Registered number:
FOR THE YEAR ENDED 31 MARCH 2024
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The directors present their strategic report on the Company for the year ended 31 March 2024.
The strategic report is consistent with the size and non-complex nature of the business and is written in the context of the risks and uncertainties the Company faces. The principal activity of the Company continues to be that of manufacturing, supplying and distributing life safety control systems. The Company develops and manufactures high quality and reliable life safety related control systems for commercial and industrial applications which are sold through professional system integrators and specialist distribution channels. The Company has developed manufacturing and support systems which allow greatly reduced lead times to customers compared with the industry norm yet maintaining the business' ability to provide bespoke and OEM products to major users. To remain competitive, the directors plan to expand the business with a wireless solutions and system sales approach.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
The Business had another challenging year following rising inflation, persisting supply shortages and political instability during April 2023 to March 2024. Despite this, the Company had exceeded its sales targets and together provided record sales and growth with turnover increasing to £ 30.2M, 115% compared to Budget.
Compared to budget, External sales enjoyed growth in sales supported by strong order book with extinguishant products. Group continued to outperform with increased Latitude. GPM% slightly improved for External mainly due to increased proportion of UK sales with higher margin. There was a new government elected in UK in Summer 2024 and there are mixed forecasts with regards to the UK economy for next year. - UK inflation has fallen this year, but still, there are risks that may be related to national debts and salary increases negotiated by the government. In line with this, we have seen salary increases across a few sectors, such as Junior doctors and train drivers, public servants, etc. - BoE's base interest rate was reduced in August 2024 to 5% after holding them at 5.25% for a long period. As the economy cools and inflation returns to back to target, BoE may cut the rates further, bringing the base rate to 4% by the end of 2025. However, uncertainty still prevails as this depends significantly on how quickly inflation drops and remains stable. - Higher borrowing costs and a slowing growth outlook are expected to weaken business investment. Government measures aiming to boost investment are likely to only have a temporary effect on growth. - The labour market is at a turning point. Whilst the unemployment rate has stayed relatively low, this will reverse as employers adjust their headcount, considering rising costs and falling demand. The unemployment rate (currently 3.8%) is expected to peak at around 4.7% by the middle of next year. The company has seen Gross Profit Margins slightly increased to 33.49% in The Financial Year ended Mar 2024 from 31.75% in April to Mar 2023. Following the company's strategic commercial plans, a significant drive in the global market for extinguishing products has led to a more robust sales performance and far greater demands on the factory and all departments. The company has listened to this challenge and made adjustments and plans in preparation for further growth. The company's profitability has improved significantly, driven by solid budget control and commercial success. The operating profit margin increased from 5.61% in April – March 2023 to 12.27 % in April – March 2024. The company's financial position remains healthy, with tight cost control throughout the mini-year. March ended with a cash increase of £486K. The directors believed that the minor reduction in cash last year's financial year was a short-term issue, and they were proven correct.
Principal risks and uncertainties
The directors, who are responsible for internal control systems which identify and manage various risks that pose a threat to achieving the Company's objectives, have identified the principal risks as follows:
- The current economic environment in the world is under elevated inflation, and the ongoing Russia and Ukraine war, conflict in the Middle East, and the American election have disrupted supply chains worldwide. The company has managed the situation by increasing the raw materials of key components. - There is still uncertainty around how Brexit will affect UK business and the economy. Any new trade agreements entered into by the UK may impact the Company's export trade. Staff shortages resulting from more rigid immigration rules will likely increase wages and reduce the company's productivity. The Company ls continually monitoring the political environment and its impact on the economic climate to react to any fundamental changes. - There is uncertainty about the regulatory framework that the Company currently operates within. Changes in
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
- the political environment may lead to revisions to the current European and US fire regulations. The company feels that it is well placed to adapt to any changes in regulations as significant investment has been made to create a larger Research and Development (R&D) department.
- The Company continues to face pressure to recruit, train and retain highly skilled and motivated staff members. The Company will continue to review its Human Resources policies in 2024 to mitigate this risk further. Currently, staff retention is at an all-time high, even in this economic environment. The Company is exposed to foreign exchange risk, particularly in the case of USD and GBP. The majority of the exposure is managed by natural hedging and will continue to exist within 2024. Any surplus of USD cash is kept to a minimum to reduce exposure. - Compliance with Health, Safety and Environmental matters is fundamental to the Company’s reputation, existence and the safety of its employees, subcontractors and the public at large. It is therefore paramount that the Company maintains and stays abreast of current legislation as well as best practice within this area. The company strengthened its compliance team in the prior year to ensure it continues to prioritise these three key areas as well as quality assurance. - The Company has become increasingly reliant on Information Technology (IT) and our ERP system is central to the business. - The Company operates within a highly regulated and technical industry. There is an ongoing threat from competition in terms of pricing, product innovations and service, which may lead to a loss in market share to competitors. The company is investing heavily in R&D to ensure it is at the forefront of product innovations. By maintaining a technical support department, the Company can deal directly with product issues and maintain communication with our customers so that we can understand the market needs and be best placed to react to the changes. The directors themselves and through delegated management periodically review the effectiveness of the Company’s internal control systems to ensure that the principal risks faced by the businesses are adequately managed and controlled.
The directors use a number of performance measures to assess the Company’s success in meeting its objectives. The key performance indicators are:
- Comparison of actual sales against budget - Gross profit margins - Variances between actual and budgeted standard costing - Operating profit percentage - Aged debtors - Working capital cycle The directors consider the key performance indicators for the year to be satisfactory.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The directors present their report and the financial statements for the year ended 31 March 2024.
Principal activity
The principal activity of· the Company in the year under review was that of manufacturing, supplying and distributing life safety control systems.
The profit for the year, after taxation, amounted to £2,639,902 (3 months ended 31 March 2023 - £329,361).
The results for the year and financial position of the Company are as shown in the annexed financial statements. The Company had a successful year by moving forward with system sales offerings and enjoyed growth both in turnover and profit. Although the global supply chain disruption had continued to adversely impact on cost structure and financial health of the company, the company took immediate actions to sustain business operations.
In 2024, Taktis/Latitude will continue to be confidently positioned as a core product to our system sales business as a part of the Group business strategy. Our new branding management for system sales and channel management increase sales opportunities for the entire Group and drive improved profits. The sales made by the Company vary from small customers in the UK to large organisations both within the UK and in regions outside the UK. In line with this, the sales in the accounts have been split geographically as follows - in the UK, Europe and Rest of the World.
The Company's business activities, together with the factors likely to affect its future development, its financial position, financial risks management objectives and its exposure to foreign currency, price, credit and liquidity risk are described in the Strategic Report on page 1.
The Company benefits from the support of membership of a strong global group under its ultimate parent undertaking, Hochiki Corporation and has long term relationships with a number of customers and suppliers across different geographic areas and industries. Consequently, the directors believe that the Company is well placed to manage its business risks successfully. After making enquiries, the directors have a reasonable expectation that they have adequate resources to continue in operational. existence for the foreseeable future. The management of Hochiki Group in Japan Is expecting growth from expansion in international business. Therefore, the Japanese management has set a higher target for 2024. Accordingly, it is felt appropriate to adopt the going concern basis in preparing the financial statements.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
The directors who served during the year were:
We are aware that any plans for the future development of the business may be subject to unforeseen events outside of our control. However, to remain competitive, we will plan to invest and develop our undeveloped export markets.
There have been no significant events affecting the Company since the year end.
The auditors, Greenback Alan LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
−select suitable accounting policies for the company's financial statements and then apply them consistently;
−make judgments and accounting estimates that are reasonable and prudent;
−prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENTEC ELECTRONICS LIMITED
We have audited the financial statements of Kentec Electronic Limited (the 'Company') for the year ended 31 March 2024, which comprise the Statement of income and retained earnings, the Statement of financial position and the related notes, including a summary of 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).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENTEC ELECTRONICS LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
−the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
−the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENTEC ELECTRONICS LIMITED (CONTINUED)
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 Auditors' 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 obtained a general understanding of the company’s legal and regulatory framework through enquiry of management concerning: their understanding of relevant laws and regulations; the entity’s policies and procedures regarding compliance; and how they identify, evaluate and account for litigation claims. We also drew on our existing understanding of the company’s industry and regulation.
We understand that the company complies with the framework through having in place robust procedures and policies that are develop with and monitored by the parent company and the wider group, and by outsourcing and taking external professional legal, tax and accounting advice on relevant specialist functions and areas including the preparation of financial statements and corporate tax compliance. In the context of the audit, we considered those laws and regulations: which determine the form and content of the financial statements; which are central to the company’s ability to conduct its business; and where failure to comply could result in material penalties. We identified the following laws and regulations as being of significance in the context of the company:
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 Auditors' 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KENTEC ELECTRONICS LIMITED (CONTINUED)
for and on behalf of
Chartered Accountant
Statutory Auditor
89 Spa Road
SE16 3SG
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 MARCH 2024
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STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
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STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 MARCH 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 28 form part of these financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
Kentec Electronics Limited is a private company limited by shares which was incorporated in the United Kingdom.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
−the requirements of Section 7 Statement of Cash Flows;
−the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
−the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Hochiki Corporation as at 31 March 2024 and these financial statements may be obtained from 2-10-43 Kamiosaki, Shinagawa-ku, Tokyo 141-8660 Japan.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
In respect of estimates and assumptions, and judgements made as a result, made by management in preparing these financial statements, the following are considered to have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities presented: Provisions – see Note 20 In respect of other significant management judgements in applying the accounting policies of the Company, the following have the most significant effect on the financial statements: Carrying value of stock – (see Note 2.5) management consider that there is no impairment to stock Recoverability of debtors – (see Note 2.6) management consider that there is no impairment to debtors
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
Analysis of turnover by country of destination:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
10.Taxation (continued)
The Finance Act 2021 announced an increase in the rate of corporation tax from 19% to 25% from 1 April 2023 for companies with taxable profits over £250,000, this increased rate was substantively enacted on 24 May 2021.
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