The directors present the strategic report for the year ended 31 December 2023.
General Traffic supplies and distributes high quality components to the automotive industry at competitive prices through a comprehensive and efficient distribution service.
Review of the Business
The group’s sales totalled £83,192,479 in 2023 (2022: £58,294,785) with a profit before tax of £13,504,426 (2022: £10,274,978). The directors are satisfied with the overall performance of the company in a fast-changing and increasingly cost-competitive marketplace.
The growth in sales of £24,897,694 (42.7%) has been driven through the expansion of General Traffic’s network to 43 branches with the addition of one new greenfield site and the acquisition of N.P. Alliance Ltd, consisting of eleven sites.
The directors monitor business performance through tracking key performance and strategic indicators monthly and quarterly to agree on actions which either mitigate against negative movements or exploit opportunities.
Risk & Impact | Mitigation |
General Traffic's acquisition of N.P. Alliance Ltd, a well-established business in the North East, brings with it several integration risks. The differing cultures, systems, and processes between the two companies can lead to challenges in aligning operations. There is a risk of losing key staff who may be resistant to change or feel uncertain about the future. Additionally, integrating the customer bases could result in losing key customers if the transition is not managed smoothly. Other potential risks include discrepancies in financial reporting, incompatibility of IT systems, and disruptions to daily operations. | When completing an acquisition, we develop a comprehensive integration plan that addresses the alignment of different cultures, systems and processes. We maintain open communication with key staff to ensure transparency throughout the integration process in order to alleviate uncertainty and resistance whilst also promoting a more cohesive work environment. We proactively engage with key customers to reassure them of our continued service level and address any concerns they may have during the transition in the interest of retaining their business. We ensure compatibility of IT systems through careful planning and potential upgrades in order to prevent technical disruptions. Finally, we conduct regular reviews and audits of financial reporting to identify and resolve discrepancies early, whilst maintaining operational stability. |
The ongoing conflict in the Middle East has led to significant disruptions in the supply chain as cargo ships have been re-routing via the southern tip of Africa to avoid attacks in the Red Sea. This has resulted in increased freight costs as well as delays in receiving goods due to fewer sailings and reduced capacity to transport goods from the Far East to the UK. | To mitigate the risk of supply chain disruptions, we work with multiple suppliers and diversify our transportation routes. By working with suppliers and logistics providers who offer alternative shipping lanes and have robust contingency plans, we can minimise delays and costs increases. We maintain higher inventory levels of critical components and strategically place stock in multiple warehouses to ensure availability for our customers. Regular communication with suppliers and logistics partners allows us to anticipate and address potential disruptions early. Additionally, investing in technology to improve supply chain visibility and agility helps us respond swiftly to changing conditions. |
Economic uncertainty, rising inflation and interest rates, pose significant risks to consumer spending habits. With reduced disposable income, consumers may postpone necessary repairs or seek cheaper alternatives to save costs. This shift could lead to a decrease in demand for car parts, as consumers may delay purchases or shop around for the best deals.
| We continue to expand our product range to include a variety of price points. By offering both premium and value-for-money options, we are able to cater for customers with different budget constraints. We leverage our purchasing power and financial stability to negotiate improved pricing with manufacturers and suppliers, enabling us to offer competitive prices without compromising quality. We continue to educate customers about the importance of timely repairs and the potential consequences of delaying maintenance. |
Inflation trends for commodities, raw materials and energy are currently on the rise and are likely to continue to escalate. This trend will ultimately increase the cost of finished goods, particularly for imports from the Far East which are further impacted by supply chain disruptions. Wage inflation in the UK is also increasing, which will affect profitability as well as the cost of goods purchased from local suppliers. | We continually review our processes and operations to drive efficiencies and improvements, however if inflation risks materialise, we may have to raise our selling prices to offset the impact. Nevertheless, these inflationary pressures will also affect our competitors and therefore we should remain competitive in the marketplace. |
General Traffic, like any other business, faces the risk of non-payment, which can arise due to factors such as economic downturns, insolvency, or customer disputes. The credit risk of customers failing to pay their bills is likely to increase during times of economic uncertainty and rising costs as customers may be unable or unwilling to fulfil their payment obligations. | We conduct thorough credit checks on customers before approving credit facilities. We set appropriate credit limits and terms for each customer based on their creditworthiness and financial stability. We monitor and adjust these limits periodically to ensure customers are not granted excessive credit that could pose a higher risk. We maintain a strict credit control policy that outlines clear consequences for late or non-payment and where necessary we implement effective debt recovery processes. |
In an attempt to gain a competitive edge and maintain or increase market share, competitors may engage in aggressive price reductions, leading to a downward spiral of prices across the industry. This can erode margins, reduce profitability and hinder the ability to invest in innovation and growth. Price wars may also create a perception of lower quality or value among customers, affecting brand reputation. | Instead of solely competing on price, we differentiate ourselves by offering value-added services to customers such as technical support, training programs, warranties, efficient order processing and reliable delivery services. We maintain a strong emphasis on providing a comprehensive selection of high-quality components and we prefer to work with industry leading suppliers that are known for certain product categories. This helps us to attract customers who value expertise, specific brands and solutions, rather than just the lowest price. |
Historically the UK aftermarket was largely dominated by independently run businesses. However, significant M&A activity in recent years has transformed the independent aftermarket as a handful of larger players have sought to consolidate their market position at every level of the supply chain. This trend looks set to continue at an accelerated pace fundamentally reshaping the structure and dynamic of the automotive aftermarket. | We are able to alleviate competitive pressure arising from consolidation through maintaining strategic partnerships with other distributors via RAPID Group membership and with supply partners through leveraging our affiliation with TEMOT International.
|
The key performance indicators that the company regards as important are:
KPI | 2023 | 2022 |
1. Gross profit margin | 50.9% | 50.9% |
2. Ratio of operating expenses to turnover | 34.7% | 33.3% |
3. Ratio of operating profit to turnover | 16.2% | 17.6% |
4. Earnings before interest, tax, depreciation and amortisation (EBITDA) | £15,435,318 | £11,203,211 |
1. The gross profit margin has maintained as a result of sourcing a wider range of products directly from factory gates whilst also negotiating bulk order discounts and cultivating long-term partnerships with suppliers.
2. The increase in the ratio of operating expenses to turnover can be attributed to inflationary pressures impacting the cost of conducting business operations.
3. The increase in operating expenses has outweighed the increase in gross profit margin thus decreasing the ratio of operating profit to turnover by 1.4%.
4. Although there was a significant increase in the operating costs the increase in sales and gross profit enabled another year of successive growth in the EBITDA.
In the medium and long term, the business will endeavour to focus on:
Supply Chain Resilience – Recognising the impact of supply chain disruptions caused by the macro-economic factors and geopolitical events, General Traffic will proactively diversify its supplier base, maintain close communication with key partners and implement demand forecasting and inventory management strategies to ensure continuity of supply and to minimise disruptions.
Customer Relationship Management – General Traffic will continue to focus on strengthening customer relationships by providing excellent customer service, personalised support and value-added services in order to enhance customer satisfaction, loyalty and retention.
Market Differentiation – By positioning itself as a trusted and reliable motor factor, General Traffic aims to differentiate from competitors solely focused on price. The company will continue to invest in research and development, innovation and market intelligence to identify emerging trends and customer needs.
Digital Transformation – General Traffic recognises the importance of embracing digital technologies to enhance operational efficiency and improve customer experience. The company will invest in digital platforms, e-commerce capabilities and data analytics to streamline processes, optimise inventory management and improve online ordering and support services.
Operational Efficiencies – General Traffic acknowledges the significance of sustainability and environmental responsibility. The company will prioritise sustainable sourcing, waste reduction, energy efficiency and responsible manufacturing practices.
Talent Development – General Traffic recognises the value of its employees and their contributions to the company’s success. The company will continue to invest in talent development programs, training initiatives and fostering a positive work culture to attract, retain and motivate skilled professionals.
Market Expansion – General Traffic will continue to explore opportunities for geographic expansion in order to enhance its market position.
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 11.
Ordinary dividends were paid amounting to £3,957,900. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
Sumer Auditco Limited were appointed as auditor in the year and are deemed to be reappointed under section 487(2) of the Companies Act 2006.
Following the change in reporting requirements our report on energy consumption and greenhouse gas emissions is set out below:
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £100,000 of turnover, the recommended ratio for the sector.
In order to meet our ESOS (Energy Savings Opportunities Scheme) compliance responsibilities, site and transport surveys have been carried out to identify cost effective energy saving opportunities.
The following energy saving measures have been identified and are currently being considered:
Radiators behind storage racking to be turned off.
All heated spaces should be thermally separated from all external areas to avoid heat being lost from the warehouses. The roller shutter doors to the warehouses should be closed when not in use.
All non-LED lighting to be converted to LED's and lights in less frequently occupied spaces should be placed on motion sensors.
We have audited the financial statements of General Traffic Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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 identified areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements from our general commercial and sector experience, and through discussions with the directors
(as required by auditing standards) and discussed with the directors the policies and procedures regarding
compliance with laws and regulations. We communicated identified laws and regulations throughout our team and
remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and
regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial
reporting legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement items.
Secondly, the company is subject to many other laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the financial statements, for instance through the
imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: laws
related to health and safety, employment laws, gender pay gap, consumer protection and COSHH for the handling
of chemicals and hazardous materials.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to
enquiry of the directors and inspection of regulatory and legal correspondence, if any. Through these procedures we
did not become aware of any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our audit
in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations
(irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a
higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and
cannot be expected to detect non-compliance with all laws and regulations.
We design procedures in line with our responsibilities, outlined below to detect material misstatement due to fraud:
• Matters are discussed amongst the audit engagement team regarding how and where fraud might occur in the
financial statements and any potential indicators of fraud
• Identifying and assessing the design and effectiveness of controls that management have in place to prevent and
detect fraud
• Detecting and responding to the risks of fraud following discussions with management and enquiring as to whether
management have knowledge of any actual, suspected or alleged fraud;
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 £9,386,534 (2022 - £8,366,683 profit).
General Traffic Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Rutland Mill, Adelaide Street, Bolton, Lancs, BL3 3NY.
The group consists of General Traffic Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company General Traffic Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
The management devise an annual estimate of provisions for stock items based on historical customer data for the products that are held by the business. The value of the stock provision is £626,175 at 31 December 2023.
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 3 (2022 - 3).
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:
A dividend of £39.50 (2022: £36.00) per ordinary share was paid during the year.
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.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The company paid rent on commercial terms of £316,800 (2022: £204,480) to Asante Investment Limited, £150,900 (2022: £Nil) to Yara International Limited and £274,560 (2022: £238,080) Southern Island Investment Limited during the year.
The company also sold land and buildings on commercial terms amounting to £Nil (2022: £1,530,000) to Asante Investment Limited, and £1,993,456 (2022: £Nil) to Yara International Limited.
A H Umarji and I H Umarji are individual beneficial owners of these companies.
The company has availed exemptions available under FRS 102 paragraph 33.1A not to disclose transactions undertaken with wholly owned group companies.
During the year the following dividends were paid to the directors:
I H Umarji £146,150 (2022: £133,200)
A H Umarji £379,200 (2022: £345,600)
M H Umarji £201,450 (2022: £183,600)
A I Umarji £102,700 (2022: £ 93,600)
A A Umarji £169,850 (2022: £154,800).