The directors present the strategic report for the year ended 31 December 2023.
In the year to 31 December 2023 turnover decreased from £60,459,427 to £47,303.474. As reported in our Strategic review in 2022 our strategic focus is the supply of market leading wooden flooring and wood related surfaces. During 2022 and 2023, we disposed of two parts of the business, which did not align with this strategic aim. During 2022, we reported the disposal of HFSCO Limited, which specialised in the supply of LVT and carpet tiles. During June 2023, we disposed of the Trekker brand, specialising in composite decking. Both of these are disclosed as discontinued operations. In Quarter 4 of 2023, we launched our new exciting range of products, bringing wood surface products to the market. Adjusting for these disposals our turnover, on continuing operations, decreased from £53,985,731 to £46,984,961.
The year have seen a lot of disruption from external factors, which have led to inflationary pressures, high inflation rates, and ultimately impacting the cost of living crisis in the majority of Global Markets. The biggest impact has been experienced in our overseas market, reporting a fall in turnover of £4,456,849. The reduction in our domestic UK market, which has proven extremely resilient to the negative market influences, is showing a reduction of 7%. Gross margin on continuing operations has reduced from 39.7% in 2022 to 37.4% in 2023, which has been largely impacted by our overseas markets.
As a result of these factor, gross profit on continuing operations, has reduced by £3,852,252.
Administrative expenses on continuing operations increased by £207,285 to £15,742,712. In the response to the inflationary pressure in the UK market, we have focused on targeted overhead savings during the year. These saving have allowed us to continue to invest on our targeted growth areas and support our employees, and further investment in our North American market, which has seen overheads increase by £1,475,320.
As a result of these factors, the company has reported decreased profits before tax on continuing operations of £2,800,852 (2022: £6,911,073).
At the year end, the company has shareholders’ funds of £20,964,572 (2022: £22,643,810). The directors therefore believe the group’s position to be strong with current assets exceeding its current liabilities by £8,088,650 (2022: £10,529,472) and consider that the business has created a great platform to achieve its strategic aims in the coming year.
Stock levels reduced to £6,517,674 (2022: £8,966,037).
Debtors has decreased by £2,739,070 (2022: increase £627,803).
Creditors falling due within one year have decreased by £2,356,124 (2022: increased by £1,070,793).
Tight control over stock and debtors has resulted in cash balances increasing by £390,487 to £4,883,070.
The directors have assessed the main risk facing the company as increased competition, and current economic outlook, with rising inflation and interest rates. The directors believe that the quality and depth of their products, along with our customer service will help to overcome such risks and see satisfactory trading results in the coming year.
The company makes little use of financial instruments other than an operational bank account and so its exposure to price risk, credit risk, liquidity risk and cash flow risk is not material for the assessment of the assets, liabilities, financial position and profit or loss of the company. The company finances its operations through retained profits.
With our products primarily being purchased from Europe, we continue to look at our exchange rate management and ways to mitigate our risks. Currently the businesses minimise the risk on longer term projects by using forward exchange contracts.
The management's objectives are to:
retain sufficient liquid funds to enable it to meet its day to day obligations as they fall due whilst maximising returns on surplus funds; and
minimise the company's exposure to fluctuating interest rates when seeking new borrowings.
Where appropriate, funds are invested in sterling treasury deposit accounts. There is therefore no price risk exposure.
The directors believe the company will continue to trade successfully in the foreseeable future.
|
|
|
| 2023 | 2022 |
| £ | £ |
Turnover | 47,303,474 | 60,459,427 |
Gross profit | 17,664,584 | 23,530,818 |
Operating profit | 2,168,608 | 6,676,155 |
|
|
|
| 2023 | 2022 |
| Number | Number |
Staff numbers | 110 | 129 |
|
|
|
| 2023 | 2022 |
| % | % |
Gross profit | 37.3% | 38.9% |
Operating profit | 4.6% | 11.0% |
The directors promote the success of the company through its implementation of the Havwoods Group Strategy. This strategic vision is currently set to 31 December 2026. Strategic initiatives consider all stakeholders, and the directors ensure that the initiatives feed directly into the day to day operations of the business. The strategy and decision making process is designed to continually advance Havwoods position in the countries and sectors it operates whilst being flexible to deal with rapidly changing market conditions.
Havwoods was set up in 1975 and is now being run by the 3rd Generation of the family. Whilst the company has developed in line with its scale the family culture remains instilled throughout the organisation. Our people will always be our most valued asset. The company ethos is to create a caring environment where our people flourish. The health, safety and wellbeing of our employees will always by a primary consideration. We ensure we take a responsible approach to pay and benefits regularly benchmarking in all locations we operate. Not only this, we ensure our employees have a fantastic place to work, having recently completed a new head office refurbishment, bringing further benefits of standing desking and a chill out area. Coupled with this, we have made investments in our warehousing facilities acquiring suction lifting equipment in to help minimise strenuous lifting.
The company has been built on long standing relationships of trust, respect and partnership. We regularly engage with our customers to ensure we are providing best in class service and updating our product range in line with changes in the market. Our level of repeat business demonstrates the strength of our customer relationships. Our supplier relationships are equally as important. We regularly meet our suppliers and ensure we treat all suppliers in a fair manner.
The company is conscious our brand represents integrity and trust, and ensures all engagements maintain these standards.
The company is embracing sustainability and embedding it into our culture. we are at the forefront of bringing sustainable (FSC) products to market. During the year we achieved the ISO 14001 accreditation, helping to illustrate our commitment to environment and social responsibilities. We have further extended our fleet of electric cars We will continue to invest to fulfil our commitment to become carbon neutral.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The principal activity of the group continued to be that of importers and merchants of hardwood flooring.
The results for the year are set out on pages 10 to 11.
Ordinary dividends were paid amounting to £4,050,000. 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 has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £1m of turnover.
The company is embracing sustainability and embedding it into our culture. We are at the forefront of bring sustainable (FSC) products to the market. We have started the journey to gain our ISO 14001 accreditation to help illustrate our commitment to environment and social responsibilities. We have continued to extend our fleet of electric cars, ensuring all new cars are either fully electric or a minimum of a Hybrid vehicle, alongside, trailing electric vehicles as part of our delivery feet. Installation of new LED lighting in our warehousing, is helping reduce our carbon footprint.
The main resource in our products is wood. On average a single tree will sequester around 400kg of CO2 over its lifetime. Trees are typically harvested at the final stage prior to the tree starting to decay or die, which would ultimately start to release CO2 back into the atmosphere. Rather than the CO2 being released, timber wood products lock in the CO2. We estimate that our annual purchase and storage of timber wooden product stores 64,000 tonnes of CO2. Further, the majority of the mills use waste materials as the main source of energy.
The group regularly makes charitable donations to a wide variety of charities and encourages employees to volunteer in enhancing the welfare of local communities as well as supporting in disaster and crisis situations.
We have audited the financial statements of Havwoods Global Holdings 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 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 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.
As part of our planning process:
- We enquired of management the systems and controls the group has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. Management did not inform us of any known, suspected or alleged fraud.
- We obtained an understanding of the legal and regulatory frameworks applicable to the group. We determined that the following were most relevant: FRS 102, Companies Act 2006, compliance with UK tax regulations and compliance with health and safety laws.
- We considered the incentives and opportunities that exist in the group, including the extent of management bias, which present a potential for irregularities and fraud to be perpetrated, and tailored our risk assessment accordingly.
- Using our knowledge of the group, together with the discussions held with management at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
- Identifying and testing journal entries in overall accounting records, in particular those that were significant and unusual.
- Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
- Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to debt recoverability, stock provisions, depreciation methods and assessment of fair values of assets and liabilities on acquisition.
- Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
- Documenting and verifying all significant related party balances and transactions.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing Standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
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.
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 £2,707,893 (2022 - £3,280,495 profit).
Havwoods Global Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 12-14 Carnforth Business Park, Oakwood Way, Carnforth, Lancashire, LA5 9FD.
The group consists of Havwoods Global Holdings 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 the revaluation of freehold properties and to include investment properties at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
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 Havwoods Global Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
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 at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Other operating income includes management charges receivable and rental income. Management charges receivable are recognised in the period that the charge relates to. Rental income is recognised on a straight line basis across the term of the agreement.
Freehold land included in buildings and showrooms is not depreciated.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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 preparing the financial statements of the individual entities, transactions in currencies other than the functional currency of the individual entities (foreign currencies) are recognised at the spot rate at the dates of the transactions, or at an average rate where this rate approximates the actual rate at the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Exchange differences are recognised in profit or loss in the period in which they arise. However, in the consolidated financial statements exchange differences arising on monetary items that form part of the net investment in a foreign operation are recognised in other comprehensive income.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations are translated from their functional currency to Sterling using the closing exchange rate. Income and expenses are translated using the average rate for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising on the translation of group companies are recognised in other comprehensive income.
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.
In our accounting for business combinations, judgment is required in determining whether an intangible asset is identifiable and should be recorded separately from goodwill. Additionally, estimating the acquisition-date fair values of the identifiable assets acquired and liabilities assumed involves considerable judgment. The necessary measurements are based on information available on the acquisition date and are based on expectations as well as assumptions that have been deemed reasonable by management. These judgments, estimates and assumptions can materially affect our financial position and profit for several reasons, including the following:
Fair values assigned to assets subject to depreciation and amortization affect the amounts of depreciation and amortization to be recorded in operating profit in the periods following the acquisition.
Subsequent negative changes in the estimated fair values of assets may result in additional expense from impairment charges.
Subsequent changes in the estimated fair values of liabilities and provisions may result in additional expense (if increasing the estimated fair value) or additional income (if decreasing the estimated value).
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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:
In the previous year the group disposed of HFSCo Limited.
A loss of £98,561 arose on disposal, being the proceeds of the sale, less the carrying amount of business assets and attributable goodwill.
In the year the company ceased the operation of the Trekker department.
The carrying value of land and buildings comprises:
Investment properties rented to other group entities are included within buildings and showrooms. The carrying value of these investment properties included within tangible fixed assets is £4,909,902 (2022: £5,013,633).
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Freehold land and buildings with a carrying amount of £4,909,902 (2022:£5,013,633) have been pledged to secure borrowings of the company. The company is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
In the year investment property with a carrying value of £3,400,000 were revalued by Robert Pinkus & Co, independent valuers not connected with the company on the basis of market value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.
The carrying value of land and buildings comprises:
Details of the company's subsidiaries at 31 December 2023 are as follows:
The investments in subsidiaries are all stated at cost less any accumulated impairment losses in the company statement of financial position. Details of how these are consolidated are given in the basis of consolidation policy within the accounting policies.
Bank loans are secured by a charge over Carnforth Business Park, Oakwood Way, Carnforth, LA5 9FD. The company is not permitted to pledge these assets as security for other borrowings or to sell them to another entity.
Other loans are directors' loans. Interest is charged on these loans at a commercial rate and the loans are repayable on demand.
Finance lease payments represent rentals payable by the company or 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.
In the year, the directors reviewed the lease in Havwoods International Inc and concluded that the unavoidable costs related to the the lease outweighed the economic benefits. The directors have therefore provided for an onerous lease provision for this amount.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
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.
Cumulative profit and loss net of distributions to owners.
At the year end there is a deferred duty bond of £10,000 in place with HMRC.
Havwoods Australia Limited, a subsidiary undertaking, has applied the exemption from audit under section 479A of the Companies Act 2006. As such the parent undertaking guarantees all outstanding liabilities to which the company is subject at the end of the financial year, until they are satisfied in full, and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.
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 is as follows.
Included within debtors is £1,322,168 (2022: £966,350) due from a number of Unit Trusts in which the group has a participating interest via Havwoods Australia Limited. The amount relates to amounts advanced.
Included within investments is £229,949 (2022: £640,062) relating to shareholdings in Unit Trusts.
During the year sales of £84,568 (2022: £nil) and rents of £75,000 (2022: £nil) were received from HFSCo Limited, a company connected by common officers. At the year end the group was owed £7,821 (£nil) by HFSCo Limited.
During the year rent and charges of £3,500 (2022: £1,545) were received from and expenses of £nil (2022: £440) were paid to Strongdor Limited, a company related by common officers.
At the year end £16,995 (2022: £16,995) was owed by Strong Developments Limited, a company related by virtue of common officers.
During the year consultancy costs of £75,000 (2022: £nil) were paid to SJG Partnership Limited, a company connected by common officers.
At the year end £nil (2022: £832) was owed to Vetro Global Limited, a company connected by common officers.
During the year sales of £nil (2022: £29,260) were received from 2San Global Limited, a company connected by common officers.
Dividends totalling £2,950,000 (2022 - £3,433,608) were paid in the year in respect of shares held by the company's directors.
At the year end there is a balance of £3,798,226 (2022: £4,145,890) owed to directors of the group and close family members. The current year movement relates to drawings taken and dividends received.