The Directors present their strategic report for the 52 weeks ending April 28th, 2024.
The Group continued implementing the 5-year strategy agreed with the management team and delivered its sixth year of growth in both revenue and profitability. In the second half of the year the Group undertook 2 strategic acquisitions.
Once again, throughout the course of 2023/24 CJ Lang continued to outperform both the Scottish Retail market and all other UK mainland SPAR companies.
The Group has continued to invest in the key resources to strengthen the Board and Executive Management Team. Chris Boyle was appointed as Finance Director in March 2024, bringing his significant experience in both retail and wholesale to the Group. Della Myers, as Trading and Supply Chain Director, joined the Executive team in June 2024 from Costcutter, replacing Richard Collins who has since retired after 5 years’ service. The Board extend our sincere thanks to Richard for his considerable efforts and support during the key years of the Group’s turnaround.
During the year, the management team continued to implement the agreed 5-year growth strategy for the business based on the five key pillars:
Profitable Group stores
Growing independent sales
Improved profitability and pricing
Food to Go
Distribution optimisation
In October 2023, the Group acquired 100% of the equity of Dynamic Retail Ltd – trading as ScotFresh Group – and with it 9 stores, the majority of which are situated throughout the central belt of Scotland. On the penultimate day of the financial year the Group acquired a further 3 stores, previously trading as part of the Eddy’s Food Station business which had been placed in administration. All 12 stores have either now been, or will shortly be, converted fully to SPAR stores. These acquisitions have accelerated our strategic objective of operating 115 Company Owned stores.
Continued implementation of our agreed strategy in 2023/24 has resulted in a 1.7% PBT return on sales, and enhanced returns for all stakeholders. In line with best practice the Board will continue to review and refine its strategy during the current financial year.
The Directors, in line with their duties under s172 of the Companies Act 2006, act individually and collectively in the way they consider, in good faith, that would promote the success of the Group for the benefit of its members, and in doing so have regard, amongst other matters, to the:
Consequences of any decision in the long term
Interests of the Group's employees
Need to foster the Group's business relationships with suppliers, customers, and others
Impact of the Group's operations on the community and the environment
Desirability of the Group maintaining a reputation for high standards of business conduct
Need to act fairly as between members of the Group
The Board understands the importance of engaging with all its stakeholders and regularly discusses issues concerning employees, clients, suppliers, community and environment, regulators and shareholders which inform its decision-making processes. Inherently, there is an inter-dependency on the success of the group and the success of its stakeholders.
Our annual Trade Show, the largest event of its kind in Scotland, was once again held at Aviemore in September 2023, and was attended by more than 800 participants. It will return there this year with an even greater number of attendees. This key annual event is used to engage and communicate with employees, customers and suppliers on our key strategy direction, the introduction of new products and services, to celebrate success, has continued to receive widespread coverage from the trade media, and receives very positive feedback from our all attendees, particularly our customers, suppliers and employees.
Employees
Our employees remain fundamental to the achievement of our business plan, and we continue to engage with all employees across the business on a regular basis.
The Directors continue to undertake a bi-annual employee survey to enhance employee communication and engagement, to measure and assess the improvements being undertaken by the Executive team and the level of understanding of the Group’s strategy.
Customers and Consumers
We continue to work closely with all our retail customers, supporting them with all aspects of advice, thereby working jointly to develop their businesses. Our team of sales executives and development managers regularly engage to drive growth with all our customers. In addition to TV advertising, we use our website, social media, and in store media and promotions to engage with our consumers.
Suppliers
We value the supplier base as partners and our aim is to develop and enter strong stable long-term working relationships with them. We seek to be fair and transparent in our dealings with suppliers and we ensure that we honour our arrangements with them.
The Group actively participates with regular top to top meetings and visits with key suppliers. In addition, the participation in the annual Advantage Survey, independently run on behalf of many major suppliers, is used as a key measurement of progress in increasing the Group’s engagement and collaboration with suppliers. In this latest year, the Group again received significant recognition by suppliers of the continued positive improvements which we have made, resulting in the Group retaining its number 2 place whilst continuing to close the gap on the number 1 competitor in its comparative peer group in the survey.
Environment and community
The Board takes sustainability and environmental responsibility very seriously and being a community retailer seeks to support local causes in the areas that we operate.
During 2023/24 the Group returned all recyclable waste material generated by its Company Owned stores to its distribution facility to maximise the level of recycling by the Group. This service is available to all our SPAR Independents and has resulted in 28 stores taking up this offer, up from 6 stores in 2022/23. We continue to encourage our other SPAR independents to take up this option and a further 17 stores have joined the scheme since year-end.
We continued to provide support to many local causes and donated £206k to a variety of local charities and foodbanks throughout Scotland during the year.
Governance and regulation
The Board’s intention is to behave responsibly and to ensure that the management team operates the business in a responsible manner, acting with the exacting standards of business conduct and good governance expected of a business of our nature and size, and in full alignment with all rules and regulations. In doing so, we believe we will achieve our long-term business strategy and further develop our reputation in our sector.
We have a risk and control framework to ensure that the Group complies with all legal and regulatory requirements relating to our industry and market. During the year, the Board undertook a formal review of the Risk Register with formal minutes produced for agreed follow up actions.
Shareholders
The Board has a close working relationship with the shareholders and hold regular meetings and discussions to drive the business towards its long-term business strategy.
The Board seeks to provide relevant information to the shareholders on a regular basis, including monthly management accounts containing analysis of performance against the key metrics set by the Board. In addition regular updates are provided to the next generation of future family shareholders.
The Group achieved turnover of £252.7M in 2023/24 an increase of £31.4M or 14.2% and incorporates ScotFresh since acquisition but excludes the 3 stores that were formerly part of Eddy’s Food Station. Throughout the year we saw cost price increases from our suppliers beginning to stabilise after the highest inflation in over 40 years. However, other cost pressures, particularly from the annual increase in the national minimum wage, continued to require careful management such that we managed to maintain our margins at 24.1%.
Net cash delivery was impacted by the continued higher levels of investment into the development of our core estate, as well as the decision to undertake the 2 strategic, but unbudgeted, acquisitions of which only 50% was funded by additional external borrowings with the remainder from cash flow. As these were unplanned there was an adverse impact on cash generation from that initially budgeted. This will be rectified by restructuring of external borrowings in the 2024/25 financial year.
Supplier delivery performance continued to improve across the year, albeit a small number of key suppliers continue to adversely impact on certain categories and product lines.
We again experienced further growth in sales to Independent supplied SPAR customers due to an increased number of new recruits to SPAR Scotland. However, as previously indicated the key focus for our sales team is the quality of new recruits, and where existing independent SPAR retailers fail to meet the standards of store quality and compliance demanded we will continue to remove them from SPAR Scotland. We undertook this with several retailers during the year.
We are confident that there continues to be the demand from quality independent retailers to join SPAR Scotland throughout our new fiscal year to drive further growth.
The Board recognises that the Group needs to continue to invest in its Company Owned estate to maintain standards, present a compelling reason for our consumers to shop within our Owned SPAR estate, and provide a showcase to attract new independent SPAR retailers.
As previously mentioned the Group acquired 12 new Company Owned stores through 2 acquisitions along with a further store opened early in the year in Castletown. Consequently, with 115 stores the Group has achieved one of its strategic goals with regard to the size of the Company Owned estate several years earlier than planned.
Throughout the forthcoming year and future years, we will continue to review and where necessary rationalise under-performing stores within the existing estate, whilst seeking to acquire further Owned stores such that overall we will seek to maintain the Company Owned estate at the current level.
Our continued investment in marketing to further develop and support the SPAR brand in Scotland resulted in us being the only convenience retailer undertaking several TV advertising campaigns throughout the year, as well as continuing our high-profile sponsorship of the Scottish Women’s Football team and the Girls football Early Start programme.
SPAR Scotland maintained the Symbol Group of the Year, as well as receiving several other key awards at the recent Scottish Licensed Retailer awards. In June we were particularly proud to be awarded Technology Initiative of the Year Award at the prestigious annual Grocer Gold awards – a feat which demonstrates how far the Group has developed in the last 7 years.
Focus on our Food to Go programme further helped improve our COS margins. 2024/25 will see the next stage in our Food to Go development appearing in many of our stores, including the full roll out of Barista coffee.
The Board recognises that during the current cost of living crisis there are additional pressures on our staff, consequently we maintained throughout the year staff discount at double the rate they historically enjoyed.
The latest National Minimum wage increase, (9.8%-14.8% depending on age), and subsequent impact on employers’ national insurance and pension costs has added significant additional costs to our Company Owned Stores. Despite the higher operational costs, we continue to invest in our stores, and by the end of 2024/25 we will have introduced electronic shelf edge labels into all of our stores which will improve productivity and reduce cost.
As noted in previous reports our Post Office operations continued to be uneconomical throughout the year, consequently since the year end we have reduced the number of locations by a further 7. We will continue to review the on-going viability of the remaining 10 operations.
Key Performance Indicators
The Group uses several key indicators (KPI’s) to measure and manage performance and progress. Of these the Directors consider that turnover, gross profit, Trading Profit, EBITDA (pre-disposal costs) and net profit/(loss) to be the most representative of the Group’s annual performance as defined below.
2023/24 2022/23
Turnover £252.7M £221.3M
Gross profit % 24.1% 24.1%
Trading Profit £4.1M £3.7M
EBITDA (pre-disposal costs) £9.3M £6.8M
Net Profit/(loss) £5.0M £3.0M
The KPI’s for the year under review were in line with the Directors expectations and plans, and we are pleased with the progress made.
In addition to the above KPI’s, the Directors internally monitor a suite of both operational and non-financial KPI’s across its various divisions including, but not limited to, health and safety, account base, retail footfall, basket spend, staff turnover and attendance, customer and supplier service levels and distribution efficiency.
The Group uses retained profits to finance on-going operating requirements, including working capital, and only uses bank borrowings to fund major capital expenditure when required. No further financial instruments are used by the Group.
The Group is exposed to the additional following risks:
- Significant increases in product costs and utilities arising from the continuing cost of living crisis and elevated energy & fuel costs.
- A change in revenue and decreased cash flow due to lower general economic activity throughout Scotland due to the current cost of living crisis and the adverse impact of weather.
- Continued legislative driven cost impacts such as National Minimum Wage.
- The continued supply of grocery and related products caused by disruption to the supply chain of some major UK suppliers, resulting in an impact on availability.
- Interest rate changes – albeit it would appear interest rates have now peaked.
The Group continues to manage the above risks, particularly that to minimise the impact of product availability on sales and manage cost increases to protect on-going margins and profitability.
The Group operates in the highly competitive Scottish wholesale and retail convenience sectors, where competition in both sectors remains strong, coupled with the added threat from the continued rise in store numbers and market share of Discounters. This highlights the need to remain competitive, albeit not necessarily on price alone, as well as ensure the SPAR brand remains relevant to both our customers and consumers.
Description of Principal Risks and Uncertainties
The main uncertainties facing the Group are the impact of legislative rises in labour costs, continued elevated energy costs, increased regulation changes such as the current consultation on vaping and the September 2024 change in minimum unit pricing, all of which require constant focus to protect margins and profitability.
The recent change of UK government will inevitably result in policy changes which may affect consumer behaviour in Scotland, and these continue to be monitored closely by the Board. As previously stated the Group has taken steps to significantly align with SPAR International for support, strategy, store format development, etc and attend the annual SPAR International Congress.
The Directors remain confident that operating within the Scottish wholesale and convenience retailing sector under the SPAR brand, present throughout four of the seven continents across the globe, positions the Group well to take the opportunities of the projected annual growth in the convenience grocery sector.
Whilst gearing has increased as a result of the strategic acquisitions, which the Board are comfortable with, this is forecast to fall in future years. However, this does not limit our ability to undertake further acquisitions where appropriate.
Our People and employee policies
The Group recognises the value of effective communication with its employees. The Executive team regularly engage in extensive small group briefings across the Group, employee surveys and continue to introduce further ways to improve greater communication and engagement across the Group.
The Group gives full and fair consideration to applications for employment from disabled persons having regard to their aptitudes and abilities.
The Group continues to be actively involved and supportive of its local communities. As previously noted during 2023 /24 a total of £206k of charitable donations were given through the efforts of our staff to local charities, including foodbanks in their communities, and to the national Marie Curie and Maggie’s charities.
The Group retained the Symbol Group Community Initiative of the Year award at the Scottish Licensed Retail awards for the second year running, as well as three awards at the SWA ceremony in February 2024.
The Group through its annual dividend payments to the Lang Foundation, established in 1987 by Charles and Stella Lang, supports the efforts of this charity’s wide range of activities in the other local areas the Group operates in.
Future Developments
The poor summer weather in Scotland, illustrated by the lowest average temperatures and higher rainfall compared to 2015, has adversely impacted our sales growth in the first quarter of the year and indeed that of our competitors. In addition, the participation of the Scottish national team in the 2024 Euro football tournament impacted footfall and sales during the key summer months. The Executive team are focused on continuing to implement actions and seek opportunities to mitigate the impact of this.
By the end of December 2024 we will have converted 100 of the Company Owned estate (87%) from Costa coffee to the Barista brand, which is only available to SPAR Scotland, at greater margins than that it replaces.
We will continue to develop and refresh our Food to Go offering in all appropriate Company Stores, complete the rollout of electronic shelf edge labels to all stores to reduce task and cost, whilst continuing to review our non-profitable Post Office offering.
During this and the following fiscal year the Group will continue to refresh refrigeration in its Company Owned estate to drive further growth in both frozen and chilled categories, as well as expand its fresh food offering.
Over the course of this fiscal year the Board will continue to review and refine its 5 pillar strategy, whilst seeking to exploit additional opportunities, in both retail and wholesale channels, which are margin accretive.
The Chair and the Directors would like to thank everyone in the Group for their continuing hard work, support, and commitment during this past year of positive growth. Whilst the Group, like its competitors, is facing several headwinds due to adverse weather, additional minimum wage costs, and external economic and political factors out with its control, the Board remain focused on delivering a positive outlook for the Group.
On behalf of the board
The directors present their annual report and financial statements for the period ended 28 April 2024.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The Group/Company provides director and officer liability insurance.
The results for the period are set out on page 14.
Ordinary dividends were paid amounting to £1,526,976 (2023 - £778,954). The directors do not recommend payment of a further dividend.
The Group's policy is to consult and discuss with employees, through 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.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Other Information
The directors have included information on the future development of the Company, in accordance with section 141(c) of the Companies Act 2006 within the Group Strategic Report.
GHG emissions and energy use data for period 1 May 2023 to 28 April 2024
| Current Reporting Year 2023-2024 | Previous Reporting Year 2022-2023 |
Energy consumption used to calculate emissions: /kWh | Electricity – 16,592,958 kWh
Gas - 609,990 kWh
Diesel – 10,933,759 kWh
Petrol – 77,252 kWh
Employee Owned cars - 263,945 kWh | Electricity – 17,196,699 kWh
Gas - 222,985 kWh
Diesel – 11,042,687 kWh
Petrol – 78,022 kWh
Employee Owned cars - 266,575 kWh |
Emissions from combustion of gas tCO2e (Scope 1) | 112 tCO2e | 40 tCO2e |
Emissions from combustion of fuel for transport purposes (Scope 1)
| 2,633 tCO2e | 2,890 tCO2e |
Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing the fuel (Scope 3) | 63 tCO2e | 69 tCO2e |
Emissions from purchased electricity (Scope 2, location-based) | 3,733 tCO2e
| 3,325 tCO2e
|
Total gross CO2e based on above | 6,541 tCO2e | 6,325 tCO2e |
Intensity ratio: tCO2e gross figure based from mandatory fields above tCO2e/GIA* | 6,541/50,623sqm
0.129
| 6,325/50,499sqm
0.125 |
Methodology | GHG Reporting Protocol - Corporate Standard | GHG Reporting Protocol - Corporate Standard |
*GIA = Gross Internal Area of the retail shops, distribution warehouse and offices in square metres
Energy Efficiency Initiatives:
In the period covered by this SECR report the Group/Company has undertaken/completed the following energy efficiency actions:-
Received the third tranche of a new, more energy efficient, transport fleet.
Continued to introduce electric fridges to the transport fleet which are 30% more efficient than their diesel equivalents.
Continued with phased replacement of older warehouse MHE equipment with energy efficient equivalents.
Continued a policy of replacement of old refrigeration and freezers in stores with energy efficient equivalents.
Continued a preventative maintenance plan on refrigeration and air conditioning equipment to improve its efficiency, reduce energy consumption and reduce usage of refrigerant gases with high global warming potential.
Continued with the replacement of fluorescent lighting throughout the estate with low energy LED equivalents.
Continued to introduce fully electric and hybrid petrol vehicles to the company car fleet.
Continued to avoid excessive travel on Group business through the use of zoom/teams meetings.
The Group continues to purchase all electricity from renewable resources.
We have audited the financial statements of C.J. Lang & Son Limited (the 'Company') and its subsidiaries (the 'Group') for the period ended 28 April 2024 which comprise the Group profit and loss account, 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 and the notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the 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 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
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 period 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 Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
the 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 statement of directors' responsibilities, 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 Group's and 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 Group or 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.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the Group and the Company, their activities, their control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the Group and the Company that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the Group and the Company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 £5,460k (2023 - £3,030k profit).
C. J. Lang & Son Limited (“the Company”) is a private limited company domiciled and incorporated in Scotland. The registered office is at 78 Longtown Road, Dundee, DD4 8JU.
The Group consists of C. J. Lang & Son Limited and all of its subsidiaries.
On 6th October 2023 the Company acquired the Scotfresh Group. The Group aligned their financial year end with that of the Parent Company. The consolidated financial information presented represents 7 months of trade from the Scotfresh Group.
The financial statements are made up to the nearest Sunday to 30 April each year. The current financial year is the 52 weeks ended 28 April 2024 (the 'period').
The financial report is presented in British Pound Sterling, which is the Group's functional and presentation currency. All values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and in accordance with the Companies Act 2006 and applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ('FRS 102') as specified in the accounting policies below.
The Group financial statements consolidate the financial statements of the Company and its subsidiaries after eliminating inter-group trading, loan interest and management charges.
Group undertakings are accounted for under the acquisition method and goodwill arising on consolidation is capitalised and written off over its estimated useful life. Businesses sold during the year are included up to the effective date of disposal.
At the time of approving the Directors a reasonable expectation that the Group and the Company have 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.
The current and future financial position of the Group and the Company and their liquidity position have been reviewed by the directors and they are confident that the existing funding facilities will provide sufficient headroom to meet the forecast cash requirements.
As such, the Directors consider that it is appropriate to prepare the financial statements on the going concern basis.
Turnover represents the fair value of sales to external customers at amounts invoiced, exclusive of value added tax and discounts offered. Turnover relating to goods is recognised when the risks and rewards of owning the goods has passed to the customer which is generally on delivery. Turnover is recognised on despatch for wholesale transactions and at point of sale for retail transactions. Turnover relating to services is recognised when the service has been provided.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have transferred to the buyer; the amount of revenue can be measured reliably; it is probable that the associated economic benefits will flow to the Group; and the costs incurred or to be incurred in respect of the transactions can be measured reliably.
The Group receives income from suppliers in the from of incentives, discounts and promotional support. Such income is recognised within cost of sales when earned.
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.
Leasehold property is depreciated over its estimated useful life or its remaining lease term, whichever is the shorter. In the absence of evidence to the contrary it is presumed that leases for retail stores will be renewed at their expiry dates.
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 Company financial statements, investments in subsidiaries 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 and the Company 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 Group and 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 and the Company 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 and the Company's balance sheet when the Group/Company 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/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 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/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 Group/Company.
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 Group/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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals paid under operating leases, including any lease incentives received, are charged to income on a straight line basis over the lease term except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
Onerous leases
Provision is made for anticipated rents payable, net of expected rents receivable, on onerous and vacant property leases as well as terminal dilapidations and future rents above market value on under performing stores. The provision is discounted for the time value of money with the unwinding of the discount reflected through finance costs.
In the application of the Group’s and 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.
In line with Section 21 of FRS 102 the Group/Company recognises a provision for restructuring costs only when it has a legal or constructive obligation at the reporting date to carry out the restructuring. A restructuring gives rise to a constructive obligation only when the Group/Company has a detailed formal plan and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.
Inherently the recognition criteria requires the directors to assess when they believe these conditions have been met and as such there is an element of judgement and estimation uncertainty.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
In accordance with accounting standards, the Group/Company recognises a tangible fixed asset to reflect the trading potential of owned retail stores at each year end. The valuation process involves the directors making estimates for each individual owned retail store based on historical trading information and taking into account any other factors known to affect the valuation.
The Group/Company establishes a reliable estimate of the useful life of goodwill and intangible assets arising on business combinations. This estimate is based on a variety of factors such as the expected use of the acquired business, the expected useful life of the cash generating units to which the goodwill is attributed, any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of similar businesses.
At the end of each financial year an assessment is made on whether there are indicators that the Group's/Company's properties fair values are impaired. Management judgement is involved in evaluating currently available facts based on a broad range of information and prior experience. Inherent uncertainties exist in such valuations.
Substantially all the Group's and the Company's turnover and profit before taxation arose from the one principal activity which is carried on within the UK.
The group performs annual valuations of its retail stores and retail store properties and a gain of £436k (2023 - £122k) has been recognised through the Group Profit and Loss Account as 'Property and business revaluations'.
Retail store properties are professionally valued by J&E Shepherd, Chartered Surveyors, on a fair value basis.
The average monthly number of persons (including Directors) employed by the Group and Company during the period was:
Their aggregate remuneration comprised:
The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2023 - 1).
The actual (credit)/charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
The net book value of plant, equipment and vehicles held under hire purchase contracts and finance lease obligations at 30 April 2024 was £1.83m (2023 - £2.02m). Depreciation charged in the year on these assets was £415k (2023 - £467k).
Each year the Directors revalue the trading potential element of retail stores on a fair value basis. Retail store properties are professionally valued by J&E Shepherd, Chartered Surveyors, on an existing use basis under a rolling programme which ensures that each site is revalued with sufficient regularity to ensure significant movements in market value are recognised.
At 30 April 2024 these stores had a valuation of £35.1m and net book value of £41.9m. The historical cost was £20.6m (company £18.5m) with a net book value of £20.1m (company £18.1m).
Investment properties comprises all property which is not owner occupied at year end. The fair value of the investment properties have been arrived at on the basis of a valuation carried out at 30 April 2024 by J & E Shepherd Chartered Surveyors, who are not connected with the company. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties. Investment properties are revalued on a rolling programme in line with owner occupied retail stores.
Details of the Company's subsidiaries at 28 April 2024 are as follows:
(1) 78 Longtown Road, Dundee, Angus, DD4 8JU
The bank overdraft facility is secured by a bond and floating charge over all the Group's assets. The bank term loan is secured by standard securities over certain of the Group's properties.
The bank loan is repayable by annual instalments until July 2029, at which point the residual balance will fall due. Interest is payable at LIBOR plus a margin of 1.85%.
The new bank facility in the year is repayable by quarterly instalments until October 2028. Interest is payable at LIBOR plus a margin of 1.85%.
C.J. Lang & Son Limited has cross guarantees in place with its subsidiary companies in respect of the facilities available to the Group.
The hire purchase liabilities are secured over the underlying assets.
Onerous lease provision is in relation to the rental payments due on leases for properties no longer occupied by the Group/Company.
The restructuring provision relates to amounts set aside for the costs associated with the closure of stores in the future where this closure has been confirmed pre year end.
The exceptional maintenance provision is for the removal of asbestos from the buildings owned by the Group/Company.
The dilapidation provision is amounts set aside to cover any costs of putting the leased properties back into their original state when the Group/Company started the lease. In the prior year, the dilapidation provision was included in accruals. In the current year it is recognised in provisions.
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/Company in an independently administered fund.
Both Ordinary and 'A' Ordinary shares carry full ownership, voting and equity rights.
This is a non-distributable reserve and represents the cumulative effect of revaluations of tangible fixed assets less deferred tax.
This is a non-distributable reserve representing the nominal value of shares following redemption or purchase of the Company's own shares.
Profit and loss reserve includes all current and prior period retained profits and losses.
The Group/Company have made a claim, through a consortium, against a former trucking manufacturer. The claim is in the early stages and therefore it is not possible to estimate the outcome or value to the Group/Company at this time.
At the reporting end date the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
The remuneration of key management personnel is as follows.
During the year dividends of £82 (2023 - £82) were paid to Mrs Joan M Scott-Adie, £371,766 (2023 - £189,638) to Fiona A Hamilton, £371,766 (2023 - £189,638) to Serena C Reynolds, £371,766 (2023 - £189,638) to Caroline J Payne and £371,766 (2023 - £189,638) to Tanya E Scott-Adie.
At the year end, Mrs Joan M Scott-Adie had a Director's loan account balance of £2,967 (2023 - £7,236) included within other debtors. The loan, which was interest free, has been repaid in full since the year end.