The directors present the strategic report for the year ended 31 December 2023.
The company's principal activity is that of a specialist tooling supplier and distributor.
Matrix Tooling Services Limited is a wholly owned subsidiary of Rubix UK Limited, a subsidiary of Rubix International Limited. Rubix Group are the market leading pan-European distributor of industrial products and services with customers being some of the biggest blue chip companies in their sectors. For these companies, we help drive their business forward supporting their need for profitability, productivity, quality and consistency.
The Rubix Group geographic footprint covers 750+ locations across 22 countries, which gives us a more extensive European coverage than any of our competitors, and we have a portfolio of in-market brands with strong reputations. Rubix UK Limited are the authorised distributor of many of the world's leading engineering component manufacturer and supply Bearings, Mechanical Power Transmission components, Fluid Power, Tools and General Maintenance products, together with engineering and associated industrial services, to the maintenance repair and overhaul ("MRO") market across the UK.
Key performance indicators
The key financial and other performance indicators during the period were as follows:
Macroeconomic risk and downturn in major markets
Risk
The downturn in the macroeconomic environment and major markets along with the current high inflationary environment and higher interest rates could lead to disruption to our customers' and suppliers' business.
Impact
The ability to maintain service levels to our customers may be lost, with consequential impacts on our results.
Strategic Importance
The company is dependent on its key suppliers in order to provide a high level of service to its customer base, including providing goods and services at a price that is acceptable to its customers.
Controls and Mitigation
The diversified nature of the business model in terms of its geographical and end-customer segments provides resilience against macroeconomic risks. The company monitors key market drivers to give an early warning of slowing demand. The company has demonstrated an ability to pass on price increases from its suppliers to its customers and expects to continue to do so.
Withdrawal or loss of a major supplier
Risk
The business is dependent on its key suppliers which it represents in a multi-brand environment to the customer base.
Impact
The unforeseen withdrawal or loss of a major supplier could cause significant harm to the company’s ability to service customers in the short term.
Strategic Importance
The overall business strategy at Group level includes leveraging economies of scale when purchasing in order to provide better value for customers across the entire geographical footprint.
Controls and Mitigation
The relationship with strategic suppliers is mutually dependent and enhanced by our partnership approach to key accounts. In addition, concentrating spend with core suppliers enables favourable purchasing terms including rebates. A significant reduction of purchases in any one year can have an impact on rebates or pricing from suppliers. The business continues to invest time in maintaining strong relationships with its core suppliers and, due to the range of suppliers it deals with, the loss of any one supplier can be mitigated by moving spend to an alternative supplier.
Loss of a major customer
Risk
There is always a risk that the business loses a significant key account contract.
Impact
The loss of significant numbers of key accounts could have an adverse effect on revenue growth and an impact on other focus areas of cross-selling opportunities. As a distributor in a fragmented market following the rebrand to Rubix, the company derives great benefits from its first-class reputation as an industry leader in its service offering to key accounts, which could be potentially damaged with significant loss of major customers.
Strategic Importance
A core part of the growth strategy for the business is a focus on winning and maintaining those significant customers it views as key accounts.
Controls and Mitigation
The business does not have dependency on any single customer. The top 100 customers represent 78%/£16.3m of the annual turnover, with no customer representing > 3.8% of revenue. Key account customers are carefully monitored by the senior management team via regular reviews and reporting.
Expected benefits from Strategic Acquisitions may not be realised
Risk
Acquisitions involve a number of risks related to the performance of the acquired business and challenges arising from integration.
Impact
If benefits from acquisitions are not realised, there could be an impact on forecasted performance and the potential for disruption to the underlying core business.
Strategic Importance
Part of the overall Rubix group strategy is growth through selective acquisitions.
Controls and Mitigation
Through a formal and well established acquisition strategy, potential targets are carefully researched prior to any purchase by an experienced M&A team and are closely monitored by Rubix Group senior management subsequent to acquisition.
Liquidity
Risk
A failure to maintain sufficient operational liquidity.
Impact
The company would be unable to pay creditors on time, acquire new investments or service its debt service obligations.
Strategic Importance
Critical in supporting the growth strategy of the company and maintaining supplier relationships.
Controls and Mitigation
The company monitors detailed cash and liquidity positions and maintains a rolling forecast of near-term and long-term requirements.
Climate change
Risk
The threat from climate change includes both physical risks to operations and supply chains arising from the impact of global warming, as well as transition risks from changing stakeholder expectations and regulation designed to drive the transition to a low-carbon economy.
Impact
Disruption to the company business model and activities.
Strategic Importance
Climate-related issues influence the company's business, strategy and financial planning.
Controls and Mitigation
The company undertakes a climate scenario analysis annually to inform risk and opportunity planning. For 2023, climate risk has been assessed alongside other business risk using the Group's risk management framework, supplemented by external climate data models. Formal materiality assessments and regular customer engagement provides additional insight for our climate-related strategy. The company supports climate risk assessment and implementation of mitigation measures, supported by a dedicated sustainability team and Group ESG Committee.
Loss of infrastructure/systems
Risk
IT infrastructure and associated systems, including business ERPs, could fail to function in a timely and accurate fashion or be compromised by cyber attack.
Impact
Failure of our IT infrastructure or key IT systems could result in loss of information, inability to operate effectively, financial or regulatory penalties and could adversely affect our reputation. For the company, which is a distributor of products, these key processes are in the area of inventory and order management, sales and delivery management and transactional record keeping, including financial books and records. A cyber attack could result in confidential databases including customer lists, price lists and sales data being stolen or misused intentionally.
Strategic Importance
The business strives to achieve a consistent level and quality of service across our businesses and functional IT infrastructure and systems are a fundamental requirement to achieve that.
Controls and Mitigation
As with most large organisations that depend on Information Technology for their day-to-day operations, there are disaster recovery plans in place such as overnight and real-time back-up systems in place and stored offsite which can be expected to mitigate the worst effects of such disruption.
Integration teams continually work to develop Group-wide solutions to business-critical processes which provide improved security and resilience against failure in the event that issues occur in our operations.
Data security measures limit access to key infrastructure and there is contingency planning to minimise operational impacts. Information security policies are readily available to all employees in the company.
Loss of key employees
Risk
There is a risk of inability to retain key employees across the group.
Impact
The loss of key employees could lead to loss of information, damage to customer/supplier relationships and an inability to execute business strategy.
Strategic Importance
Key employees assist our ability to meet our key strategic targets.
Controls and Mitigation
The business regularly reviews its remuneration and succession plan arrangements to ensure that key managers are recognised and developed.
Where appropriate, employment contracts contain relevant provisions regarding interaction with competitors and customers. Industry benchmarking and the use of external advisors form part of the recruitment process for key managers to ensure high calibre recruits to key roles.
Relationships with employees
Risk
The company is dependent on good relations with its employees.
Impact
Poor relations could result in interruptions to the business and restructuring implementation.
Strategic Importance
Engaged and supportive employees are necessary for the company to deliver on its targets and goals.
Controls and Mitigation
Regular dialogue is maintained between the senior management and employees of the company, through physical and virtual roadshows, employee representatives and daily digital communication updates.
Conflict in Ukraine
The company is mindful of the evolving situation in Ukraine. While the company has no sales to the Ukraine, limited values of products purchased by Rubix U.K. Limited are traditionally manufactured in the country, requiring alternative suppliers to be sourced. We continue to monitor developments and will react as appropriate.
The conflict in the Ukraine has added to the economic pressures faced by the world. Rising energy prices and general inflation will challenge the Company but it will continue to work with its suppliers to ensure that any price increases to customers are minimised.
Environmental, Social and Governance (ESG)
The company is committed to ensuring that its business model creates value for stakeholders in a socially and environmentally responsible manner, with the highest ethical and sustainable business standards applied across its value chain.
The company has established a clear governance structure to deliver its ESG strategy. Supported by the Group, the company and its Directors drive ESG-related data collection processes, identifying, prioritising and advancing the adoption of ESG initiatives and improvement measures.
Relevant details of the Group’s ESG progress are given in the 2022 Rubix Limited Annual Report and Consolidated Financial Statements.
ESG Policy Framework
The Group’s ESG strategy is supported by the compliance and policy framework that includes the Group’s Code of Conduct and Ethics for employees and business partners, Human Rights, Anti Bribery and Corruption, and Health and Safety practices.
Human rights and business ethics
The company is committed to acting with honesty, integrity and the highest ethical standards, and in compliance with all applicable local and international legislation, as set out in the Group’s Code of Conduct and Ethics.
The Group is committed to upholding and respecting human rights and since 2017 has been a full signatory to the United Nations Global Compact (UNGC), thus respecting the ten principles of the UNGC on human rights, labour, environment and anti-corruption. This includes the commitment to report transparently on the implementation of the ten principles.
The Group's fulfilment of its obligations under the Modern Slavery Act of 2015 are published in an annual Modern Slavery Act Transparency Statement which sets out the steps taken to mitigate the risk of slavery and human trafficking taking place within its business or supply chain.
The company endeavors to select suppliers who adopt high ethical standards which are consistent with the company’s corporate beliefs and values. The company expects its suppliers (and their subcontractors) to operate their businesses and conduct employee relations in an ethical manner and to meet the requirements stipulated by both international and regional laws and industry standards.
Environment
It is the policy of the company, so far as is reasonably practicable, to protect and conserve the local and wider environment from any adverse impacts caused by its operations and to take all reasonable steps to reduce its impact upon the environment, including reducing its carbon footprint through reducing energy consumption and proactive waste management.
Employees are provided with relevant environmental training and awareness, to meet all relevant legislative requirements on environmental issues and ensure that all contractors follow company practices while working on site and respond promptly and efficiently to adverse incidents.
Health and Safety
The company strives to provide and maintain a safe environment for all employees, customers and visitors to its premises and to comply with relevant health and safety legislation. The company encourages the involvement of employees in health and safety matters and aims for continual improvement through a formal structure incorporating a training, reporting and review process that ensures every employee of the company is aware of methods to prevent accidents and, if they happen, to deal with them in an appropriate manner. Mandatory health and safety awareness training is provided to all employees through the Rubix Academy, with specialist training also made available to employees engaged in roles that involve activities such as heavy lifting and machine operation.
The company aims to minimize the risk of workplace accidents by ensuring that policies, systems and processes are in place to address the health and safety of its employees. Company entities collect data (total incidents, lost time, injury frequency rate, etc.) to track the development and improvements in safety measures.
In order to achieve best practice across all its operations, compliance with health and safety policies and legislation is monitored and discussed in the company’s monthly business reviews.
Financial Risk Management
The company is a fully owned subsidiary of Rubix UK Limited and is a part of the Rubix International Limited group. The company's activities expose it to a variety of financial risks including market risk, credit risk, price risk and cash flow and liquidity risk. We actively participate in the group's overall risk management programme which focuses on the unpredictability of financial markets, which seeks to minimise the potential adverse effects on the company's financial performance.
Market risk is mitigated by ensuring the business continues to supply a diverse range of sectors. The company frequently enters into contracts with both customers and suppliers agreeing fixed price terms as a means to combat price risk. The company has no significant concentrations of credit risk. It has policies in place to ensure that the sales of products are made to customers with an appropriate credit history. Management implement controls to manage these risks and have a continual review and improvement process. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Group treasury aims to maintain flexibility in funding by keeping committed credit lines available and monitoring the cash flow position for all group entities.
Commercial risk review
Matrix Tooling Services Limited is dependent on its key suppliers which it represents in a multi-brand environment to the existing customer base. The relationship with strategic suppliers is mutually dependent and enhanced by our partnership approach to key accounts. At group level support continues to be available for Matrix Tooling Services’ efforts to increase market share.
In the event of a loss of infrastructure or systems, Matrix Tooling Services Limited has backup systems in place which can be expected to mitigate the worst effects of such disruption. Matrix Tooling Services Limited continually works to develop improved resilience against failure in our key processes: stock and order management, sales and delivery management and transactional record keeping, including financial books and records. Through technical and administrative controls, access to key infrastructure and databases are limited, to safeguard sensitive and Commercial information.
Future Developments
Focus will continue in 2024 on delivering key account growth both organically and through new customer wins, delivering growth through the engineered solutions team, developing margin through exclusive brand penetration and creating cross-selling opportunities with other group companies and acquisitions.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 13.
Ordinary dividends were paid during the year of an amount equal to £1,919,195. Post year end, the directors have recommended payment of a final dividend of £964,358 in relation to the financial year 31 December 2023, to be paid in 2024.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, MHA, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
Basis for 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 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 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 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, 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. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, is detailed below:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations;
Enquires with management about any known or suspected instances of fraud;
Reviewed of legal and professional expenditure to identify any evidence of ongoing litigation or enquiries.
Challenging assumptions and judgements made by management in their significant accounting estimates and;
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Audit the risk of the completeness of revenue by tracing a sample of transactions from sales orders through to invoices and ensure these are appropriately recorded on the system.
Reviewed a sample of sales around the year end to ensure they have been appropriately recorded in the period to which the sale relates.
Reviewed post year end credit notes for those that relate to the year to ensure accounted for correctly and that sales have not been artificially inflated pre year end.
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 member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Matrix Tooling Services Limited is a private company limited by shares incorporated in England and Wales. The registered office is Dakota House, Concord Business Park, Manchester, M22 0RR.
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 £.
This 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:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instruments recognised in profit or loss and other comprehensive income,
Section 33 related Party Disclosure paragraph 33.7; the requirement to disclose key management personnel compensation in total and paragraph 33.1A; the requirement to disclose related party transactions with parent and fellow companies.
The financial statements of the company are consolidated in the financial statements of Rubix Group Holding Limited. These consolidated financial statements are available from its registered office, Accurist House, 44 Baker Street, London, England, W1U 7AP. Copies of the consolidated financial statements are available from Companies House, Cardiff.
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 credited or charged to profit or loss.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets 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.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company 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 company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The stock provision is determined based on the prior 24 months sales and the level of stock held. The resulting provision may not equal the actual accounting results dependent on the rate of future sales.
The carrying amount of the provision at year end is £190k (2022: £90k).
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Factors affecting future tax charges
In the budget on 3 March 2021, the UK Government announced an increase in the main corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted on 24 May 2021.
Ordinary dividends were paid during the year of an amount equal to £1,919,195. Post year end, the directors have recommended payment of a final dividend of £964,358 in relation to the financial year 31 December 2023, to be paid in 2024.
Included within other creditors is £1,700,029 (2022: £1,097,113) in respect of factoring liabilities which are secured by a fixed and floating charge over the assets of the company. As disclosed in the debtors note above, this liability has been offset with the value of trade debtors sold without recourse.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company is a party to a bank guarantee whereby they agree to discharge, on demand, in part or in total, bank borrowings under a specific facility of other companies with the Rubix Group.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The company has taken advantage of the exemption permitted under Section 33.1A from disclosing transactions with the parent and fellow subsidiary companies.