The directors present the strategic report for the year ended 31 May 2024.
The group's principal activities continue to be that of drylining and other specialist building finishes.
We aim to present a balanced and comprehensive review of the development and performance of our business during the year and its position at the year end. Our review is consistent with the size and nature of our business and is written in the context of the risks and uncertainties we face.
As for many businesses of our size, the business environment in which we operate continues to be challenging. In light of the challenging business environment, economic factors and competitive nature of the industry, we consider the group’s results for the year and its financial position at the year end to be satisfactory and believe that the group is well placed to react quickly to any changes in trading conditions and to take advantage of any business opportunities that may arise.
The principal risks and uncertainties faced by the group continue to be the uncertainty over contracts that are won year on year. The continued success of the group depends on our ability to continue to maintain a good reputation which in turn will ensure the group wins more contracts; consequently this will ensure the group continues to maintain a strong financial position.
The group responds to this risk by continually improving operational effectiveness. Changes are implemented where deemed appropriate.
We consider that our key financial performance indicators are those that communicate the financial performance and strength of the group as a whole, being turnover and gross profit margin.
During the year turnover has decreased to £14,429,864 (2023: £19,446,420); the gross profit margin has increased to 24.3% (2023: 24.2%). This has resulted in an decrease in profit before taxation to £2,015,212 (2023: £3,234,234). After dividends of £2,000,000 and taxation, £511,857 has been deducted from the reserves.
On behalf of the board
The directors present their report and financial statements for the year ended 31 May 2024.
The results for the year are set out on page 6.
Ordinary dividends were paid amounting to £2,000,000. 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:
We have audited the financial statements of L Reynolds Holdings Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 May 2024 which comprise the group statement of income and retained earnings, the group balance sheet, the company balance sheet, 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 FRS 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 set out on page 2, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. However, responsibility for the prevention and detection of fraud ultimately rests with both those charged with governance and management of the company.
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:
obtaining an understanding of the legal and regulatory framework applicable to the group and parent company by considering the nature of the industry in which the group and parent company operates and enquiring of management; and
identifying the key laws and regulations considered to have a direct impact on the financial statements including the UK Companies Act 2006, UK Generally Accepted Accounting Practice, UK tax legislation, Building regulations and Health & Safety Laws and Regulations; and
assessing how the group and parent company is complying with the applicable legal and regulatory framework by making further enquiries of management and observing the group and parent company's control environment regarding compliance with regulations and fraud prevention; and
assessing the susceptibility of the group and parent company’s financial statements to material misstatement, including how fraud might occur, by considering the effectiveness of the group and parent company’s accounting systems and controls and how these were monitored by management. Where the risk of material misstatement was considered to be higher in certain areas, further audit procedures were designed to address this increased risk; and
discussing amongst the engagement team how and where fraud might occur in the financial statements and any potential indicators of fraud.
Audit response to risks of irregularities identified
Our procedures to respond to risks identified included the following:
reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations; and
enquiry of group and parent company staff responsible for compliance to identify any instances of non-compliance with laws and regulations; and
reviewing supporting documentation confirming compliance with specific laws and regulations considered central to the ability of the group and parent company to operate; and
enquiry of management, those charged with governance and other relevant parties around actual and potential litigation claims; and
performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias; and
communicating identified laws and regulations and potential fraud risks to all engagement team members and assessing whether there are any indications of fraud or non-compliance with laws and regulations throughout the audit; and
performing audit work over revenue recognition including substantive tests of detail of a sample of revenue transactions.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
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 £2,335,670 (2023 - £2,026,680 profit).
L Reynolds Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The address of the registered office and the place of business is given in the company information page of these financial statements.
The group consists of L Reynolds Holdings Ltd and all of its subsidiaries ("group").
These financial statements have been prepared in accordance with applicable accounting standards including 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. The principal accounting policies adopted are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
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 taken advantage of the exemption from preparing a statement of cash flows on the basis that the group statement of cash flows, included in these financial statements, includes the company's cash flows.
The consolidated financial statements incorporate those of L Reynolds Holdings Ltd and all of its subsidiaries.
All financial statements are made up to 31 May 2024. 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.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents amounts receivable for drylining and other specialist building finishes services net of VAT and trade discounts.
Revenue from contracts for the provision of services is recognised by reference to the stage of completion of the contract activity at the end of the reporting period when the stage of completion, costs incurred and costs to complete can be estimated reliably.
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
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, or the asset’s cash generating unit, is estimated and compared to the carrying amount in order to determine the extent of the impairment loss (if any). Where the carrying amount exceeds its recoverable amount, an impairment loss is recognised in the profit and loss account unless the asset is carried at a revalued amount where the impairment loss is a revaluation decrease.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Debtors and creditors with no stated interest rate and receivable or payable within one year are measured at transaction price. Any losses arising from impairment are recognised in the profit and loss account.
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. 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.
When employees have rendered service to the company, short-term employee benefits to which the employees are entitled are recognised at the undiscounted amount expected to be paid in exchange for that service.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.
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 the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
As explained in note 1.4, where contracts can be estimated reliably, contract revenues and costs are recognised for each contract on a stage of completion basis. The application of this accounting policy requires both the total costs of a contract and the stage of completion of contracts to be assessed.
Surveys of work performed are carried out by qualified surveyors. An inherent degree of judgement will exist in determining the stage of completion on a contract at any given time.
The directors do not consider there to be any other key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2023 - 2).
From 1 April 2023, the UK corporation tax rate increased from 19% to 25%. The prior year rate is pro-rated accordingly.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 May 2024 are as follows:
The registered address of all subsidiaries is the same as the company's registered office address as given in the company information page of these financial statements.
Creditors due within one year amounting to £22,375 (2023: £3,713) are secured against the assets to which they relate.
Creditors due after one year amounting to £1,865 (2023: £nil) are secured against the assets to which they relate.
Finance lease payments represent rentals payable by the company or group for certain motor vehicles. 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 2-3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
The company has one class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.
This reserve represents the premium on shares issued at a value that exceeds their nominal value.
The profit and loss reserve comprises retained profits and losses for the current and prior periods.
The remuneration of key management personnel is as follows.
Group
At the year end a balance of £1,426,939 (2023 - £3,842,172) was owed from a company in which a director has a controlling interest.
During the year, remuneration was paid to close family members of the directors amounting to £47,450 (2023 - £36,548).
During the year, rental charges of £10,500 (2023 - £8,500) were paid to a director and £40,000 (2023 - £40,000) were paid to a company in which a director has a controlling interest.
During the year sales invoices of £nil (2023 - £162,000) were raised to a director.
Company
At the year end a balance of £1,424,768 (2023 - £3,840,000) was owed from a company in which a director has a controlling interest.
At the year end a balance of £35,122 (2023 - £535,122) was owed to a 100% owned subsidiary company.
The company has taken advantage of the exemption offered by FRS 102 from the requirement to disclose transactions with wholly owned group companies on the grounds that consolidated financial statements are
prepared by the ultimate parent company.
Dividends totalling £2,000,000 (2023 - £10,004,000) were paid in the year in respect of shares held by the company's directors.
Advances or credits have been granted by the group to its directors as follows:
The year end balance of £2,000,000 (2023 - £9,465,404) is included within other trade creditors.