Company registration number 10887323 (England and Wales)
NATIONAL TIMBER GROUP MIDCO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NATIONAL TIMBER GROUP MIDCO LIMITED
COMPANY INFORMATION
Directors
R G Myatt
M Mikhailova
(Appointed 30 June 2024)
P Procyck
(Appointed 13 January 2025)
S Shipley
(Appointed 13 January 2025)
E J Cunningham
(Appointed 13 January 2025)
Company number
10887323
Registered office
22 Cross Keys Close
Marylebone
London
United Kingdom
W1U 2DW
Auditor
BHP LLP
2 Rutland Park
Sheffield
S10 2PD
Bankers
Santander UK plc
Bootle Centre
Bridle Road
Bootle
L30 4GB
Solicitors
Addleshaw Goddard LLP
19 Canning Street
Edinburgh
EH3 8EH
NATIONAL TIMBER GROUP MIDCO LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 24
NATIONAL TIMBER GROUP MIDCO LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Principal activities and future developments

The company is a wholly owned subsidiary of National Timber Group Topco Limited.

The principal activity of the Company continued to be that of an intermediate holding company.

The results for the year are set out on page 8. The company generated a loss before tax of £13.3m (2022: loss of £9.6m) in the year due to an increase in interest costs.

During the year the opportunity was taken to simplify the Group’s corporate structure which resulted in the Company acquiring, at book value, the assets and liabilities of its subsidiary companies Arnold Laver Holdings Limited and LHSL2 Limited on 31 January 2023.

Following the acquisition of the assets and liabilities of these entities and the subsequent distribution of reserves to the Company by way of a dividend receipt totalling £50.0m, the Company’s investments in Arnold Laver Holdings Limited and LHSL2 Limited was impaired. This resulted in an impairment loss being recognised of £50.0m.

Business Review

The Company operates in markets and an industry which by their nature are subject to a number of inherent risks. The Group has a risk management programme that seeks to limit the adverse effect of such risks on financial performance.

Given the size of the Group, the directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the board of directors are implemented by the Group's finance department.

As a holding company, the key risk that the business faces relates to the potential diminution in the carrying value of investments which the Company holds that would arise as a result of the risks faced by each subsidiary undertaking. Risks faced by subsidiary undertakings include price risk and credit risk.

 

The company is also exposed to liquidity risk and interest rate cash flow risk. A summary of these risks is set out below.

 

Liquidity risk

The Group maintains a mixture of long-term and short-term debt finance that is designed to ensure that the Group has sufficient funds for its operations.

Interest rate cash flow risk

The Group has interest-bearing liabilities, including a term facility and a revolving credit facility. The Group’s term and revolving credit facilities accrue interest daily based on the sterling overnight index average (SONIA). The Group continually reviews its fixed versus floating interest rate position, performing sensitivity analysis to understand the impact of interest rate movements on future cash flows. The appropriateness of this position will be reassessed should the Group's operations change in size or nature.

Key performance indicators

As an intermediate holding company, key performance indicators are not considered necessary for understanding of the development, performance or position of the Company.

NATIONAL TIMBER GROUP MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
S172 Statement

In accordance with section 172(1)(a) to (f) of the Companies Act 2006, each of our directors acts in the way he considers, in good faith would promote the success of the Group for the benefit of its members as a whole.

The Board acknowledges that every decision it makes will not necessarily result in a positive outcome for all the Company’s stakeholders. By considering the Company’s purpose, vision, and values, together with its strategic priorities and having a process in place for decision making the Board does, however, aim to make sure that its decisions are consistent.

Stakeholder engagement

The Board believes that considering our stakeholders in key business decisions is not only the right thing to do, but is fundamental to our ability to drive value creation. The Board seeks to understand the respective interest of such stakeholder groups through various methods, including direct engagement by Board members; receiving of reports and updates from members of management who engage with such groups; and coverage in our Board papers of relevant stakeholder interests with regards to proposed courses of action. The directors consider the following to be the Company’s key stakeholders:

Employees

The strength of our business is built on the hard work and dedication of our employees. The Board recognises that the implementation of an effective people strategy and strong culture underpin the effective delivery of the Company’s strategy.

Employees are kept informed of performance and strategy through regular presentations and updates from members of the Board. These updates are further supported by newsletters and management briefings. The directors attend key business meetings throughout the year, including weekly trading meetings. An anonymous employee whistleblowing line is also in place, allowing employees to raise any concerns in confidence.

Key focus of the Board includes employee health and well-being, personal development, pay and benefits.

Government and regulations

We engage with the government and regulators through a range of industry consultations, forums, and meetings to communicate our views to policy makers relevant to our business. Key areas of focus are compliance with laws and regulations, health and safety and product safety. The Board is updated on legal and regulatory developments and takes these into account when considering future actions.

Investors

The Company relies on our shareholders and providers of debt funding as essential sources of capital to further our business objectives. Investor involvement in the decision making process includes representation on the Company Board. The Company has open dialogue with all investors through regular meetings which cover a wide range of topics including financial performance, strategy, outlook and governance.

On behalf of the board

R G Myatt
Director
21 January 2025
NATIONAL TIMBER GROUP MIDCO LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company is that of an intermediate holding company within the Group and provides management services to the Group (being National Timber Group Topco Limited and its subsidiaries).

Results and dividends

The results for the year are set out on page 8.

No ordinary dividends were paid. 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:

J C R Declerck
(Resigned 6 November 2023)
J J Faulds
(Resigned 31 May 2024)
R T Barclay
(Resigned 19 September 2023)
R G Myatt
J M Chilton
(Resigned 6 November 2023)
A D Steel
(Appointed 25 May 2023 and resigned 13 January 2025)
J E Gatfield
(Appointed 13 January 2025 and resigned 1 February 2024)
S Cairns
(Appointed 1 February 2024 and resigned 30 June 2024)
M Mikhailova
(Appointed 30 June 2024)
A Bayliss
(Appointed 6 November 2023 and resigned 6 November 2023)
P Procyck
(Appointed 13 January 2025)
S Shipley
(Appointed 13 January 2025)
E J Cunningham
(Appointed 13 January 2025)
Post reporting date events

On 13 January 2025, the Group successfully completed its financial restructuring. This included securing a new £35 million super-senior asset-based lending facility, a new £18 million term loan facility, the repayment of its £15 million revolving credit facility, and a £96 million recapitalisation, in which outstanding debt was exchanged for new share capital. Following this recapitalisation, Pricoa Private Capital, part of Prudential Financial Inc., became the majority shareholder of National Timber Group Midco Limited.

The significant incremental liquidity generated by the new long-term facilities along with the debt reduction and cost saving measures implemented in Q4 2024, provides National Timber Group with a solid platform upon which to deliver its planned strategic growth in markets which remain subdued.

Auditor

The auditor, BHP LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Energy and carbon report

The SECR disclosures relating to the Company are included within the SECR disclosures made in the annual report of National Timber Group Topco Limited, the Company's ultimate parent. The Company has taken advantage of the exemption from the requirement to make SECR disclosures in these financial statements.

NATIONAL TIMBER GROUP MIDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
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:

 

 

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.

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.

On behalf of the board
R G Myatt
Director
21 January 2025
NATIONAL TIMBER GROUP MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF NATIONAL TIMBER GROUP MIDCO LIMITED
- 5 -
Opinion

We have audited the financial statements of National Timber Group Midco Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity 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:

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 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.

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:

NATIONAL TIMBER GROUP MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF NATIONAL TIMBER GROUP MIDCO LIMITED (CONTINUED)
- 6 -
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:

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.

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

 

 

 

 

NATIONAL TIMBER GROUP MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF NATIONAL TIMBER GROUP MIDCO LIMITED (CONTINUED)
- 7 -

We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

 

 

To address the risk of fraud through management bias and override of controls, we:

 

 

 

 

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

 

 

 

 

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or 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.

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

Paul Winwood
Senior Statutory Auditor
For and on behalf of BHP LLP
21 January 2025
Chartered Accountants
Statutory Auditor
2 Rutland Park
Sheffield
S10 2PD
NATIONAL TIMBER GROUP MIDCO LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
-
-
Administrative expenses
(898,445)
(2,956,548)
Other operating income
732,550
2,872,012
Exceptional items
3
(50,951,357)
(1,568,979)
Operating loss
4
(51,117,252)
(1,653,515)
Interest receivable and similar income
8
50,003,151
-
0
Interest payable and similar expenses
9
(12,197,855)
(7,953,402)
Loss before taxation
(13,311,956)
(9,606,917)
Tax on loss
10
19,000
(214,000)
Loss for the financial year
(13,292,956)
(9,820,917)

The profit and loss account has been prepared on the basis that all operations are continuing operations.

NATIONAL TIMBER GROUP MIDCO LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
11
209,249
285,002
Tangible assets
12
4,406
15,066
Investments
13
60,735,401
60,735,401
60,949,056
61,035,469
Current assets
Debtors
15
37,291,468
29,507,829
Cash at bank and in hand
2,204,232
34,229
39,495,700
29,542,058
Creditors: amounts falling due within one year
16
(19,730,136)
(10,331,158)
Net current assets
19,765,564
19,210,900
Total assets less current liabilities
80,714,620
80,246,369
Creditors: amounts falling due after more than one year
17
(95,507,376)
(81,727,169)
Provisions for liabilities
Deferred tax liability
19
39,000
58,000
(39,000)
(58,000)
Net liabilities
(14,831,756)
(1,538,800)
Capital and reserves
Called up share capital
20
1
1
Profit and loss reserves
(14,831,757)
(1,538,801)
Total equity
(14,831,756)
(1,538,800)
The financial statements were approved by the board of directors and authorised for issue on 21 January 2025 and are signed on its behalf by:
R G Myatt
Director
Company registration number 10887323 (England and Wales)
NATIONAL TIMBER GROUP MIDCO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 January 2022
1
8,282,116
8,282,117
Year ended 31 December 2022:
Loss and total comprehensive income
-
(9,820,917)
(9,820,917)
Balance at 31 December 2022
1
(1,538,801)
(1,538,800)
Year ended 31 December 2023:
Loss and total comprehensive income
-
(13,292,956)
(13,292,956)
Balance at 31 December 2023
1
(14,831,757)
(14,831,756)
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
1
Accounting policies
Company information

National Timber Group Midco Limited is a private company limited by shares incorporated in England and Wales. The registered office is 22 Cross Keys Close, Marylebone, London, United Kingdom, W1U 2DW.

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.

This 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:

 

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

 

National Timber Group Midco Limited is a wholly owned subsidiary of National Timber Group Topco Limited and the results of National Timber Group Midco Limited are included in the consolidated financial statements of National Timber Group Topco Limited which are available from Companies House.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 12 -
1.2
Going concern

The Company is part of the National Timber Group and is a guarantor company for the Group’s borrowing facilities. The Company’s ability to operate as a going concern is therefore directly linked to the Group’s funding position which the Directors have considered in their assessment of going concern.true

 

After reviewing the Group’s forecasts and risk assessments and making enquiries, the Directors have formed a judgement at the time of approving the financial statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the 12 months from the date of signing this Annual report and financial statements. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

 

In arriving at their opinion, the Directors considered:

 

The Group forecasts on which the going concern assessment is based have been subject to sensitivity analysis and stress testing to assess the impact of the above risks and the Directors have also reviewed mitigating actions that could be taken. The conclusions from these reviews all supported the adoption of the going concern basis.

1.3
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation 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:

Software
3 years straight line
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:

Computers
3 years straight line

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
Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -

A subsidiary is an entity controlled by the company. 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 company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

1.6
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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 balance sheet 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 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

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.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
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, 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.

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.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
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 and deferred tax.

Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

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 when the company has 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.

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
Leases

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 leases asset are consumed.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
1.14
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.

2
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.

 

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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Impairment of fixed asset investments

The Company tests fixed investments assets and investments annually for impairment, or more frequently if there are indications that an impairment may be required.

 

In determining whether fixed asset investments are impaired, the value of use of the cash generating unit is reviewed. The key estimates made in the value in use calculation are those regarding discount rates, sales growth rates and direct costs to reflect the operational gearing of the business. Reviews are performed by forecasting cashflows based upon the budget and latest forecasts, which anticipates sales growth based on industry growth expectation and management experience.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
3
Exceptional items
2023
2022
£
£
Restructure and redundancy costs
-
172,815
Refinancing and other
949,205
1,396,164
Impairment of fixed asset investment
50,003,152
-
50,952,357
1,568,979

Exceptional costs are expenses that are material in nature and arise from events or transactions outside the ordinary course of business. These costs are typically unrelated to the normal operating activities of the company and arise from restructuring or other one-off events. Costs may include redundancy, property closure costs, consultancy costs and legal fees which are significant in size and will not be incurred on an ongoing basis.

 

During the year the opportunity was taken to simplify the Group’s corporate structure which resulted in the Company acquiring, at book value, the assets and liabilities of its subsidiary companies Arnold Laver Holdings Limited and LHSL2 Limited on 31 January 2023. Following the acquisition of the assets and liabilities of these entities and the subsequent distribution of reserves to the Company by way of a dividend receipt totalling £50,003,151, the Company’s investments in Arnold Laver Holdings Limited and LHSL2 Limited was impaired. This resulted in an impairment loss being recognised of £50,003,152.

 

Exceptional costs are recognised in the financial statements when they are directly attributable to the exception al event or circumstance, it is probable that an outflow of economic benefit will occur and the cost can be reliably measured.

4
Operating loss
2023
2022
Operating loss for the year is stated after charging:
£
£
Exchange losses
1,990
2,242
Depreciation of owned tangible fixed assets
10,660
10,621
Amortisation of intangible assets
188,356
144,737
Operating lease charges
55,108
34,257
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
13,300
12,150
For other services
Taxation compliance services
3,600
3,600
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
6
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Management and administration
10
10

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
1,458,877
1,866,883
Social security costs
183,333
198,305
Pension costs
50,462
44,674
1,692,672
2,109,862
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
879,505
839,514
Remuneration disclosed above include the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
217,500
542,490
8
Interest receivable and similar income
2023
2022
£
£
Income from fixed asset investments
Income from shares in group undertakings
50,003,151
-
0
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
9
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loans
11,576,017
6,142,935
Other interest on financial liabilities
-
0
1,382,690
Finance costs for financial instruments measured at fair value through profit or loss
621,838
427,777
12,197,855
7,953,402
10
Taxation
2023
2022
£
£
Deferred tax
Origination and reversal of timing differences
(19,000)
214,000

The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Loss before taxation
(13,311,956)
(9,606,917)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(3,130,972)
(1,825,314)
Tax effect of expenses that are not deductible in determining taxable profit
11,793,178
275,911
Tax effect of income not taxable in determining taxable profit
(11,761,015)
-
0
Change in unrecognised deferred tax assets
3,275,478
2,263,064
Permanent capital allowances in excess of depreciation
(708)
(7,886)
Remeasurement of deferred tax for changes in tax rates
(194,961)
(491,775)
Taxation (credit)/charge for the year
(19,000)
214,000
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
11
Intangible fixed assets
Software
£
Cost
At 1 January 2023
570,541
Additions
112,603
At 31 December 2023
683,144
Amortisation and impairment
At 1 January 2023
285,539
Amortisation charged for the year
188,356
At 31 December 2023
473,895
Carrying amount
At 31 December 2023
209,249
At 31 December 2022
285,002
12
Tangible fixed assets
Computers
£
Cost
At 1 January 2023 and 31 December 2023
33,706
Depreciation and impairment
At 1 January 2023
18,640
Depreciation charged in the year
10,660
At 31 December 2023
29,300
Carrying amount
At 31 December 2023
4,406
At 31 December 2022
15,066
13
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
14
60,734,101
60,734,101
Unlisted investments
1,300
1,300
60,735,401
60,735,401
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
13
Fixed asset investments
(Continued)
- 21 -
Movements in fixed asset investments
Shares in subsidiaries
Other investments
Total
£
£
£
Cost or valuation
At 1 January 2023
60,734,101
1,300
60,735,401
Additions
50,003,152
-
50,003,152
At 31 December 2023
110,737,253
1,300
110,738,553
Impairment
At 1 January 2023
-
-
-
Impairment losses
50,003,152
-
50,003,152
At 31 December 2023
50,003,152
-
50,003,152
Carrying amount
At 31 December 2023
60,734,101
1,300
60,735,401
At 31 December 2022
60,734,101
1,300
60,735,401
14
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
LHSL2 Limited
England and Wales
Ordinary
100.00
-
National Timber Group Scotland Limited
Scotland
Ordinary
100.00
-
Scotia Roofing and Building Supplies Limited
Scotland
Ordinary
-
100.00
Glow Insulation & Site Supplies Limited
Scotland
Ordinary
-
100.00
Orchard Timber Products Limited
Scotland
Ordinary
-
100.00
Legname Limited
Scotland
Ordinary
-
100.00
Ken's Yard Limited
Scotland
Ordinary
-
100.00
Intelligent Door Solutions Limited
England and Wales
Ordinary
-
100.00
North Yorkshire Timber Company Limited
England and Wales
Ordinary
-
100.00
Joseph Thompson & Co Limited
England and Wales
Ordinary
-
100.00
Arnold Laver Holdings Limited
England and Wales
Ordinary
100.00
-
National Timber Group England Limited
England and Wales
Ordinary
100.00
-
Fire Door Inspect Limited
England and Wales
Ordinary
-
100.00
Hymor Timber Limited
England and Wales
Ordinary
-
100.00
AMA Timber Services Limited
England and Wales
Ordinary
-
100.00
Norclad Limited
England and Wales
Ordinary
-
100.00
S.V. Timber Limited
England and Wales
Ordinary
-
100.00
NYT (Holdings) Limited
England and Wales
Ordinary
-
100.00
NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
15
Debtors
2023
2022
Amounts falling due within one year:
£
£
Amounts owed by group undertakings
37,004,033
29,219,764
Other debtors
277,356
278,897
Prepayments and accrued income
10,079
9,168
37,291,468
29,507,829
16
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans
18
16,300,000
2,000,000
Amounts owed to group undertakings
2,843,815
5,196,047
Other creditors
-
0
1
Accruals and deferred income
586,321
3,135,110
19,730,136
10,331,158
17
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Bank loans and overdrafts
18
95,507,376
81,727,169
18
Loans and overdrafts
2023
2022
£
£
Bank loans
111,807,376
83,727,169
Payable within one year
16,300,000
2,000,000
Payable after one year
95,507,376
81,727,169

The Group's revolving credit facility and term loans, included within bank loans, are secured over the assets of the Group.

 

Bank loans were repayable in quarterly installments of £425,000, commencing March 2025.

 

Interest on borrowings carries a variable interest rate of SONIA plus 4.00 to 10.25 percent.

 

Post year end there has been a group refinancing exercise. Detailed have been disclosed in Note 23.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
19
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Liabilities
Liabilities
2023
2022
Balances:
£
£
Accelerated capital allowances
39,000
58,000
2023
Movements in the year:
£
Liability at 1 January 2023
58,000
Credit to profit or loss
(19,000)
Liability at 31 December 2023
39,000

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

20
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary share of £1 each
1
1
1
1
21
Related party transactions
Transactions with related parties

The Company has taken advantage of the exemption provided by FRS 102 from the requirement to report transactions with other group companies that are 100% subsidiaries of the parent company National Timber Company Topco Limited.

The Company and Cairngorm Capital II LP are related parties due to the existence of common members / directorships and because the private equity funds Cairngorm Capital II LP, which is managed by Cairngorm Capital Partners LLP, own a controlling interest in the parent company National Timber Company Topco Limited.

At 31 December 2023 the Company had issued loan notes payable to Cairngorm Capital II LP with a nominal value of £nil (2022: £32,713,549), including interest, which accrued at a rate of 12% compounded per annum, the total amount payable at 31 December 2023 was £nil (2022: £33,986,842).

At 31 December 2023, the Group had a term loan payable to Cairngorm Capital II LP of £12,000,000 (2022: £nil).

During the period, the company purchased £47,016 (2022: £nil) of consultancy services from Scott Cairns Consultant Ltd, a company owned by Scott Cairns, a director of the company.

NATIONAL TIMBER GROUP MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
22
Ultimate controlling party

During the year and through to 13 January 2025, the company's immediate and ultimate parent undertaking was National Timber Group Topco Limited, a company registered in England and Wales.

The ultimate controlling party was Cairngorm Capital Partners II LP, a fund managed by Cairngorm Capital Partners LLP, a partnership registered in England and Wales. During the year, the group was headed by National Timber Group Topco Limited which was the smallest and largest group in which the results of the company were consolidated.

 

Following the financial restructuring of the Group, which concluded on 13th January 2025, the ultimate controlling partying became Sylvan Span LLC, a limited liability company incorporated in Delaware, USA and managed by Pricoa Private Capital. As a result of the restructuring, National Timber Group Midco became the smallest and largest group in which the results of the company are consolidated.

 

23
Post balance sheet events

On 13 January 2025, the Group successfully completed its financial restructuring. This included securing a new £35 million super-senior asset-based lending facility, a new £18 million term loan facility, the repayment of its £15 million revolving credit facility, and a £96 million recapitalisation, in which outstanding debt was exchanged for new share capital. Following this recapitalisation, Pricoa Private Capital, part of Prudential Financial Inc., became the majority shareholder of National Timber Group Midco Limited.

The significant incremental liquidity generated by the new long-term facilities along with the debt reduction and cost saving measures implemented in Q4 2024, provides National Timber Group with a solid platform upon which to deliver its planned strategic growth in markets which remain subdued.

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