Company registration number 12983521 (England and Wales)
UPGRADE GROUP LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
UPGRADE GROUP LIMITED
COMPANY INFORMATION
Directors
Mr D H Mason
Mr M E Ryley
Company number
12983521
Registered office
Amelia House
Crescent Road
Worthing
West Sussex
BN11 1QR
Auditor
Sumer Audit
Amelia House
Crescent Road
Worthing
West Sussex
BN11 1RL
Business address
Units A - B
Star Road Trading Estate
Partridge Green
West Sussex
RH13 8RA
UPGRADE GROUP LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2 - 3
Directors' responsibilities statement
4
Independent auditor's report
5 - 7
Group statement of comprehensive income
8
Group statement of financial position
9
Company statement of financial position
10
Group statement of changes in equity
11
Company statement of changes in equity
12
Group statement of cash flows
13
Notes to the financial statements
14 - 25
UPGRADE GROUP LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Review of the business

The business worked through and experienced the toughest market and trading conditions since we started. It was a challenging year with many casualties within our industry and the directors suspect there may still be more to come in 2024. The directors expected a post-COVID-19 normalisation for our industry, however they did not predict it to drop to the level it did. 

2023 saw the closure of three of our largest customers. ProBike Kit, Chain Reaction Cycles and Wiggle. Their combined purchases in 2022 were £2.3m (approx. 22% of 2022 turnover). The UK cycle market also saw the closure of some of our competitors, signaling the tough trading conditions that exist. However, this has meant that we have been able to pick up some new brands for distribution within the UK, we are confident that this will help boost our turnover and overall profitability.

 

The UK cycle market in 2023 remained flooded with excess stock and this has caused gridlock with some dealers and cashflow problems for many others, and we experienced a downturn in orders placed and revenue in 2023.

 

Revenue for the year was £7.95m compared to £10.87m achieved in the comparative period, a 26.9% decrease, and gross profit margin fell from 17.39% in 2022 to 12.88% in 2023. These KPI's were affected significantly as a result of the above comments.

 

The directors will continue to explore strategies to increase market share with continued investment in advertising, and are planning a strong presence at trade shows and other biking events in 2024 and beyond.

 

Our in-house brands, DMR and Kinesis UK, continue to perform consistently, accounting for about 30% of total sales. The business will continue to invest in R&D for these two brands. We will also be investing in the development of our B2B eCommerce infrastructure in 2024.

 

Stock levels are closely monitored, and provisions made where necessary for old and slow-moving stock.

 

Unfortunately, Brexit has undoubtedly had a negative effect on our business and our sales and in the short term at least, we will struggle to sell into Ireland and mainland Europe.

 

We are optimistic that, starting in 2024, the medium to long term outlook for our business is positive as people continue to enjoy riding bikes, as working from home begins to decline as people return to the office and seek more affordable commute options. Plus, with more and more e-bike/e-cargo options becoming available and affordable, we expect people will look to replace their car or at least one of the family’s cars for a bike. The directors strongly believe the market will rebound, and global targets for carbon reduction and people seeking healthier lifestyle options should give us huge opportunities to grow in the years ahead.

On behalf of the board

Mr M E Ryley
Director
12 June 2024
UPGRADE GROUP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the group continued to be that of the distribution of racing and mountain bicycles and bicycle parts.

Results and dividends

The results for the year are set out on page 8.

For the year ended 31 December 2023, the group declared an ordinary dividend of £345,368. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr D H Mason
Mr M E Ryley
Financial instruments
Treasury operations and financial instruments

The group operates a treasury function which is responsible for managing the liquidity and foreign currency risks associated with the group’s activities.

 

The group’s principal financial instruments include derivative financial instruments, the purpose of which is to manage currency risks arising from the group’s activities. In addition, the group has various other financial assets and liabilities such as trade receivables and trade payables arising directly from its operations. Derivative transactions which the group enters into principally comprise forward exchange contracts. In accordance with the group’s treasury policy, derivative instruments are not entered into for speculative purposes.

Liquidity risk

The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the group has sufficient liquid resources to meet the operating needs of the business.

Foreign currency risk

The group’s principal foreign currency exposures arise from trading with overseas companies. Group policy permits but does not demand that these exposures may be hedged in order to fix the cost in sterling. This hedging activity involves the use of foreign exchange forward contracts.

Credit risk

Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating criteria approved by the Board.

 

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade receivables are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

Research and development

The group aims to produce bikes and parts at certain price points and performance standards. Research and development is carried out across a number of products and always involves the commercial assessment of the designs, production of prototypes and performance testing.

Future developments

The directors believe that there are currently no major future developments requiring disclosure.

UPGRADE GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Auditor

The auditor, Sumer Audit, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

On behalf of the board
Mr M E Ryley
Director
12 June 2024
UPGRADE GROUP LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

UPGRADE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF UPGRADE GROUP LIMITED
- 5 -
Opinion

We have audited the financial statements of Upgrade Group 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).

In our opinion the financial statements:

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:

UPGRADE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF UPGRADE GROUP LIMITED
- 6 -
Matters on which we are required to report by exception

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:

Responsibilities of directors

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.

Auditor's responsibilities for the audit of the financial statements

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.

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:

 

 

As a result of these procedures, we considered the opportunities and incentives that may exist within the group for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: health & safety, employment law and compliance with the UK Companies Act.

In addition to the above, our procedures to respond to risks identified included the following:

 

UPGRADE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF UPGRADE GROUP LIMITED
- 7 -

Due to the inherent limitations of an audit, there is an unavoidable risk that some 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). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.

 

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.

Alex Chidwick FCCA (Senior Statutory Auditor)
For and on behalf of Sumer Audit
13 June 2024
Chartered Accountants
Statutory Auditor
Worthing
Sumer Audit is the trading name of Sumer Auditco Limited
UPGRADE GROUP LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Revenue
3
7,945,990
10,873,911
Cost of sales
(6,922,236)
(8,983,425)
Gross profit
1,023,754
1,890,486
Distribution costs
(494,096)
(498,061)
Administrative expenses
(1,173,255)
(133,323)
Operating (loss)/profit
4
(643,597)
1,259,102
Investment income
24,199
818
Finance costs
-
0
(103)
Fair value gains and losses on foreign exchange contracts
116,416
(136,526)
(Loss)/profit before taxation
(502,982)
1,123,291
Tax on (loss)/profit
8
120,280
(243,521)
(Loss)/profit for the financial year
(382,702)
879,770
Other comprehensive income
Revaluation of property, plant and equipment
1,529,372
-
0
Tax relating to other comprehensive income
(302,643)
-
0
Total comprehensive income for the year
844,027
879,770
(Loss)/profit for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
UPGRADE GROUP LIMITED
GROUP STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Non-current assets
Intangible assets
1
1
Property, plant and equipment
10
2,678,977
1,196,212
2,678,978
1,196,213
Current assets
Inventories
14
3,462,139
4,823,834
Trade and other receivables
15
1,996,348
1,679,722
Cash and cash equivalents
2,456,518
2,682,758
7,915,005
9,186,314
Current liabilities
16
(688,223)
(1,266,369)
Net current assets
7,226,782
7,919,945
Total assets less current liabilities
9,905,760
9,116,158
Provisions for liabilities
Deferred tax liability
17
318,643
27,700
(318,643)
(27,700)
Net assets
9,587,117
9,088,458
Equity
Called up share capital
19
6,000
6,000
Revaluation reserve
1,225,210
-
0
Capital redemption reserve
1
1
Retained earnings
8,355,906
9,082,457
Total equity
9,587,117
9,088,458

These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.

The financial statements were approved by the board of directors and authorised for issue on 12 June 2024 and are signed on its behalf by:
12 June 2024
Mr D H Mason
Mr M E Ryley
Director
Director
Company registration number 12983521 (England and Wales)
UPGRADE GROUP LIMITED
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 December 2023
- 10 -
2023
2022
Notes
£
£
£
£
Non-current assets
Property, plant and equipment
10
2,594,583
-
0
Investments
11
6,000
6,000
2,600,583
6,000
Current assets
Trade and other receivables
15
468,741
477,521
Cash and cash equivalents
83,331
153
552,072
477,674
Current liabilities
16
(34,650)
(476,886)
Net current assets
517,422
788
Total assets less current liabilities
3,118,005
6,788
Provisions for liabilities
Deferred tax liability
17
302,643
-
0
(302,643)
-
Net assets
2,815,362
6,788
Equity
Called up share capital
19
6,000
6,000
Revaluation reserve
1,225,210
-
0
Retained earnings
1,584,152
788
Total equity
2,815,362
6,788

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 £3,456,585 (31 December 2022 - £169,012).

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

The financial statements were approved by the board of directors and authorised for issue on 12 June 2024 and are signed on its behalf by:
12 June 2024
Mr D H Mason
Mr M E Ryley
Director
Director
Company registration number 12983521 (England and Wales)
UPGRADE GROUP LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
Share capital
Revaluation reserve
Capital redemption reserve
Retained earnings
Total
Notes
£
£
£
£
£
Balance at 1 January 2022
6,000
-
0
1
8,371,611
8,377,612
Year ended 31 December 2022:
Profit and total comprehensive income
-
-
-
879,770
879,770
Dividends
9
-
-
-
(168,924)
(168,924)
Balance at 31 December 2022
6,000
-
0
1
9,082,457
9,088,458
Year ended 31 December 2023:
Loss for the year
-
-
-
(382,702)
(382,702)
Other comprehensive income:
Revaluation of property, plant and equipment
-
1,529,372
-
-
1,529,372
Tax relating to other comprehensive income
-
(302,643)
-
-
0
(302,643)
Total comprehensive income
-
1,226,729
-
(382,702)
844,027
Dividends
9
-
-
-
(345,368)
(345,368)
Transfers
-
(1,519)
-
1,519
-
Balance at 31 December 2023
6,000
1,225,210
1
8,355,906
9,587,117
UPGRADE GROUP LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
Share capital
Revaluation reserve
Retained earnings
Total
Notes
£
£
£
£
Balance at 1 January 2022
6,000
-
0
700
6,700
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
-
169,012
169,012
Dividends
9
-
-
(168,924)
(168,924)
Balance at 31 December 2022
6,000
-
0
788
6,788
Year ended 31 December 2023:
Profit for the year
-
-
3,456,585
3,456,585
Other comprehensive income:
Tax relating to other comprehensive income
-
(302,643)
-
0
(302,643)
Total comprehensive income
-
(302,643)
3,456,585
3,153,942
Dividends
9
-
-
(345,368)
(345,368)
Transfers
-
1,527,853
(1,527,853)
-
Balance at 31 December 2023
6,000
1,225,210
1,584,152
2,815,362
UPGRADE GROUP LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
21
496,146
(26,042)
Interest paid
-
0
(103)
Income taxes paid
(396,625)
(470,227)
Net cash inflow/(outflow) from operating activities
99,521
(496,372)
Investing activities
Purchase of property, plant and equipment
(4,592)
(33,799)
Interest received
24,199
818
Net cash generated from/(used in) investing activities
19,607
(32,981)
Financing activities
Dividends paid to equity shareholders
(345,368)
(168,924)
Net cash used in financing activities
(345,368)
(168,924)
Net decrease in cash and cash equivalents
(226,240)
(698,277)
Cash and cash equivalents at beginning of year
2,682,758
3,381,035
Cash and cash equivalents at end of year
2,456,518
2,682,758
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
1
Accounting policies
Company information

Upgrade Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Amelia House, Crescent Road, Worthing, West Sussex, BN11 1RL.

1.1
Accounting convention

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 £1.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain financial instruments 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:

 

1.2
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company and its subsidiary. The subsidiary is consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

1.3
Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The directors have considered relevant information, including the company’s principal risks and uncertainties, forecast future cash flows and the impact of subsequent events in making their assessment.

Based on these assessments and having regard to the resources available to the entity, the directors have concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.

1.4
Revenue

Revenue is recognised to the extent that the group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The following criteria must also be met before revenue is recognised:

Sales of goods

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 group and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -

Commissions receivable

Revenue from commissions receivable is recognised when the individual transaction, for which the commission is earned, has been completed.

1.5
Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Freehold land and buildings
2% straight line - buildings element only
Plant and equipment
25% diminishing balance
Fixtures and fittings
25% diminishing balance
Computers
33% straight line
Motor vehicles
25% diminishing balance

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.

1.6
Non-current investments

In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

1.7
Impairment of non-current assets

At each reporting end date, the group reviews the carrying amounts of its tangible 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).

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset 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.

1.8
Inventories

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

1.9
Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks.

1.10
Financial assets and liabilities

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.

UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -

The group enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities including trade and other accounts receivable and payable, loans from banks and loans from related parties.

 

Debt instruments including loans and other accounts receivable and payable are initially measured at transaction price and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received.

 

The group also enters into other financial instruments in the use of forward foreign currency contracts in order to reduce exposure to foreign exchange rates.

 

Derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value through profit or loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

 

The fair value of the forward currency contracts is calculated by reference to current forward exchange contracts with similar maturity profiles and carried out by a third party.

 

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity. Financial liabilities are derecognised when, and only when, the group's obligations are discharged, cancelled, or they expire.

1.11
Equity instruments

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.

1.12
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current 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

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.

1.13
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense.

1.14
Retirement benefits

For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
1.15
Foreign exchange

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.

2
Judgements and key sources of estimation uncertainty

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.

Key sources of estimation uncertainty

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.

Inventory impairment

The directors have made key assumptions in determining the appropriate impairment provision against inventory items held at the end of the reporting period, based on the ageing of inventory lines purchased in excess of 18 months prior to the statement of financial position date, as well as any adjustments for specific identified items.

Freehold land and buildings

The directors revalued freehold land and buildings to fair value on 31 July 2023, prior to the transfer of the assets from the subsidiary company via a dividend in specie, Upgrade Bikes Limited. This valuation was based on a the results of an independent professional valuation which took place on 15 November 2021.

3
Revenue
2023
2022
£
£
Revenue analysed by class of business
Sales of goods
7,918,432
10,707,916
Commissions receivable
27,558
165,995
7,945,990
10,873,911
2023
2022
£
£
Revenue analysed by geographical market
United Kingdom
7,248,578
8,838,054
Europe
251,710
822,885
Rest of world
445,702
1,212,972
7,945,990
10,873,911
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
4
Operating (loss)/profit
2023
2022
£
£
Operating (loss)/profit for the year is stated after charging/(crediting):
Exchange losses/(gains)
239,830
(505,235)
Depreciation of owned property, plant and equipment
51,199
55,067
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
3,750
3,000
Audit of the financial statements of the company's subsidiaries
14,000
13,000
17,750
16,000
6
Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
Directors
2
2
2
2
Administration
7
7
-
-
Marketing, IT and design
6
6
-
-
Warehouse
6
7
-
-
Sales
10
10
-
-
Total
31
32
2
2

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£
£
£
£
Wages and salaries
998,580
1,008,832
-
0
-
0
Social security costs
104,802
108,628
-
-
Pension costs
163,416
40,163
-
0
-
0
1,266,798
1,157,623
-
0
-
0
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
13,182
13,182
Company pension contributions to defined contribution schemes
120,000
-
133,182
13,182

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2). The directors are considered to be the only key management personnel of the group.

8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
-
0
250,021
Adjustments in respect of prior periods
(108,580)
(800)
Total current tax
(108,580)
249,221
Deferred tax
Origination and reversal of timing differences
(11,700)
(5,700)
Total tax (credit)/charge
(120,280)
243,521

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
(Loss)/profit before taxation
(502,982)
1,123,291
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
(95,567)
213,425
Tax effect of expenses that are not deductible in determining taxable profit
(21,951)
33,357
Adjustments in respect of prior years
-
0
(800)
Permanent capital allowances in excess of depreciation
-
0
(1,100)
Depreciation on assets not qualifying for tax allowances
1,188
783
Other non-reversing timing differences
(2,650)
(794)
Effect of changes in local deferred tax rate
(1,300)
(1,350)
Taxation (credit)/charge
(120,280)
243,521
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Taxation
(Continued)
- 20 -

In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:

2023
2022
£
£
Deferred tax arising on:
Revaluation of property
302,643
-
9
Dividends
2023
2022
Recognised as distributions to equity holders:
£
£
Interim paid
345,368
168,924
10
Property, plant and equipment
Group
Freehold land and buildings
Plant and equipment
Fixtures and fittings
Computers
Motor vehicles
Total
£
£
£
£
£
£
Cost or valuation
At 1 January 2023
1,242,779
34,108
23,741
181,023
148,401
1,630,052
Additions
-
0
2,260
-
0
2,332
-
0
4,592
Disposals
(172,151)
-
0
-
0
-
0
-
0
(172,151)
Revaluation
1,529,372
-
0
-
0
-
0
-
0
1,529,372
At 31 December 2023
2,600,000
36,368
23,741
183,355
148,401
2,991,865
Depreciation and impairment
At 1 January 2023
166,693
28,156
22,680
143,804
72,507
433,840
Depreciation charged in the year
10,875
1,599
265
19,487
18,973
51,199
Eliminated in respect of disposals
(172,151)
-
0
-
0
-
0
-
0
(172,151)
At 31 December 2023
5,417
29,755
22,945
163,291
91,480
312,888
Carrying amount
At 31 December 2023
2,594,583
6,613
796
20,064
56,921
2,678,977
At 31 December 2022
1,076,086
5,952
1,061
37,219
75,894
1,196,212
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
10
Property, plant and equipment
(Continued)
- 21 -
Company
Freehold land and buildings
£
Cost or valuation
At 1 January 2023
-
0
Additions
2,600,000
At 31 December 2023
2,600,000
Depreciation and impairment
At 1 January 2023
-
0
Depreciation charged in the year
5,417
At 31 December 2023
5,417
Carrying amount
At 31 December 2023
2,594,583

Freehold land and buildings, including property improvements, with a carrying amount of £1,070,628 were revalued by the directors at 31 July 2023. The revaluation was based on an independent valuation by SHW at 12 November 2021.The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.

 

The revaluation of the property took place in the subsidiary company, Upgrade Bikes Limited, prior to the transfer of ownership of the property to Upgrade Group Limited via a dividend in specie. A transfer of £1,529,372, being equivalent to the gain on revaluation of the property, has been made from retained earnings to the revaluation reserve in Upgrade Group Limited. A further transfer of £1,519 has been made from the revaluation reserve to retained earnings in Upgrade Group Limited, being excess depreciation charges as a result of the revaluation.

The following assets are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:

2023
2022
£
£
Group
Cost
1,242,779
1,242,779
Accumulated depreciation
(176,049)
(166,693)
Carrying value
1,066,730
1,076,086
11
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
12
-
0
-
0
6,000
6,000
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
11
Fixed asset investments
(Continued)
- 22 -
Movements in non-current investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023 and 31 December 2023
6,000
Carrying amount
At 31 December 2023
6,000
At 31 December 2022
6,000
12
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Upgrade Bikes Limited
Amelia House, Crescent Road, Worthing, West Sussex, BN11 1RL
Ordinary
100.00
13
Financial instruments
Group
Company
2023
2022
2023
2022
£
£
£
£
Carrying amount of financial liabilities
Measured at fair value through profit or loss
- Other financial liabilities
-
116,416
-
-

The group purchases forward foreign currency contracts to manage currency exposure on future commitments. The fair values of the assets and liabilities held at fair value through profit and loss at the statement of financial position date are determined using quoted prices. At the statement of financial position date the group has agreed forward contracts totalling £nil (2022 - £3,631,144) for the purchase of foreign currency.

14
Inventories
Group
Company
2023
2022
2023
2022
£
£
£
£
Finished goods and goods for resale
3,462,139
4,823,834
-
0
-
0

The replacement cost of stock held by the group as at the reporting date is estimated at £4,022,000 (2022 - £5,710,000).

UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
15
Trade and other receivables
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Trade receivables
792,530
1,518,340
-
0
-
0
Corporation tax recoverable
493,232
-
0
-
0
-
0
Amounts owed by group undertakings
-
-
468,741
477,521
Other receivables
6,914
6,914
-
0
-
0
Prepayments and accrued income
703,672
154,468
-
0
-
0
1,996,348
1,679,722
468,741
477,521
16
Current liabilities
Group
Company
2023
2022
2023
2022
£
£
£
£
Trade payables
427,053
374,439
-
0
-
0
Corporation tax payable
185
12,158
185
185
Other taxation and social security
109,747
228,036
-
-
Derivative financial instruments
-
0
116,416
-
0
-
0
Other payables
30,194
473,750
24,865
468,421
Accruals and deferred income
121,044
61,570
9,600
8,280
688,223
1,266,369
34,650
476,886
17
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Liabilities
Liabilities
2023
2022
Group
£
£
Accelerated capital allowances
16,000
27,700
Revaluations
302,643
-
318,643
27,700
Liabilities
Liabilities
2023
2022
Company
£
£
Revaluations
302,643
-
UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
17
Deferred taxation
(Continued)
- 24 -
Group
Company
2023
2023
Movements in the year:
£
£
Liability at 1 January 2023
27,700
-
Credit to profit or loss
(11,700)
-
Charge to other comprehensive income
302,643
302,643
Liability at 31 December 2023
318,643
302,643
18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
163,416
40,163

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.

19
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary A shares of £1 each
2,000
2,000
2,000
2,000
Ordinary B shares of £1 each
4,000
4,000
4,000
4,000
6,000
6,000
6,000
6,000

Ordinary A shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.

 

Ordinary B shares are non-voting shares and hold no rights but may be considered separately by the directors when declaring dividends.

20
Directors' transactions

At the statement of financial position date, the directors were owed £12,427 (2022 - £345,094) by the group and company, this amount is included within other payables. The loans are interest free and have no fixed repayment date.

 

At the statement of financial position date a shareholder was owed £12,438 (2022 - £123,327) by the group and company, this amount is included within other payables. This loan is interest free and has no fixed repayment date.

UPGRADE GROUP LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
21
Cash generated from/(absorbed by) group operations
2023
2022
£
£
(Loss)/profit for the year after tax
(382,702)
879,770
Adjustments for:
Taxation (credited)/charged
(120,280)
243,521
Finance costs
-
0
103
Investment income
(24,199)
(818)
Fair value (gain)/loss on foreign exchange contracts
(116,416)
136,526
Depreciation and impairment of property, plant and equipment
51,199
55,067
Movements in working capital:
Decrease/(increase) in inventories
1,361,695
(546,797)
Decrease in trade and other receivables
176,606
769
Decrease in trade and other payables
(449,757)
(794,183)
Cash generated from/(absorbed by) operations
496,146
(26,042)
22
Analysis of changes in net funds - group
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
2,682,758
(226,240)
2,456,518
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