The directors present the strategic report for the year ended 29 February 2024.
The Year to February 2024 saw a number of changes in the group with the closure of one site due to a specific customer contract coming to an end, the opening of a site new serving multiple customers, and also the end of a large one-off contract at the Bradford site.
This resulted in extra costs being incurred during the year due to these changes and the increased overall square footage, leading to a lower level of profits than in previous years.
Whilst it’s been a more difficult year, following the known loss of a major government covid contract, which has led to the major drop in turnover, the targets and expectations set by the business for the year have been achieved, which bodes well for the coming year where it is expected that the Group will again reap the rewards of a sound strategic approach and investment in the infrastructure in support of a deep seated culture of lean manufacturing.
The Group remains cash generative and is predominantly self-funding with little reliance on outside financiers. A new site was opened in the previous year to cope with the previous increase in demand, and there has been significant investment in equipment and infrastructure into this new site during the current year which has attracted new customers, and gained BRC AA* status along with major retailer approval (the same level as the main Bradford site).
We continue to invest in the Group and significant investment in tangible fixed assets and research and development activities have been made during the year. Working capital remains strong with a net current asset position of £7.4m and strong cash reserves. The Group has significant headroom in its available facilities and this headroom is expected to be maintained for the foreseeable future.
Post year end there has been a significant increase in the number of long term projects, and the order book for the year to February 2025 looks strong with several exciting projects in the pipeline, all of which provides support towards achieving the targets for the year. There is now a sense of high expectation for the standards set for service, costs and margins and combined with the back drop of ever increasing demands from a growing list of loyal major brand clients, the Group is well places to continue to grow and develop the products and services provided. The Directors look forward to the coming year with continued optimism.
Operational Review
The strategic development of the food related business continues to develop well with continued increases in demand across all areas. New levels of independently audited Quality and Ethical accreditations have been achieved with particular recognition of achieving success in the SMETA 4 pillar Ethical audit covering the four pillars of Health and Safety, Ethical Employment, Environmental Management and Business Integrity.
One of the group subsidiaries, Mailway Country Products Limited ceased trading within the year and thus is treated as a discontinued operation. This was due to the subsidiary's unprofitability. The orders and customers have been moved to Mailway Packing Solutions Limited, this has led to increased profitability on those customers.
Continuing supply of labour
Following the exit of the United Kingdom from the European Union there been a large reduction in the level of European workforce in the UK which is a major source of production labour to the group. To deal with this the group has invested in automation to enable it to manage with less direct staff.
Working Capital & Interest Rates
Whilst the Group does not borrow extensively, it does use invoice discounting. The current high interest rates have an impact on the business with the increased cost of the invoice discounting. The business is looking to improve its working capital position to reduce the need to use the facility.
Financial key performance indicators
The Directors consider the financial KPI’s of the business to be:
FY24 FY23 Percentage
£'000 £'000 Change
Turnover 14,016 30,783 (54%)
Gross Profit 5,957 17,546 (66%)
Net Profit/(Loss) (422) 5,622 (108%)
Cash Balances 588 1,056 (44%)
Working Capital Position 7,270 9,031 (19%)
Turnover across the group declined with Mailway Packing Solutions experiencing a significant downturn due to contract losses and site closure. This, coupled with decreased gross profit and an overall net loss, led to a decrease in cash and subsequent decline in working capital.
Other key performance indicators
In addition, non-financial KPI’s are:
High standard of customer services - this is tracked and measured through feedback from customers, repeat business and customer audits.
Health and safety compliance - the group ensures high health and safety standards through the use of quality audits on a regular basis.
Environmental Issues - these are monitored closely by the management team and board.
The Directors of the Company, as those of all UK companies, must act in accordance with a set of general duties.
These duties detailed in section 172 of the UK Companies Act 2006 which is summarised as follows:
A director of a Company must act in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:
1. The likely consequences of any decisions in the long term:
The Group continues to invest in equipment and technology and develop its people and processes to enable it to be competitive for the short, medium and long term.
2. The interest of the Company's employees:
The Group continues to invest in its employees training and development needs and the apprenticeship program, and the continued engagement with its team at all levels promotes a healthy relationship between the Company and its employees.
3. The need to foster the Company's business relationships with suppliers' customers and others - business relationships:
The Group continues to develop new products and packaging for its customers working closely with its own well developed supply chain, It values and appreciates its relationship with both its Customers and Suppliers.
4. The impact of the Company's operations on the community and the environment:
Over the last few years, the Group has further developed is waste stream programs promoting recycling and reuse. It works with its customers and suppliers to minimise packaging waste and promote new technology.
Investing in plant, equipment, and infrastructure that is more energy efficient to reduce our requirements and impact on the environment. The Group is involved in community work and support a number of charities.
5. The desirability of the Company maintaining a reputation for high standards of business conduct:
The Group prides itself on its professional reputation and ethical processes. We are regularly audited by external bodies to ensure the highest compliance.
6. The need to act fairly as between shareholders of the Company:
Fairness and equality are a major strength of the business, we work with members at all levels and promote a good working relationship between all colleagues.
On behalf of the board
The directors present their annual report and financial statements for the year ended 29 February 2024.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £2,091,614 (2023 - £1,075,149). 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 has robust reporting systems and produces timely and accurate management information which is regularly reviewed by the Directors.
The Group is exposed to downward pressure on margins resulting from current market conditions and increasing costs but continues to improve efficiencies by avoiding the lower end of the market where price is the only consideration and by continuing to supply innovation into the market ahead of competitors.
The Group's principal financial assets are bank balances, cash, stock and trade debtors that represent the Group's maximum exposure to credit risk in relation to financial assets. The credit risk is primarily attributable to its trade debtors. The risk is managed by having a strict credit policy and effective credit rating of prospective customers. The amounts presented in the balance sheet are net of allowances for doubtful debts estimated by the Group's management based on prior experience and their assessment of the current economic environment.
The Group's policy has been to ensure continuity of funding through the use of an invoice discounting facility.
The Group is reliant on its employees to a large extent, and so the continued rising costs is a risk, it minimises this by its constant investment in automation and lean activity. It secures the continued contribution of its employees by employing them all direct, it always scores very high on various ethical audits. The directors are not aware of any other significant risks that may impact the Group.
The group undertook research and development in various projects sought to streamline production and reduce labour costs. Automation was a key focus with solutions for tasks such as cracker feeding, straw packaging, calendar packing, and bagging processes. Innovations in metal detection and carton crushing addressed specific challenges. These improvements helped secure contracts and enhance overall efficiency.
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.
No events after the reporting date have occurred that require disclosure.
The Directors will continue to implement business strategies focused on growth, margin improvement, customer service, safety performance and the development of major national customers.
In accordance with the company's articles, a resolution proposing that Sedulo Audit Limited be reappointed as auditor of the group will be put at a General Meeting.
The company continues to evaluate the energy consumption and identified ways in which the environmental impact can be reduced. At the current time it is not practical for the company to report the specific consumption figures. There is a new ERP system being installed and this has the capability to track carbon usage. This system will go live early 2025.
In assessing the Group and Company's ability to continue as a going concern, the Directors considered the Group and Company's business activities alongside factors likely to impact its future development, performance, and financial position, including cash flows, liquidity, borrowing facilities, and key risks and uncertainties.
The Group reported net current assets of £7.3 million, net assets of £16.7 million, and a post-tax loss of £0.4 million. Despite this loss, the financial statements were prepared on a going concern basis, which the Directors believe is appropriate due to:
A stable customer base
Overall financial stability
£0.14m of the loss was attributable to a discontinued operation, Mailway Country Products Limited.
Consequently, the Directors are confident that the Group and Company will have sufficient funds to meet its liabilities as they become due for at least 12 months from the date of financial statement approval. Based on this assessment, the financial statements were prepared on a going concern basis.
We have audited the financial statements of Mailway Packaging Solutions Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 29 February 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 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
Extent to which the audit was capable of detecting irregularities, including fraud
The primary responsibility for the prevention and detection of fraud rests with directors and management, and we cannot be expected to detect non-compliance with all laws and regulations.
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our knowledge of the business and sector, enquiries of directors and management, and review of regulatory information and correspondence. We communicated identified laws and regulations throughout the audit team and remained alert to any indications of non-compliance throughout the audit.
We discussed with directors and management the policies and procedures in place to ensure compliance with laws and regulations and otherwise prevent, deter and detect fraud.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations identified as potentially having a material effect on the financial statements. Our procedures included review of financial statement information and testing of that information, enquiry of management and examination of relevant documentation, analytical procedures to identify unusual or unexpected relationships that may indicate fraud, and procedures to address the risk of fraud through director or management override of controls.
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 Report of the Auditors.
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 £736,055 (2023 - £5,976,456 profit).
Mailway Packaging Solutions Group Limited (“the company”) is a private company limited by shares domiciled and incorporated in England and Wales. The registered office is 12-16 Pitcliffe Way, West Bowling, Bradford, BD5 7SG.
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 company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Mailway Packaging Solutions Group 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 29 February 2024. 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.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
In assessing the Group and Company's ability to continue as a going concern, the Directors considered the Group and Company's business activities alongside factors likely to impact its future development, performance, and financial position, including cash flows, liquidity, borrowing facilities, and key risks and uncertainties.
The Group reported net current assets of £7.3 million, net assets of £16.7 million, and a post-tax loss of £0.4 million. Despite this loss, the financial statements were prepared on a going concern basis, which the Directors believe is appropriate due to:
Year-on-year business growth
A stable customer base
Overall financial stability
£0.14m of the loss was attributable to a discontinued operation, Mailway Country Products Limited.
Consequently, the Directors are confident that the Group and Company will have sufficient funds to meet its liabilities as they become due for at least 12 months from the date of financial statement approval. Based on this assessment, the financial statements were prepared on a going concern basis.
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.
Sale of goods
Turnover from the sale of goods is recognised when all of the following conditions are satisfied: the Group has transferred
the significant risks and rewards of ownership to the buyer;
the Group has transferred the significant risks and rewards of ownership to the buyer;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the Group will receive the consideration due under the transaction; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
the amount of revenue can be measured reliably;
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
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 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.
Significant judgements and estimates
Critical judgements in applying the Group's accounting policies
The critical judgements that the directors have made in the process of applying the Group's accounting policies that have the most significant effect on the amounts recognised in the statutory financial statements are discussed below.
(i) Assessing indicators of impairment
In assessing whether there have been any indicators of impairments to assets, the directors have considered both external and internal sources of information such as market conditions, counterparty credit ratings and experience of recoverability and where applicable, the ability of the asset to be operated as planned. There have been no indicators of impairments identified during the current financial year.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(i) Recoverability of receivables
The Group establishes a provision for receivables that are estimated not to be recoverable, When assessing recoverability the directors have considered factors such as the aging of the receivables, past experience of recoverability, and the credit profile of individual or groups of customers.
(ii) Determining residual values and useful economic lives of investments, tangible and intangible assets
The Group depreciates tangible assets, and amortises intangible assets, over their estimated useful lives. The estimation of the useful lives of tangible assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied. The estimation of useful lives of intangible assets is based on any contractual or legal rights associated with the asset, or the period in which the Group expects to use the asset if shorter. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes.
Judgement is also applied, when determining the residual values for fixed assets. When determining the residual value, the directors have assessed the amount that the Group would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful life. Where possible this is done with reference to external market prices.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
On 15 September 2023 a subsidiary company Mailway Country Products Limited on 15 September 2023. During the year the company contributed post-tax losses of £142,237. (2022: £48,869).
Details of the company's subsidiaries at 29 February 2024 are as follows:
The company has sold £763,419 of trade debtors, with recourse, under a invoice discounting agreement (2023 - £856,565).
The bank loans and overdrafts are secured by a fixed and floating chare over assets of the Company and Group.
Net obligations under financial lease and hire purchase contracts are secured on assets to which they relate.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
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.
Each A and B Ordinary share has full rights in the company with respect to voting,dividends and distribution.
Each, C D and F Ordinary share has full rights with respect to voting and dividends. Rights in relation to distributions are restricted to that in excess of the reserved amount which which shall be distributed amongst the holders of the A Ordinary and B Ordinary Shares
During the year the Company repurchased 2,217 Ordinary C Shares at par value from one of the shareholders. The resulting balance is reflected in the capital redemption reserve.
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:
There have been no significant events affecting the Group or parent Company since the year end.
R Bramma has given personal guarantees of £25,000 in respect of the invoice discounting facility.