The directors present their strategic report for the year ended 31 December 2023.
The principal activity of the company during the year was the design, manufacture and installation of specialist equipment for use in retail stores, such as digital displays, checkouts, related products, and entrance/exit control solutions, combined with project management, aftercare service and maintenance. The client base of the company is primarily very large UK retailers.
Review of business
The company is part of a larger group in the UK and worldwide which provides a complete shopfitting solution for major retailers. This offer includes standard and bespoke retail display equipment, innovative solutions for the checkout arena, professional lighting systems, and interior fit-outs. This wide product and service offering enables the company in conjunction with its sister companies to provide innovative solutions to its customer needs.
The reduction in sales is primarily due to the retail climate, with high inflation levels driving uncertainty and reduced customer spend. Employee numbers similarly fell as the business aligned its costs accordingly to maintain its levels of profitability.
The Profit before tax was £1,262,926 (2022: £2,655,887). The decrease is as a result of the impact of reduced sales, but mostly offset by improved gross margins, actions taken to reduce administrative expenses, and fully amortised the goodwill in the prior year.
Net assets benefited from a significant reduction in stock levels as part of a Group working capital initiative, while the increase in debtors was as a result of strong sales towards the end of the year.
The company's key performance indicators were as follows:
2023 2022 Movement £000 £000 £000
Sales 44,860 63,516 (18,656)
Profit/(loss) before tax 1,263 2,656 (1,393)
Stock 5,242 5,163 79
Employees 161 187 (26)
The number of employees fell in line with the actions taken across the business to manage its overhead expenses in line with sales activity and profitability levels.
The company's operations expose it to a variety of commercial and financial risks. The commercial risks include the loss of a major contract and the availability of raw materials. The financial risks include credit risk, liquidity risk, price risk and currency risk.
Loss of a major contract
The company's sales are typically subject to annual tenders by its customers and the loss of a major contract would impact sales. Furthermore, the company's sales are affected by its customer's capital expenditure programmes and changes in these would impact sales. The company looks to minimise these risks by continually reviewing and updating its product and service offer, and seeking to reach a wide customer base.
Availability of raw materials
The availability of raw materials is a global risk and one that is managed through the company's network of supply chain across the globe both internal and external to the group.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Company policies are aimed at minimising such losses, and require that deferred terms are only granted to customers who have reliable payment history and satisfy credit checks. The company supplies mainly blue- chip retailers and accordingly this risk is minimised as much as possible.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations as they fall due. The company mitigates liquidity risk by managing cash generation by its operations and holding significant cash balances.
Price risk
Price risk arises on raw material commodity prices which is managed by close price monitoring and contractual terms.
Currency risk
The company purchases products from overseas and as such is subject to some currency risk primarily around the euro and US dollar. This is reviewed regularly on receipt of customer orders to minimise the risk of fluctuations and therefore this does not provide a material risk to the company.
In preparing these financial statements, the directors have assessed the ability of the company to continue to operate for the period of at least twelve months from the date of signing the financial statements.
The directors have undertaken a risk assessment and forecasting exercise to assess the company's liquidity position in response to the impact of high inflation and reduced customer activity. The assessment included performing cash flow sensitivity analysis focusing on sales levels. In addition, reverse stress testing is performed to assess the levels of performance where cash availability would breach. The results of this analysis demonstrated that there is sufficient cash availability.
Based on current trading performance, and the sensitivity and reverse stress testing performed, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for a period of at least twelve months from the date of signing these financial statements and accordingly they continue to adopt the going concern basis in preparing these financial statements.
As required by Section 172 of the Companies Act, a director of a Group must act in good faith in a way which promotes the Group's success, for the benefit of the shareholders. In doing so each director has regard, amongst other matters, to the following.
Likely consequences of any decisions in the long-term
All long-term planning is directed and aligned to the Group global strategy, with shorter term decision making at local level ensuring the business remains focused on achieving the longer-term goals and objectives. The directors have significant experience of the market and regularly review the short-term planning and decision making of the business to ensure the long-term impact is understood.
Interests of the company's employees
The company operates a number of initiatives to improve the communication and wellbeing of its employees, including regular monthly updates to all staff on company matters, annual reviews and personal development plans. The business encourages career progression from within its existing labour force and ensures all staff are given the appropriate training to advance in their professions and ensure they are qualified to perform their roles. Additionally the company offers flexible working arrangement for its employees where roles permit.
The need to foster the company's business relationships with suppliers/customer and others
The company looks to have relationships at all levels within is customers and work closely to deliver its products and services in a timely manner and to a level of quality expected. As the company is seen as one of the industry's experts in its field the customers frequently utilise the company to gain insight and market intelligence in exploring new opportunities.
Strong processes and experience exist around the company's procurement and relationship with its suppliers. This ensures the supplier base is appropriately accredited and adhere to the policies and ethical guidelines of the business as well as those of its customers, to deliver supply chain integrity. In turn the company pays its obligations with its suppliers promptly and consistently and has established annual meetings with its key suppliers by the procurement team.
The impact of the company's operations on the community and environment
The company looks to manage its impact to the environment and in turn the local community by being responsible around its carbon footprint and disposal of waste in a safe and secure manner. The company continues to support and has taken part in several fund-raising activities through both its customers and employees during the year.
The company operate multi-site and flexible working arrangements to minimise unnecessary travel and monitor closely any air travel to business priorities and outcomes.
The company also maintains accreditations relevant to our industry, including sustainability and environmental policies aligned to our group sustainability strategy.
The company's reputation for high standards and business conduct
The reputation and standards of the company are long standing as one of the largest providers of products and services to the market within which it operates. The company will prioritise the quality of its products and services over price to ensure the best customer experience.
In addition, the policies of the company are such that it drives a culture of business integrity within its employees when conducting business. The business holds a number of accreditations that ensure both the company, and its suppliers are compliant with best working practices and operate in a healthy and safe environment.
Need to act fairly between members of the company
The company is owned by its ultimate holding company, ITAB Shop Concept AB, of which two directors of the company are also directors of that entity. The Directors therefore operate and work in a fair manner that closely aligns the interests of the Group and ultimate owners with those of the company. The board is presented with regular board packs and other information that it needs to fulfil its responsibilities. During the year at board meetings, the board have discussed and made decisions on a number of specific issues including business priorities and strategy, capital investments and the ongoing management of the current economic situation.
Our culture
The company is part of a global group which drives a "One ITAB" philosophy helping to define our common policies, guidelines, and behaviour, to each other and our business partners.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The profit for the financial year amounted to £960,720 (2022: £2,240,302). Dividends totalling £500,000 (2022: £nil) were paid during the year.
Future developments
The company intends to continue to market its own and its group's wide product and service offering to the retail community.
Ordinary dividends were paid amounting to £500,000. The directors do not recommend payment of a final dividend.
The directors shown below have held office during the whole of the period from 1 January 2023 to the date of this report were:
The company finances its activities with a combination of cash, bank loans, intercompany loans and operating leases. Overdrafts are used to satisfy short term cash flow requirements. Other financial assets and liabilities, such as trade debtors and trade creditors, arise directly from the company's operating activities.
Financial instruments give rise to foreign currency, credit price and liquidity risk. In accordance with S414C (11) of the Companies Act 2006, the directors have presented information of financial risk management objectives and policies in the strategic report.
The company has seen an impact on shipping following the attacks in the Red Sea, changing shipping routes to detour around the Cape of Good Hope, adding lead time and cost. This has impacted the entire industry for Far East supply which has been managed in coordination with our customers and wider group relationships, enabling responsive pricing and agreed revised delivery timescales. Our local factory provides an opportunity to meet tighter timescales, which has seen higher utilisation during the start of the year.
The group to which the company belongs has provided qualifying indemnity provisions in respect of the directors which were in force during the year.
The company customer base is principally located within the UK and Ireland and focused within the Retail sector across a number of markets such as grocery and home improvement. The business has a long-standing reputation in the industry within which it operates and is considered an expert in its field, providing its products and range of services at scale. The sales director is responsible for managing the relationship with key customers and maintains regular contact with them, seeking feedback and reporting to the managing director and the board on a regular basis.
In order to offer the best in products ranging from manufactured in-house to procured equipment, the company has an extensive supplier and trusted eco-system partner base spanning a number of territories that enables it to make compelling offers to its customers depending on their needs and requirements. The company operates its network through strict codes of conduct and ethical guidelines and conduct annual audits on all key suppliers. The operations director is responsible for managing the relationship with key suppliers and maintains regular contact with them, seeking feedback and reporting to the managing director and the board on a regular basis.
The financial risk management policy sections are not included in the Report of Directors as under S414C(11), they have been included in the Strategic Report.
This report represents the greenhouse gas ("GHG") emissions quantified by the business for the financial year ending 31 December 2023 and its comparative year.
The prior year figures have been restated on the basis that in the prior year, natural gas fuel consumption was estimated for the Wentworth site. However, there was no gas use at Wentworth in 2023 and all historic periods.
Furthermore, updated data provided for 2022 identified the mileage of seven vehicles, which had been duplicated in both Scope 1: Mobile Combustion and Scope 3: Staff Vehicles. The effect of the restatement is a reduction in KgCO2e of 30,329 (kWh 119,922).
The results represent all GHG emission issues from business activities, using the financial control approach.
This report was produced in accordance with the UK Governments Environmental Reporting Guidelines 2019 and covers UK operations only, as required by SECR for No-Quoted Large Companies.
Emissions have been calculated using the latest conversion factors provided by the UK Government.
There are no material omissions from the mandatory reporting scope.
The company has taken steps to engage with the Carbon Trust to look at an energy strategy to drive a number of initiatives to drive energy efficiency and reduce carbon footprint.
Reduce the heating requirements for the manufacturing paint line and factory air heaters by replacing with a combined heat and power unit
Rationalising and upgrading the building lighting to all LED, personnel activated locations, reduction in number of lights utilised
Update to automated meter monitoring to establish all areas of usage to target systems and controls
Improvements and automation of controls to ventilation and air conditioning systems in the building to reduce usage to only required periods
Controls over computer usage and use of energy efficient equipment
Reduction of fleet vehicles through transition away from perk cars
Transition remaining fleet to hybrid or fully electric vehicles as leases expire
In addition, feasibility studies are underway in respect of the use of solar photovoltaic panels and battery storage to power some or all of the factory electricity requirements, as well as installation of rapid EV chargers to support the company and local networks.
The auditors, Grant Thornton UK LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.
Basis for opinion
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the company to cease to continue as a going concern.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the company's business model including effects arising from macro-economic uncertainties such as the cost of living crisis and the impact of the war in Ukraine, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the company's financial resources or ability to continue operations over the going concern period.
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 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
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the 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.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
As explained more fully in the directors' responsibilities statement set out on page 8, 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 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 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. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
We obtained an understanding of the legal and regulatory frameworks applicable to the company and industry in which it operates through our general commercial and sector experience, discussions with management and review of board minutes. We determined that the following laws and regulations were most significant: FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, the Companies Act 2006 and the relevant tax compliance regulations in the UK. In addition, we concluded that there are certain laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements such as health and safety and employee matters.
We enquired of management concerning the company’s policies and procedures relating to:
the identification, evaluation and compliance with laws and regulations;
the detection and response to the risks of fraud; and
the establishment of internal controls to mitigate risks related to fraud or non-compliance with laws and regulations.
We enquired of management and those charged with governance, whether they were aware of any instances of non-compliance with laws and regulations or whether they had any knowledge of actual, suspected or alleged fraud.
We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur and the risk of management override of controls. Audit procedures performed by the engagement team included:
identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
challenge assumptions and judgements made by management in its significant accounting estimates;
identifying and testing journal entries, in particular journal entries posted with unusual account combinations that increased revenues or that reduced costs in the statement of comprehensive income; and
assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item.
In addition, we completed audit procedures to conclude on the compliance of disclosures in the annual report and accounts with applicable financial reporting requirements.
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it.
The assessment of the appropriateness of the collective competence and capabilities of the engagement team including consideration of the engagement team’s:
understanding of, and practical experience with, audit engagements of a similar nature and complexity through appropriate training and participation;
knowledge of the industry in which the client operates; and
understanding of the legal and regulatory requirements specific to the entity including, the provisions of the applicable legislation and the applicable statutory provision.
We communicated relevant laws and regulations and potential fraud risks to all engagement team members. We remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: 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.
All activities derive from continuing operations.
The financial statements of ITAB UK Ltd (the "company") for the year ended 31 December 2023 were
authorised for issue by the board of directors on 14 May 2024 and the balance sheet was signed on the board's behalf by R T French. ITAB UK Ltd is registered and domiciled in England and Wales.
The principal accounting policies adopted by the Company are specified below.
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 company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
the requirements of Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
the requirement of Section 3 Financial Statements Presentation paragraph 3.17(d);
the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
the requirements of Section 12 Other Financial Instruments paragraphs 12.26, 12.27, 12.29(a), 12.29(b) and 12.29A;
the requirement of Section 33 Related Party Disclosures paragraph 33.7.
The financial statements of the company are consolidated in the financial statements of ITAB Shop Concept AB as at 31 December 2023. These consolidated financial statements are available from the company secretary at Box 9054, SE-550. 09 Jönköping, Sweden.
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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.
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 company’s contractual obligations expire or are discharged or cancelled.
Foreign currencies
The Company's financial statements are presented in sterling, which is also the company's functional currency. Transactions in foreign currencies are initially recorded in the entity's functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange prevailing at the balance sheet date. All exchange differences are included in the Statement of Comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments under operating leases are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.
Interest payable and similar expenses
Interest payable and similar expenses are charged to the statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of judgements, estimations and assumptions means that actual outcomes could differ.
Critical accounting judgements in applying the company accounting policies
Management do not consider there to be any areas of critical judgement that have been made in the application of the company accounting policies.
Key accounting estimates and assumptions
The company makes estimates and assumptions concerning the future. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are addressed below:
Stock provisions are based on a combination of the ageing of the stock items and historical experience of product sales.
Dilapidation provisions are based on the anticipated likely cost of restoring leased properties to their original condition.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors to whom retirement benefits are accruing is 1 (2022: 1).
Two (2022: Two) of the directors of the company are directors of other undertakings within the ITAB group of which ITAB UK Ltd is a subsidiary. Two of these directors remuneration for 2023 (2022: Two) were paid by other group undertakings and the directors have concluded that none of the remuneration relates to incidental services to the company in the current or preceding year.
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:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
More information on impairment movements in the year is given in note 10.
The goodwill arose on a business combination in 2010 which created the company as it is today. Its net book value as at 1 January 2017 was amortised over five years.
More information on impairment movements in the year is given in note 10.
There is no significant difference between the replacement cost of stock and its carrying amount. The carrying amount of stock is stated net of provisions totalling £1,295,628 (2022: £2,169,333).
Trade debtors are stated after a provision of £298,523 (2022: £81,835).
The amounts owed by group undertakings are unsecured, interest free and repayable on demand.
The company entered into a non-recourse receivables purchase facility agreement in 2021, the initial term of the facility expires in March 2023 and, after that date, the facility can be cancelled by either party with a 3 month notice period. Interest is charged at 1.5% plus 3 month SONIA or ESTR dependent on the currency of the invoice sold. The amounts due in relation to the facility is £351,747 (2022: £1,299,424) and is included within other debtors.
Amounts owed to group undertakings are unsecured, interest free and repayable on demand.
Minimum lease payments under non-cancellable operating leases, which fall due are as follows:
The Company has reviewed the existing leases on the buildings it occupies and determined a valuation of costs that to return the properties to their original condition as set out in the respective leases.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
There are no unused tax losses.
The net deferred tax liability expected to reverse in 2024 is £nil. This is primarily related to the reversal of timing differences in capital allowances.
The company has one class of ordinary shares which carry no rights to fixed income.
The capital contribution represents amounts given to the company by its owner as part of an ongoing obligation to fund the entity.
The company has a fixed and floating charge in favour of Nordea Bank AB, London branch, over all its property and undertakings.
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.
The company operates a defined contribution pension scheme for the benefit of the directors and employees. The assets of the scheme are administered by trustees and held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to £338,171 (2022: £352,750). Contributions totalling £60,211 (2022: £50,944) were payable to the fund at the balance sheet date and are included in the creditors.
The company has seen an impact on shipping following the attacks in the Red Sea, changing shipping routes to detour around the Cape of Good Hope, adding lead time and cost. This has impacted the entire industry for Far East supply which has been managed in coordination with our customers and wider group relationships, enabling responsive pricing and agreed revised delivery timescales. Our local factory provides an opportunity to meet tighter timescales, which has seen higher utilisation during the start of the year.