The directors present the strategic report for the year ended 31 December 2023.
Running a business is a constant schooling in all aspects of life, people, relationships, hopes, stumbles, disappointments and many more. Any business has external and internal forces competing to shape the nature of the company, how successful it is and how it operates. I’ve found that in reality the aspects the directors can directly control or influence are very few. We do not have control over the wider economic or employment environment, nor can we control behaviour of the general public let alone our customers. Instead we have to concentrate on the small items we can influence, as the serenity prayer goes “Grant me the Serenity, to accept the things I can not change, Courage to change the things I can, and Wisdom to know the difference”.
We therefore concentrate on the type of people we employ, checking their values match those of the company. We control our investment strategy, how much we spend on what and when as well as how we fund it. We can control how our company operates, what software we use and how we control quality. We control how we market ourselves, what work we agree to do or not do. Most of all we control how much energy we want to put into the company. It would be easier to sit on our hands and let the ship sail with the inertia it has but we continue to push and strive to improve every aspect of our company.
We very much subscribe to the concept of improvements little and often or the 1% compounding theory. The concept of the ‘infinite game’ influences our decision making and strategy, the idea being that there is no single point of ‘winning’ life or ‘winning’ business. We instead consider business something that you never ‘win’ but you continue to play and that where success and the rules by which you play are ours to decide.
During 2023 we concentrated on reducing our debt levels whilst maintaining investment into our rental inventory. We do have a goal to become sustainably debt free which if we achieve it over the long term will be a remarkable achievement for an asset rental business but something I am confident we can achieve.
A key way of monitoring our business is to look at EBD, a modified version of EBITDA. Interest and Tax are real costs to us so they must be included whilst amortisation is a real cost just with a timing difference. We’re interested in the cash the business is producing and available to reinvest or pay debt. Free cash flow is our ultimate measure of the company's success as it is easy to kid ourselves that the company is profitable despite years of evidence that all the EBD goes back in equipment reinvestment. Whilst this looks good on paper, the reality is the company isn’t producing anything at the end of its reinvestment. This is very common in our industry and something I want TSL to differ from the norm. Free cash flow increases cash levels which in turn ensures greater stability and steady growth. It is the cash that is generated by the company that isn’t required in capex or debt servicing. It helps improve cash flow as more cash enters our system which allows us to grow organically or without additional funding. The free cash flow created in 2023 was £373,260.
The key risks and uncertainties that relate to the future profitability of the business are:
Economic, UK and Global downturn in economies may reduce demand of our services in the
corporate and event markets
War and associated effects on commodity pricing
Operational Health and Safety risks
Financial, cash flow, access to finance and customer credit
The directors monitor all risks and have a proven track record of planning effectively to mitigate any and all risks.
Key financial and other performance indicators during the year were as follows:
| 2023 £
| 2022 £
|
|
Turnover | 10,639,018 | 11,154,083 |
|
Gross Profit | 6,505,021 | 6,951,709 |
|
EBD | 1,985,561 | 3,143,508 |
|
Free Cash Flow | 373,260 | (199,585) |
|
Shareholders Funds | 4,670,383 | 4,015,852
|
|
I am happy to say that since 2023 year end our services have continued to be in demand. Our strategy of prioritising debt repayments whilst continuing to reinvest in core equipment has continued. We are now looking at ways to grow the business and are excited to see how the next 10 years or so develop.
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 £75,720. 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 groups financial instruments comprise bank balances, asset finance funders, trade creditors and trade debtors. The main purpose of these instruments is to raise funds for the group's asset purchases when needed and ongoing operations. Due to the nature of these funds there is little to no exposure to price risk. The groups approach to managing other risks applicable to the financial instruments concerned is shown below. In respect of bank balances an overdraft facility size and cost is reviewed and agreed each year with the bank. There are no loans from directors. Financial institutions are used for asset finance with all costs being fixed and not subject to change. The group manages the liquidity risk by ensuring there are sufficient funds to meet the payments. Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding and overdue. Trade creditors risk is managed by ensuring sufficient funds are available to meet amounts due.
In 2023 we carried out various R&D projects related to customer projects as well as internal development projects. We have engaged an R&D specialist and see many ongoing opportunities.
The auditor, West & Berry Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the groups strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report.
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 TSL Lighting 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 directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The objectives of our audit are to identify and assess the risks of material misstatement of the financial statements due to fraud or error; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud or error; and to respond appropriately to those risks. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
We obtained an understanding of the legal and regulatory frameworks applicable to the group and the sector in which it operates. We determined that the following laws and regulations were most significant: the Companies Act 2006, UK corporate taxation laws, Health and Safety at Work etc Act 1974 and the Operators transport licensing regulations.
We obtained an understanding of how the group is complying with the legal and regulatory frameworks by making inquiries to management.
We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
challenging assumptions and judgments made by management in its significant accounting estimates;
identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
assessing the extent of compliance with the relevant laws and regulations.
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.
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 £954,139 (2022 - £1,969,834 profit).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
TSL Lighting Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 11, Bilton Road, Kingsland Business Park, Basingstoke, Hampshire, RG24 8NJ.
The group consists of TSL Lighting 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 £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The accounts comply with FRS 102.
The consolidated financial statements incorporate those of TSL Lighting Limited 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 subsidiaries have been included in the group financial statements using the purchase method of
accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of the subsidiaries for the twelve month period.
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 is recognised in the period of rental and is shown net of VAT .
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.
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.
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.
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 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 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 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.
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 statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
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.
In the opinion of the Directors it would be seriously prejudicial to the interests of the company to disclose the turnover between geographical markets.
The group received government grants during the year of £1,500 (2022: £21,000).
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Defined contribution pension scheme payments recognised as an expense £72,667 (2022: £54,617).
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022: 2).
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:
National Westminster Bank PLC holds charges over the groups assets.
The deprecation rate applied to part of plant and equipment has been adjusted from 20% to 17.5% (reducing balance basis) at the start of the year. This change is to reflect the increase in residual values of lighting equipment. If the change had not occurred the charge for the year would have increased by £151,961.
The net book value of tangible fixed assets includes £779,545 (2022: £743,588) in respect of assets held under finance leases or hire purchase contracts. The depreciation charge in respect of such assets amounted to £134,846 (2022: £88,857) for the year.
Details of the company's subsidiaries at 31 December 2023 are as follows:
The registered office address of both subsidiaries is Unit 11 Bilton Road, Kingsland Business Park, Basingstoke, Hampshire, RG24 8LJ.
Listed investments are carried at market value.
Historic cost of listed investments as at 31 December 2023 is £275,768 (2022: £229,269).
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. 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. Leased assets act as security until final payments have been made.
The group has recognised a provision relating to its obligation to re-instate business premises to the acquired condition upon termination of the lease.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The estimated amount of the deferred tax liabilities expected to reverse during the year beginning after the reporting period is £273,218 (2022: £253,271).
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. At the balance sheet date contributions of £9,987 (2022: £8.322) were due to the fund.
All shares carry one voting right at the general meeting and equal rights in the company. No shares can be sold to a third party without approval of the board. Each share carries equal rights on final distribution in the event of the company winding up.
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:
Operating lease payments recognised as an expense in the year £164,186 (2022: £274,330).
Amounts contracted for but not provided in the financial statements:
No details are included for transactions with Blinding Light Limited as the exemption for 100% owned subsidiaries is being claimed. Other group companies were dormant during the year.
During the year consultancy fees of £217,000 (2022: £132,000) were paid to a company owned and controlled by the director S Tamplin. At the end of the period an amount of £102,000 (2022: £nil) was due to a company owned and controlled by the director S Tamplin.