The directors present the strategic report for the year ended 31 December 2023.
After the shocks of recent years which have included BREXIT, COVID and the Ukraine war, and their resultant disruptions to our markets, operations and supply chains, it was pleasing to see the group end a turbulent 2023 with a business performance in line with expectations and set for future growth.
The expected drop off in demand following the previous COVID induced boom materialised during 2023 in some of our key markets. Exterior Solutions volumes fell within the UK and Western Europe although not by as much as had perhaps been feared. On the Interior Surfaces side of the business we saw this slow down impact our North American business in particular. On the plus side Exterior Solutions benefitted from significant growth within Eastern Europe – some linked to earthquake reconstruction - and recent product developments such as Premier Matt and Paintflow drove good sales growth for Interior Surfaces. Overall, it was encouraging therefore to see a 5% increase in our year on year turnover.
We saw raw material prices peak during the course of 2023 although our PMMA formulations lagged significantly behind the development of PVC and other commodities. After benefitting in previous years from advance energy purchases, we saw a major uplift in costs in this area in 2023 and will see a further major rise as we start 2024. Given this background as well as other inflationary pressures, carefully targeted price increases were required in order to restore profitability to the required levels.
In terms of investment, 2023 saw the installation of our new embossing line, Emboss 5. In addition to providing further machine and shift capacity, this machine provides additional functionality and flexibility. At a cost approaching £10m this is a major investment for both the present and future of the site.
The group operates a quarterly risk management process in order to regularly assess risks and identify counter measures and controls. As part of this process the group works with the wider RENOLIT group where appropriate – for example, sourcing and testing alternative raw materials. In addition, the capabilities and expertise spread across the RENOLIT group provides back-up solutions via alternative production facilities, machines and routes.
The Group is subject to the usual risks in respect of customer and supplier behaviour and the resultant impact on sales pricing and volumes. A monthly sales and operations planning process helps to continually assess future demand, match this to production capacity and guide raw material purchasing and investment plans.
Major external factors to be considered include the ongoing cost of living crisis, Ukraine and Gaza wars, Red Sea disruption, as well as potential impact of elections and changes to government policies over the coming year.
The group has noted the results of the recent investigation by the European Chemicals Agency (ECHA) which found that, whilst risks from PVC resin to workers and the environment are adequately controlled, regulatory action may be needed for certain additives. The group continues to monitor for any future REACH restrictions to be placed on any of its raw materials and proactively works to eliminate such substances from its production and processes.
| 2023 | 2022 |
Revenue £000 | 86,753 | 82,735 |
Gross Profit Margin | 24.9% | 23.7% |
Operating Profit Margin | 12.5% | 12.2% |
Working Capital / Sales | 22.5% | 22.9% |
ROCE | 36.1% | 36.2% |
Reportable accidents | 4 | 2 |
Given the volatility seen over the course of 2023 it is pleasing to note a 5% increase in turnover coupled with a maintenance of profit margins.
From a Health and Safety perspective it was disappointing to see an increase in RIDDOR reportable accidents. However, we were encouraged to see a continued high level of proactive measures and consequent lower overall incident rate. In addition, our measure of severity or potential severity has also seen a significant improvement.
With the exception of foreign exchange, the group does not actively use financial instruments as part of its financial risk management. The Group is exposed to the usual credit risk and cash flow risk associated with selling on credit and manages this through appropriate credit control procedures. The nature of these financial instruments means that the group is not subject to a price risk or liquidity risk other than as set out below. The group undertakes significant sales and purchases in foreign currencies, especially the Euro and US$, which exposes it to foreign exchange rate risk. This risk is managed through the use of Euro and US$ current accounts although group sales in Euros are consistently in excess of purchases. Where appropriate, forward exchange contracts are also considered with a view to further managing exchange risk.
We are pleased to report that, following on-site audits, we continue to be certified to ISO50001. Also, our certificate for the ISO9001, ISO14001 and ISO45001 standards was renewed. These standards ensure legal compliance and demonstrate we have systems in place to effectively control health and safety, quality and environmental aspects. We are signatories to Operation Clean Sweep, which is the international initiative from the plastics industry to reduce plastic loss into the environment. In addition, in 2023 we participated in the EU PC Pellet Loss Reporting Survey, this puts in a strong position to have the necessary data when pellet loss reporting becomes mandatory in 2026.
Directors' duties and responsibilities
We completed the third year of our ONE RENOLIT 2025 medium term strategy which is focused on our 5 strategic cornerstones – Our People / Operational Excellence / Sales, Market & Service / Products & Innovation / Sustainability. In addition to our local work Cramlington personnel continue to play key roles with strategy implementation across the RENOLIT group. This process helps to coordinate activity across the relevant sites as well as monitor and control progress towards 2025 target states.
It is pleasing to report that we have retained the Maintaining Excellence stage of the Better Health at Work Award as we continue with our efforts to improve employee health and wellbeing. Our successful employee assistance programme continues to be promoted to all employees and we also introduced a wellbeing app to provide employees with a further range of services to help them look after themselves. As well as reviewing and updating existing policies where appropriate, we introduced a Menopause Policy for the first time in 2023. We continue to participate in the British Safety Council’s Keep Thriving Campaign and in 2023 we opened our Wellbeing Garden for all employees, to promote regular breaks and fresh air. We also introduced two bee hives on site, maintained by employee volunteers.
We continuously aim to ensure we make a positive impact on our local community through providing charitable donations for local worthy causes and by volunteering, with our 2023 nominated charity being the “People’s Kitchen”. We introduced a Volunteering Policy, allowing all employees paid time off to volunteer at a charity of their choice. Community initiatives included employee donations of tins of soup for a homeless shelter, Easter eggs for the Cramlington Youth Project, and toys for the Christmas Cash for Kids appeal. In addition, we hosted visits from the local high school to support students with their studies and aim to continue to foster our relationship with local schools going forward.
The Group relies on good working relationships with customers and suppliers and relies on these to ensure success. As a group we have a reputation for reliability, trustworthiness, open mindedness and cooperation with customers and suppliers alike. These qualities are highly valued by the group and our partners.
The Board of Directors consider that they have acted in good faith to promote the long-term success of the group for the benefit of its members as a whole. In doing so the Board have regard to their stakeholders and those matters set out in Section 172 of the Companies Act 2006:
the likely consequences of any decision in the long term;
the interests of the group’s employees;
the need to foster the group’s business relationships with suppliers, customers and others;
the impact of the group’s operations on the community and the environment;
the desirability of the group maintaining a reputation for high standards of business conduct; and
the need to act fairly as between members of the group.
As can be seen from the activities described elsewhere in this Strategic Report, there are many examples showing the group’s commitment to, and consideration for, its stakeholders (employees, customers, suppliers, regulators, shareholder, local community and society as a whole). Similar regard has been taken and continues to be taken in our medium and long term business planning.
Stakeholder engagement and consideration takes place across a wide spectrum of meetings and committees (eg Health & Safety, Energy & Environment, Community, Union), employee surveys and briefs, customer and supplier visits and satisfaction metrics, as well as regular dialogue with regulatory authorities and our shareholder.
The Board acts and makes decisions to promote the long term sustainable success of the group for the benefit of its members, whilst also seeking to contribute to the economy and communities we operate in. This approach is actively encouraged and fostered by the Board throughout all levels of the organisation.
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 11.
Ordinary dividends were paid amounting to £4,000,000 (2022 £4,750,000). 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's current policy concerning the payment of trade payables is to:
- Settle the terms of payment with suppliers when agreeing the terms of each transaction;
- Ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts;
and
- Pay in accordance with the group's contractual and other legal obligations.
The group continues to investigate new production methods and materials to both improve the quality and performance of existing products and provide opportunities for the introduction of new products.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the group's performance.
The group's policy is to consult and discuss with employees, through unions and at meetings, matters likely to affect employees' interests.
Information of matters of concern to employees is given through presentations, monthly briefs and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the company's performance.
Over the medium to long term the group will continue to grow the business by remaining focussed on delivering a high quality product with excellent service at competitive prices.
The auditor, Azets Audit Services Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have considered the recommendations of The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 which implement the government’s policy on Streamlined Energy and Carbon reporting (SECR) when preparing this report. The figures reported relate to our subsidiary RENOLIT Cramlington Limited as RENOLIT (UK) Limited does not trade.
Total electricity and gas usage has been extracted from supplier invoices and adjustment made where periods were not coterminous with the reporting period.
The total kWh has been multiplied by 0.20707kg (electric) (2022 - 0.19338kg) and 0.18293kg (gas) (2022 - 0.19338kg) of CO2 to derive the total CO2e emissions for the Company as a whole. The multipliers have been extracted from the UK Government GHG Conversion Factors for Company Reporting 2023.
The fuel for transport usage has been derived from litres purchased converted to kWh, the total volume has been multiplied by 0.25192 (2022 - 0.25321) for diesel, 0.24171 (2022 - 0.24157) for petrol and 0.20707 (2022 - Not applicable) for electric to derive the total CO2e emissions for the Company as a whole. The multipliers have been extracted from the Carbon Trust Energy and Conversion 2023 update.
Energy consumption and greenhouse gas emissions for the year ended 2022:
| 2023 |
| 2022 | ||
| ‘000 kWh | ‘000 Kg |
| ‘000 kWh | ‘000 Kg |
Electric | 13,464 | 2,788 |
| 13,286 | 2,569 |
Gas | 19,944 | 3,648 |
| 20,341 | 3,713 |
Fuel for transport | 270 | 66 |
| 286 | 72 |
| 33,678 | 6,502 |
| 33,913 | 6,354 |
The Intensity Ratio is 784:1 (2022 – 791:1), based on total CO2e per output tonne.
The group is committed to reducing its impact on the environment with energy saving measures coordinated and targeted through the Sustainability cornerstone of our RENOLIT 2025 strategic plan as well as Energy & Environment Steering Committee. Via this process 2023 saw the group agree an exclusivity agreement for the proposed supply and installation of solar panels during 2024. Improvements to production performance drive day to day energy efficiency and our Operational Excellence teams continue to play a key role in this area. Energy efficiency is considered as a matter of course as new equipment is required and old equipment is replaced with energy efficient alternatives where possible.
We have audited the financial statements of RENOLIT (U.K.) Limited (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 statement of financial position, the company statement of financial position, 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 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:
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.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting 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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s profit for the year was £4,000,000 (2022 - £4,750,000 profit).
RENOLIT (U.K.) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Station Road, Cramlington, Northumberland, NE23 8AQ.
The group consists of RENOLIT (U.K.) Limited 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 £'000.
The financial statements have been prepared under the historical cost convention. 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:
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: Interest income/expense and net gains/losses for financial instruments not measured at fair value; 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;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company RENOLIT (U.K.) Limited together with all entities controlled by the parent company (its subsidiaries).
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.
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 revenue from sales of products, after deduction of Value Added Tax and is recognised on dispatch.
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.
Royalty income is recognised on an accruals basis and included within other operating income.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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 income statement.
No depreciation is provided on land and assets under construction.
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 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.
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 statement of financial position 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 trade and other receivables 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.
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
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 trade and other payables bank loans and loans from fellow group, 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 payables 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 payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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 income statement 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 income statement, 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 non-current assets.
The costs of long-term employee benefits are recognised as a liability and an expense and recognised over the period to which they relate.
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.
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.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Inventories are valued at the lower cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete inventories. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends.
The group converts raw materials to finished goods. Inventory values include any costs such as labour and overheads attributable to generating finished goods, as management believe this is the most suitable costing method to take into account the matching concept of accounting.
Depreciation policies have been set according to management's experience and judgement of the useful lives of the assets in each category, something which is reviewed annually.
The group incurs expenditure on creating tangible fixed assets for use in the primary trade. The cost is determined by reference to the direct attributable costs which bring the fixed asset to working condition for its intended use, with costs being incurred over several months. Management believe it is possible to segregate these costs into identifiable projects, and as such no depreciation is charged on that project until it is bought into use. This expenditure is therefore capitalised as a fixed asset and depreciated in line with the relevant depreciation policy.
Warranty provisions are calculated as a percentage of the average annual sales figures, based upon group wide historic warranty claims data, and included as an expense within sales.
Research and development costs include staff costs, which are also disclosed in note 6.
Costs in respect of the audit of the group and company financial statements are borne by the subsidiary.
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).
Remuneration of directors of Renolit (UK) Limited is borne by the fully owned trading subsidiary of which they are also statutory directors.
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 Renolit (UK) group falls within the scope of the Pillar Two legislation as a result of the worldwide group which is it a part of. Based on the latest estimates of the worldwide tax position, the UK subgroup is not expected to be impacted as a result of Pillar Two.
The carrying value of land and buildings comprises:
Within plant and machinery is £10,301,000 (2022 - £5,430,000) in respect of assets under construction, which have not been depreciated.
Further information on the above provisions can be found in accounting policy 1.17 and note 2.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The company operates the RENOLIT Group Personal Pension Scheme. Pension costs charged in respect of the scheme amounted to £3,135,000 (2022 - £2,914,000), with £10,000 (2022 - £174,000) accrued at the balance sheet date. The costs charged in the accounts as detailed above include death in service life assurance payments of £378,000 (2022 - £368,000).
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:
Amounts contracted for but not provided in the financial statements:
Details of the company's subsidiaries at 31 December 2023 are as follows:
The subsidiary registered office address is the same as this company's registered office address.
The company and the group have taken advantage of the disclosure exemptions of Section 33.1A of FRS 102 which permit it to not present details of its transactions with members of the group headed by JM Industriebeteiligungen GmbH & Co. KGaA where relevant group companies are all wholly owned. Details of outstanding balances as at the year end are given in notes 17 and 18. These balances represent normal trading debtors and creditors.
The company is a wholly owned subsidiary of RENOLIT SE, a company incorporated in Germany.
The ultimate parent is JM Industriebeteiligungen GmbH & Co. KGaA, a company incorporated in Germany, which is the largest group into which these accounts are consolidated.
Both Renolit SE and JM Industriebeteiligungen GmbH & Co. KGaA have a Registered Office of Horchheimer Strasse 50, 67547 Worms, Germany.
RENOLIT (U.K.) Limited is the smallest group into which these accounts are consolidated and the consolidated accounts are publicly available from the registered office; Station Road, Cramlington, Northumberland, NE23 8AQ.