The directors present the strategic report for the year ended 31 December 2023.
As noted on page 9 of the financial statements, the Group achieved an operating profit of £403,852. The gross margin percentage increased in the period to 38.5% (2022: 37.6%), consequently the directors are satisfied with the group's trading position and results for the year.
The well publicised impact of the “cost of living crisis” has contributed to an approximate 5% net reduction in sales, however, the group’s main revenue is related to the housing market, and this has remained buoyant during the year with consumers continuing to refurbish their properties. Cost increases have steadily impacted the business during the year with only a proportion of these in areas such as employment and material costs, passed on to customers via increased selling prices. This has contributed to the overall reduction in operating profit compared to the previous year.
The directors are closely monitoring other areas of the economy such as Interest rate rises to understand the impact that this will have on future demand.
The market focus remains on the independent retail, workroom, contract and homeworking sectors by providing extensive, innovative, and quality product ranges at competitive prices. The directors’ strategy is to continually expand the portfolio and categories of products available through the group’s distribution network to increase both customer numbers and the average sales value per customer. This has continued throughout 2023 with new and innovative ranges brought to market, helping our customer base adapt to the changing requirements of the end consumer, including a greater focus on energy saving and sustainable ranges
During the period the business has continued to focus on its core USP of high levels of stock available for same day despatch. Whilst supply chains have been impacted by high shipping costs and extended lead times, pro-active management of stock and excellent trading partners have seen this service level be maintained. The business has further supported this critical area by accelerating payments to suppliers and increasing certain stock holding positions in order to maintain stability in the supply chain
Significant disruption in the UK next day carrier market, with a major next day carrier entering administration in June, caused additional operational pressures, but additional resources were brought into the business to minimise the impact on customers. A key emphasis has been placed on creating a more robust next day distribution network with a significantly reduced dependency on any one single next day carrier.
The Group committed approximately £1.4m of capital expenditure during the year, mainly financed from its own cash reserves and consisting of two major projects. Firstly, £600,000 in upgrading the central warehousing and distribution centre in Preston. Secondly, £700,000 as part of a 2-year project to update information technology and systems in the business. The latter project will be completed in 2024 and represents a major step into cloud-based systems. Technology remains an area that the business will continue to invest in to ensure that our systems can cope with the changing demands of our customers.
At the period end the group’s shareholder funds have increased by £53,596 to £5,703,491. The directors consider the group’s financial position to be satisfactory with the current assets exceeding current liabilities by £3,966,448 (2022: £5,146,637) and that the group is well placed to achieve its targets over the next twelve months.
The principal uncertainties for the coming year are the disruption to global supply chains, coupled with global inflationary pressures which are being managed to ensure that prices remain competitive in the marketplace. The Directors continue to closely monitor both customer spending and consumer demand.
Sufficient liquidity is in place to manage any period of disruption and a full cost review has been undertaken to ensure the business remains able to cope with any changes in demand from its customers.
The group finances its operations through a mixture of retained profits and where necessary to fund expansion or capital expenditure programmes through bank borrowings. Management’s objectives are to:
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Where appropriate, funds are invested in sterling bank deposit accounts and borrowings are obtained from standard bank loan accounts and using debtors as security. The group seeks to limit its exposure to foreign currency fluctuations by ensuring sales and purchase invoices are raised in sterling where possible. Movements in exchange rates are monitored closely by the group and forward currency contracts are purchased to help mitigate the risk. Hedge accounting is not used by the group.
Future Developments
As we look toward the future, we are committed to expanding our product offerings and strengthening our market presence, allowing us to continue to meet the diverse & evolving needs of our customers. Investing in technology will be a key focus. The implementation of a new ERP system in 2024 will enable us to operate more efficiently, respond swiftly to market demands, and offer a seamless experience to our customers.
The directors recognise that effective performance management is key to being a strong business. Progress is monitored by review of key financial indicators, including but not limited to:
Gross profit as a % of turnover - 38.5% (2022: 37.6%)
Net Profit - £213,596 (2022: £681,850)
Net Asset Value - £5,703,491 (2022: £5,649,895)
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £160,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group agrees terms and conditions for its business transactions when orders for goods and services are placed, ensuring that suppliers are aware of the terms of payment and including the relevant terms in contract where appropriate. These arrangements are adhered to when making payments, subject to the terms and conditions being met by the suppliers.
Following the merger of MHA Moore & Smalley with MHA, the company's independent auditor has now become MHA. A resolution to reappoint MHA as independent auditor will be proposed at the next Annual General Meeting.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Harper Industries Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 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 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 information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and 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:
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 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.
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.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, is detailed below:
Enquiries with management, including directors, about any known or suspected instances of non-compliance with laws and regulations and fraud;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to stock provisions; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Reviewed the systems for recording sales and tested a sample of sales throughout the year, to ensure they have been invoiced and recognised within the correct period.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
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 £159,782 (2022 - £816 profit).
Harper Industries Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit B1 Red Scar Business Park, Longridge Road, Ribbleton, Preston, PR2 5NJ.
The group consists of Harper Industries Ltd and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.
This 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:
The requirements of Section 7 'Statement of Cash Flows' and Section 3 'Financial Statement Presentation' paragraph 3.17(d).
The requirements of Section 11 ‘Basic Financial Instruments’ paragraphs 11.29 to 11.28A and Section 12 ‘Other Financial Instrument Issues’ paragraphs 12.26 to 12.29A.
The requirements of Section 33 ‘Related Party Disclosures’ paragraph 33.7.
The consolidated financial statements incorporate those of Harper Industries Ltd and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
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.
The directors have considered the financial position of the company at 31 December 2023, management information to date and forecasts for a period of 12 months from the date of signing these financial statements.
In light of these forecasts, they consider that the Company has adequate resources to continue in operational existence for the foreseeable future.
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.
Turnover represents the invoiced amount of goods sold and services provided less returns and allowances excluding Value Added Tax. Turnover is recognised on delivery of goods.
Negative goodwill arising on consolidation is calculated as the difference between the fair value of the consideration made for the net assets and liabilities of an acquisition, and the fair value of the net assets of that acquisition.
Negative goodwill up to the excess of the fair value of non-monetary assets acquired has been recognised in the profit and loss account in the period in which the non-monetary assets have been recovered.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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.
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.
The only non-basic financial assets that the group may from time to time hold are those that result from its participation in forward currency contracts, the accounting for which is detailed in accounting policy 1.15.
Financial assets 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 or .
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 or .
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 and loans from fellow group companies 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.
The only non-basic financial liabilities that the group may from time to time have a liability under are those that result from its participation in forward currency contracts, the accounting for which is detailed in accounting policy 1.15.
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 direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in or immediately.
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.
The tax expense represents the sum of the tax currently payable.
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.
The costs of short-term employee benefits are recognised as a liability and an expense.
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.
The group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the group. The annual contributions payable are charged to the profit and loss account.
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 the profit and loss account 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 income on a straight line basis over the term of the relevant lease.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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.
At the inception of each lease, management undertake an assessment of the terms of the lease including payments to be made over the life of the lease, the fair value of the asset subject to the lease, the length of the lease and whether the terms of the lease transfer substantially all of the risks and rewards of ownership.
Based on this assessment, management will determine whether the lease should be classified as a finance or operating lease.
At each balance sheet date, management undertake an assessment of the recoverability of trade debtors based upon their knowledge of the customers, ageing of the balances outstanding and previous write off history. Where necessary, an impairment is recorded as a doubtful debt. The actual level of debt collected may differ from the estimated level of recovery.
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.
At each balance sheet date, management will review the stock listing and identify items that are considered to be obsolete based upon their knowledge of the products, the ageing of stock and expected sales in future periods. Balances considered to be obsolete are provided for.
An analysis of the group's turnover is as follows:
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 3 (2023 - 3).
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:
The group has trading tax losses to carry forward of £352,844 (2022: £52,670) and capital losses to carry forward of £587,512 (2022: £587,512).
Tangible fixed assets with a carrying value of £1,119,055 (2022: £601,343) have been pledged to secure borrowings of the group.
These financial statements are separate company financial statements for Harper Industries Plc.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Lansdown Mills Limited and R S Design Consultants Limited are owned by Hallis-Hudson Group Limited. All other subsidiaries are owned by the company directly.
The company's voting rights in respect of each subsidiary undertaking are held in the same proportion as the company's share of the ordinary share capital of each subsidiary.
Stock with a carrying value of £2,531,357 (2022: £2,308,580) have been pledged to secure borrowings of the group.
Included in other loans is an amount of £396,686 (2022: £450,922) which is secured by a debenture over the assets of the company.
Bank loans also include £533,333 (2022: £733,333) CBILS loan drawndown by the company. The repayment period starts 12 months from the date of first drawdown and will be repaid by monthly instalment over the proceeding 60 months. Interest will be charged at 3.99% above the Bank of England base rate from September 2021. The loan is secured by a personal guarantee limited to £100,000.
Finance lease obligations are secured on the assets to which they relate.
Finance lease payments represent rentals payable by the group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Group
The group also has a deferred tax asset amounting to £13,000 (2022: £13,000) in relation to tax losses available respectively. This asset has not been recognised due to the timescale over which it will be realised.
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.
Company
The company is party to a multilateral guarantee with its subsidiary company, Hallis-Hudson Group Limited. At the year end there were potential obligations of £930,019 (2023: £1,184,255) due under this guarantee.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel, some of whom are also directors, is as follows.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
Amounts owed to related parties are interest free and repayable on demand.
Company
The company has taken advantage of the exemption permitted under Section 33 'Related Party Disclosures' paragraph 33.1A from disclosing transactions with the parent and fellow subsidiary companies.
Dividends totalling £160,000 (2022: £1,000) were paid in the year in respect of shares held by the company's directors.