Company Registration No. 02897004 (England and Wales)
Timber Connection Limited
Annual report and financial statements
for the year ended 30 June 2024
Timber Connection Limited
Company information
Directors
Danny Catherall
Keeley Baker
Neil Cripps
(Appointed 1 February 2024)
Secretary
Keeley Baker
Company number
02897004
Registered office
2 Crane Mead Business Park
Crane Mead
Ware
Hertfordshire
SG12 9PZ
Independent auditor
Saffery LLP
St John's Court
Easton Street
High Wycombe
HP11 1JX
Timber Connection Limited
Contents
Page
Strategic report
1 - 2
Directors' report
3 - 5
Independent auditor's report
6 - 9
Statement of comprehensive income
10
Statement of financial position
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 25
Timber Connection Limited
Strategic report
For the year ended 30 June 2024
1
The directors present the strategic report for the year ended 30 June 2024.
The company's principal activities continued to be those of importing and selling timber.
Business review and future developments
The 2023-2024 result was positive considering the challenges we have seen in the sector. Demand has changed within the market which is evident in the reduction of turnover year on year. Gross Profit continues to be positive which is reflected in the performance, coupled with strong cost controls has allowed the business to perform better than the previous year. The industry has been contracting since the Covid period and continues to be challenging. This has led to many companies in the sector consolidating or exiting the industry. Timber Connection has been no exception to the downturn in demand which is evident by the financial key performance indicators noted below.
Trade has been positive since the year end and although turnover is proving to be a challenge, we continue to see a positive margin compared to the last financial year. Our continued approach to focusing on cost reductions has assisted in achieving a performance in line with budget for the first 4 months of 2024-2025. Our international division is gaining momentum and a positive addition to the UK operations. Stock levels remain in line with anticipating sales; however, the business has sufficient resources to increase when the timber sector improves.
The Company remains a market leader, providing excellent customer service and quality products. The key objectives for 2024-2025 continues to be focused on increasing market share in our core operations whilst exploring further product opportunities. The approach to the international trade is an opportunity to explore global activities whilst maintaining strict controls to protect margin.
Timber Connection has a solid asset base that is well positioned within the market. Its continued investment in personnel and new opportunities means that the directors expect the company to continue to trade profitably for the foreseeable future.
Principal risks and uncertainties
The Company’s primary financial instrument is cash. The Company has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.
The main risks that arise from the Company’s financial instruments are that of credit risk associated with customers and any foreign currency exposure.
Liquidity risk
The Company manages its cash and borrowing requirements in order to ensure it has sufficient liquid resources to meet the operational needs of the business.
Credit risk
The Company trades only with recognised and creditworthy third parties. It is Company policy that all customers who wish to trade on credit terms are subject to credit vetting procedures and approval at Director level. In addition, receivable balances are monitored on an ongoing concern to minimise the Company's exposure to potential Bad Debt.
The Company has credit insurance on all major debtors.
Currency risk
The Company ensures that whenever possible it hedges against adverse currency movement primarily by matching future payments and receipts in the same currency and through the use of forward rate agreements. The majority of the Company’s revenue and expenses are denominated in sterling, the Company secures forward rate agreements on currencies in order to minimise its foreign currency exposure.
Timber Connection Limited
Strategic report (continued)
For the year ended 30 June 2024
2
Financial key performance indicators
The Company's key performance indicators include turnover, net profit and gross profit margin. The year end results were:
Turnover £36,234,092 (2023: £45,069,409).
Net profit £1,523,667 (2023: £1,427,080).
Gross profit margin 14.9% (2023: 11.7%).
Promoting the success of the company and business relationships
The Directors’ priorities are to promote the long-term success of the Company for the benefit of its employees and shareholders and to comply to the matters set out in section 172 (1) (a) to (f) of the Companies Act 2006.
All shareholders are regularly consulted on key decisions made by the Board of Directors.
The Company acknowledges that its employees are key stakeholders and instrumental to the success of the business and engages with them on a regular basis whether it be for business or personal/social matters. We consider their personal wellbeing and mental health to be of the upmost importance. The Directors would like to thank all employees for their hard work and loyalty to the Company.
The Company is committed to developing new customer and supplier relationships as well as maintaining those established over the last 25 years. We are in continual contact with our key customers and suppliers to ensure that relationships are good, enabling us to increase market share. We regularly discuss the requirements of our customers in order to provide them with the products and service that they would expect from a leading timber importer. The Company has built up the reputation of being an excellent payer to all suppliers which has enabled us to source premium products at very competitive prices. We consider both customer and supplier relationships of upmost importance to the future growth of the company and endeavour to treat all business contacts with courtesy and respect.
The Directors of the Company have regular contact with other key stakeholders including Bankers, Financial Advisors, Lawyers, Insurers and Foreign Exchange Providers. This close contact has enabled the business to thrive over many years and ensure that the Company is offered the best professional advice and the tightest pricing on any borrowing products provided by financial institutions. We believe that the Company is held in the highest esteem by all external stakeholders and accordingly their long-term support has enabled uninterrupted growth.
As a company operating within the timber sector we are ever mindful of our responsibility to the environment, both locally and further afield. We are members of various trade associations and adhere strictly to all instructions to ensure that all products supplied are legally sourced. The Company continually monitors its relationships with all stakeholders to ensure that it is not in any breach of anti-bribery, anti-corruption, anti-slavery or anti-money laundering regulations.
The Company supports various charities directly, both locally and nationwide, and supports its own employees as well as those of customers and other stakeholders in their efforts to raise money for charitable purposes.
This report was approved by the board and signed on its behalf.
Neil Cripps
Director
6 December 2024
Timber Connection Limited
Directors' report
For the year ended 30 June 2024
3
The directors present their annual report and financial statements for the year ended 30 June 2024.
Principal activities
The principal activity of the company continued to be that of importing and selling timber.
Results and dividends
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £923,102. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Danny Catherall
Keeley Baker
David Green
(Resigned 18 January 2024)
Neil Cripps
(Appointed 1 February 2024)
Auditor
Saffery LLP have expressed their willingness to continue in office.
Energy and carbon report
We report here on Timber Connection Limited's use of energy and emission of greenhouse gases under the Streamlined Energy and Carbon Reporting regulations.
During the year to 30 June 2024, the company was responsible for emissions of CO2 as follows:
2024
2023
Energy consumption
kWh
kWh
Aggregate of energy consumption in the year
117,751
121,028
2024
2023
Emissions of CO2 equivalent
KgCO2e
KgCO2e
Scope 1 - direct emissions
- Gas combustion
5,374
5,168
- Fuel consumed for owned transport
13,965
13,985
19,339
19,153
Scope 2 - indirect emissions
- Electricity purchased
5,914
7,580
Total gross emissions
25,253
26,733
Intensity ratio
Intensity ratio (KgCO2e per £m of revenue)
697
593
Timber Connection Limited
Directors' report (continued)
For the year ended 30 June 2024
4
Quantification and reporting methodology
This report has been compiled following the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2024 UK Government’s Conversion Factors for Company Reporting. Gas and electricity usage figures are extracted directly from the supplier, while transport figures are calculated for an average car based on mileage reimbursed.
Intensity measurement
The chosen intensity measurement ratio is KgCO2e emitted per £m of revenue generated, which gives a measure of how efficiently the company is performing against its environmental impact.
Measures taken to improve energy efficiency
The company is taking actions to reduce its emissions, for instance by replacing cars with hybrid and electric vehicles, encouraging car sharing and replacing fluorescent lights with LED. There is a project planned to insulate the office roof, and further improve energy efficiency.
Statement of directors' responsibilities
The directors are responsible for preparing the annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
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 and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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 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.
Strategic report
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect to directors' duties to stakeholders and the need to foster the company's business relationships with suppliers, customers and others, and in respect to future developments.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Timber Connection Limited
Directors' report (continued)
For the year ended 30 June 2024
5
On behalf of the board
Neil Cripps
Director
6 December 2024
Timber Connection Limited
Independent auditor's report
To the members of Timber Connection Limited
6
Opinion
We have audited the financial statements of Timber Connection Limited (the 'company') for the year ended 30 June 2024 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the 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).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30 June 2024 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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 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 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.
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.
Timber Connection Limited
Independent auditor's report (continued)
To the members of Timber Connection Limited
7
Opinions on other matters prescribed by the Companies Act 2006
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.
Matters on which we are required to report by exception
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.
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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
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.
Timber Connection Limited
Independent auditor's report (continued)
To the members of Timber Connection Limited
8
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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.
Timber Connection Limited
Independent auditor's report (continued)
To the members of Timber Connection Limited
9
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.
Sheryl Davis
Senior Statutory Auditor
For and on behalf of Saffery LLP
6 December 2024
Statutory Auditors
St John's Court
Easton Street
High Wycombe
HP11 1JX
Timber Connection Limited
Statement of comprehensive income
For the year ended 30 June 2024
10
2024
2023
Notes
£
£
Turnover
3
36,234,092
45,069,409
Cost of sales
(30,821,361)
(39,790,784)
Gross profit
5,412,731
5,278,625
Distribution costs
(721,218)
(781,092)
Administrative expenses
(2,018,382)
(1,930,415)
Other operating income
6,000
6,000
Operating profit
4
2,679,131
2,573,118
Interest payable and similar expenses
8
(599,839)
(775,482)
Profit before taxation
2,079,292
1,797,636
Tax on profit
9
(555,625)
(370,556)
Profit and total comprehensive income for the financial year
1,523,667
1,427,080
The income statement has been prepared on the basis that all operations are continuing operations.
Timber Connection Limited
Statement of financial position
As at 30 June 2024
30 June 2024
11
2024
2023
Notes
£
£
£
£
Fixed assets
Tangible assets
11
743,173
765,520
Current assets
Stocks
12
12,362,432
14,781,517
Debtors
13
8,235,529
7,787,993
Cash at bank and in hand
860,917
583,636
21,458,878
23,153,146
Creditors: amounts falling due within one year
14
(12,431,241)
(12,748,421)
Net current assets
9,027,637
10,404,725
Net assets
9,770,810
11,170,245
Capital and reserves
Called up share capital
17
555
665
Share premium account
138,434
138,434
Capital redemption reserve
17,030
16,920
Other reserves
500
500
Profit and loss reserves
9,614,291
11,013,726
Total equity
9,770,810
11,170,245
The financial statements were approved by the board of directors and authorised for issue on 6 December 2024 and are signed on its behalf by:
Danny Catherall
Neil Cripps
Director
Director
Company Registration No. 02897004
Timber Connection Limited
Statement of changes in equity
For the year ended 30 June 2024
12
Share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
Balance at 1 July 2022
665
138,434
16,920
500
10,052,599
10,209,118
Year ended 30 June 2023:
Profit and total comprehensive income for the year
-
-
-
-
1,427,080
1,427,080
Dividends
10
-
-
-
-
(465,953)
(465,953)
Balance at 30 June 2023
665
138,434
16,920
500
11,013,726
11,170,245
Year ended 30 June 2024:
Profit and total comprehensive income for the year
-
-
-
-
1,523,667
1,523,667
Dividends
10
-
-
-
-
(923,102)
(923,102)
Own shares acquired
-
-
-
(2,000,000)
(2,000,000)
Redemption of shares
17
110
-
110
Reduction of shares
17
(110)
-
-
(110)
Balance at 30 June 2024
555
138,434
17,030
500
9,614,291
9,770,810
Timber Connection Limited
Statement of cash flows
For the year ended 30 June 2024
13
2024
2023
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
22
2,807,233
9,855,793
Interest paid
(599,839)
(775,482)
Income taxes paid
(401,554)
(1,019,606)
Net cash inflow from operating activities
1,805,840
8,060,705
Investing activities
Purchase of tangible fixed assets
(117,996)
(210,932)
Proceeds from disposal of tangible fixed assets
40,002
83,700
Net cash used in investing activities
(77,994)
(127,232)
Financing activities
Purchase of own shares
(2,000,000)
Proceeds from borrowings
547,237
Repayment of borrowings
(5,993,789)
Dividends paid
(923,102)
(465,953)
Net cash used in financing activities
(2,375,865)
(6,459,742)
Net (decrease)/increase in cash and cash equivalents
(648,019)
1,473,731
Cash and cash equivalents at beginning of year
(3,173,869)
(4,647,600)
Cash and cash equivalents at end of year
(3,821,888)
(3,173,869)
Relating to:
Cash at bank and in hand
860,917
583,636
Bank overdrafts included in creditors payable within one year
(4,682,805)
(3,757,505)
Timber Connection Limited
Notes to the financial statements
For the year ended 30 June 2024
14
1
Accounting policies
Company information
Timber Connection Limited is a private company limited by shares incorporated in England and Wales. The registered office is 2 Crane Mead Business Park, Crane Mead, Ware, Hertfordshire, SG12 9PZ.
1.1
Accounting convention
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.
1.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods 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 and settlement discounts.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Freehold land and buildings
2% straight line
Motor vehicles
25% reducing balance
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible 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.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
1
Accounting policies (continued)
15
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 is estimated to be less than its carrying amount, the carrying amount of the asset 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 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 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.
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.8
Financial instruments
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 company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include debtors, 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.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
1
Accounting policies (continued)
16
Other financial assets
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.
Impairment of financial assets
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.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors and bank loans 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.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
1
Accounting policies (continued)
17
Other financial liabilities
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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Taxation
The tax expense represents the sum of the tax currently payable.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
1.11
Employee benefits
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.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
18
2
Critical accounting judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Critical accounting judgements made in this period include:
1. Determining whether trade debtors are recoverable. Factors taken into consideration include credit insurance and expected recovery.
2. Determining whether there are indicators of impairment of the physical assets held by the company including stocks and tangible fixed assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the assets.
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.
Other key sources of estimation uncertainty includes:
1. Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing the lives of such assets, factors such as technological innovation, product life cycle and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of asset and projected disposal values.
3
Turnover
2024
2023
£
£
Turnover analysed by geographical market
United Kingdom
35,088,624
43,108,254
Rest of the world
1,145,468
1,961,155
36,234,092
45,069,409
4
Operating profit
2024
2023
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(16,480)
145,696
Depreciation of tangible fixed assets
109,915
99,011
Profit on disposal of tangible fixed assets
(9,574)
(14,261)
Cost of stocks recognised as an expense
30,821,361
39,790,784
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
19
5
Auditor's remuneration
2024
2023
Fees payable to the company's auditor:
£
£
Audit of the financial statements of the company
23,400
22,250
For other services
Taxation compliance services
1,800
1,700
All other non-audit services
12,540
2,430
14,340
4,130
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2024
2023
Number
Number
Sales and Purchasing
9
12
Administration
8
7
Distribution
1
1
Total
18
20
Their aggregate remuneration comprised:
2024
2023
£
£
Wages and salaries
1,131,248
943,164
Social security costs
140,354
120,909
Pension costs
23,713
14,214
1,295,315
1,078,287
7
Directors' remuneration
2024
2023
£
£
Remuneration for qualifying services
339,827
238,466
Company pension contributions to defined contribution schemes
6,280
(1,400)
346,107
237,066
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2023 - 2).
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
7
Directors' remuneration (continued)
20
Remuneration disclosed above include the following amounts paid to the highest paid director:
2024
2023
£
£
Remuneration for qualifying services
239,284
186,506
Company pension contributions to defined contribution schemes
2,230
(7,400)
During the prior year, pension previously accrued of £11,000 was waived by a director of the company.
8
Interest payable and similar expenses
2024
2023
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
277,040
262,706
Other finance costs:
Other interest
322,799
512,776
599,839
775,482
9
Taxation
2024
2023
£
£
Current tax
UK corporation tax on profits for the current period
555,889
370,556
Adjustments in respect of prior periods
(264)
Total current tax
555,625
370,556
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2024
2023
£
£
Profit before taxation
2,079,292
1,797,636
Expected tax charge based on the standard rate of corporation tax in the UK of 25.00% (2023: 20.50%)
519,823
368,515
Tax effect of expenses that are not deductible in determining taxable profit
17,633
8,458
Under/(over) provided in prior years
(264)
(Accelerated)/decelerated capital allowances
18,433
(6,417)
Taxation charge for the year
555,625
370,556
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
21
10
Dividends
2024
2023
£
£
Interim paid
923,102
465,953
11
Tangible fixed assets
Freehold land and buildings
Motor vehicles
Total
£
£
£
Cost
At 1 July 2023
693,307
469,329
1,162,636
Additions
117,996
117,996
Disposals
(77,878)
(77,878)
At 30 June 2024
693,307
509,447
1,202,754
Depreciation and impairment
At 1 July 2023
277,949
119,167
397,116
Depreciation charged in the year
13,872
96,043
109,915
Eliminated in respect of disposals
(47,450)
(47,450)
At 30 June 2024
291,821
167,760
459,581
Carrying amount
At 30 June 2024
401,486
341,687
743,173
At 30 June 2023
415,358
350,162
765,520
12
Stocks
2024
2023
£
£
Finished goods and goods for resale
12,362,432
14,781,517
13
Debtors
2024
2023
Amounts falling due within one year:
£
£
Trade debtors
7,978,749
7,649,603
Other debtors
69,247
Prepayments and accrued income
187,533
138,390
8,235,529
7,787,993
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
22
14
Creditors: amounts falling due within one year
2024
2023
Notes
£
£
Bank loans and overdrafts
15
4,682,805
3,757,505
Other borrowings
15
1,055,081
507,844
Trade creditors
6,021,422
7,279,636
Corporation tax
224,627
70,556
Other taxation and social security
82,701
260,594
Accruals and deferred income
364,605
872,286
12,431,241
12,748,421
15
Loans and overdrafts
2024
2023
£
£
Bank overdrafts
4,682,805
3,757,505
Other loans
1,055,081
507,844
5,737,886
4,265,349
Bank overdrafts due within one year are secured by a fixed charge over the relevant debtors and the proceeds, and a floating charge over all assets of the company.
Included within trade creditors is an amount of £2,579,677 (2023: £3,834,689) in respect to the supplier discounting facility provided by Santander. The company is charged interest at a rate of 2% above SONIA and also pays a turnover charge of 0.5% on the Promissory Note facility.
16
Retirement benefit schemes
2024
2023
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
23,713
14,214
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
23
17
Share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
"A" Ordinary shares of £1 each
433
433
433
433
"B" Ordinary shares of £1 each
67
67
67
67
"C" Ordinary shares of £1 each
-
55
-
55
"D" Ordinary shares of £1 each
-
55
-
55
"E" Ordinary shares of £1 each
55
55
55
55
555
665
555
665
The A, B, and E Ordinary shares of £1 each rank pari passu in all respects, except that the declaration of a dividend in respect of one class of share shall not compel a dividend at the same rate to be declared in respect of any other class of share.
18
Reserves
Share premium account
Share premium includes excess amounts received by the company over the par value of its shares.
Capital redemption reserve
Capital redemption reserve includes the nominal value of Ordinary shares repurchased by the company and cancelled.
Other reserves
Amounts retained in the business and not distributed to the shareholders.
Profit & loss account
Profit and loss account includes all current and prior year retained profits and losses.
19
Other financial commitments
The company enters into forward foreign currency contracts to eliminate the currency exposures that arise on purchases denominated in foreign currencies. At year end the company was committed to pay £7,560,318 (2023: £4,788,073). The movement in fair value of forward foreign exchange contracts at year end is not material and therefore not recognised.
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
24
20
Related party transactions
Remuneration of key management personnel
Included within other borrowings is an amount due to key management personnel of £945,081 (2023: £507,844) on which interest of £46,965 (2023: £222,233) was charged.
Included within other borrowings is an amount due to immediate family members of key management personnel of £110,000 (2023: £nil) on which interest of £nil (2023: £49,005) was charged.
Included within wages and salaries are amounts paid to immediate family members of key management personnel of £132,833 (2023: £135,983) and amounts paid to shareholders excluding key management personnel and their immediate families of £98,500 (2023: £36,000)
The directors of the company are considered as key management personnel and their remuneration has been disclosed in note 7.
21
Ultimate controlling party
The company's ultimate controlling party is Danny Catherall, a director, by virtue of his majority shareholding.
22
Cash generated from operations
2024
2023
£
£
Profit for the year after tax
1,523,667
1,427,080
Adjustments for:
Taxation charged
555,625
370,556
Finance costs
599,839
775,482
Gain on disposal of tangible fixed assets
(9,574)
(14,261)
Depreciation and impairment of tangible fixed assets
109,915
99,011
Movements in working capital:
Decrease in stocks
2,419,085
6,697,504
(Increase)/decrease in debtors
(447,536)
3,539,393
Decrease in creditors
(1,943,788)
(3,038,972)
Cash generated from operations
2,807,233
9,855,793
Timber Connection Limited
Notes to the financial statements (continued)
For the year ended 30 June 2024
25
23
Analysis of changes in net debt
1 July 2023
Cash flows
30 June 2024
£
£
£
Cash at bank and in hand
583,636
277,281
860,917
Bank overdrafts
(3,757,505)
(925,300)
(4,682,805)
(3,173,869)
(648,019)
(3,821,888)
Borrowings excluding overdrafts
(507,844)
(547,237)
(1,055,081)
(3,681,713)
(1,195,256)
(4,876,969)
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