 August 2023, the company was due the directors amounts totalling £404,548 (2022 - £82,722). This loan is interest free with no set repayment terms.
FWM Investments Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Oldmeldrum Road, Inverurie, Aberdeenshire, AB54 0TP.
The group consists of FWM Investments Limited and all of its subsidiaries.