Registered number:
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Company Information
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PSSF Brady Holdco (UK) Limited
Contents
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PSSF Brady Holdco (UK) Limited
Group strategic report
For the Period Ended 26 May 2024
The Group’s principal activities continued to be the procurement and sale of alcoholic and non-alcoholic drinks via its Leased and Tenanted and Operator Managed pubs, and the collection of rents charged to licensees in occupation of the Group’s licenced premises (public houses) and directly via the Group’s operator managed pubs.
Results During the period ended 26 May 2024 the Group generated turnover of £194.5m, an operating profit of £33.6m and underlying operating profit (after excluding exceptional and non underlying items) of £38.0m. The loss after tax is £6.2m and underlying loss after tax is £0.1m. Strategic review Admiral Taverns has a long term growth strategy to acquire, develop and maintain a high quality estate of successful, individual, wet led community pubs at the heart of their communities. This growth strategy is underpinned by a highly supportive business model, which attracts, recruits, and develops local entrepreneurs who wish to build a hospitality business that serves their community, as well as providing an income and (usually) family accommodation on site. Together with licensees, Admiral’s objective is to create a pub that is a viable and sustainable small business, and a vital social asset providing a range of products, services, and amenities to the local community. Our strategy is built upon three critical building blocks. First, the recruitment, retention and development of colleagues, licensees, and operators, based on potential and values. Second, we support our licensees and operators to maximise their retail opportunity and embrace their local community. Third, the provision of well invested local pubs and property services that meet the needs of our licensees and their community. FY24 has seen the Group make good progress towards its strategic objectives, despite inflationary pressures, political turmoil, and cost of living challenges. Although the cost of borrowing has risen significantly, we have continued to invest in our estate and our licensees/operators, to position our pubs as vibrant hubs of their community. Our commitment to invest has been rewarded with healthy returns and strong drinks volumes, indicating consumer satisfaction with our retail offers. The willingness and desire of our licensees to work with their communities on a range of charitable and social events, has also proven very beneficial to their businesses. The leased and tenanted pub will always be our primary business model, seeking to share risk and reward with our licensees. However, we have accelerated the growth of our community wet led operator business (Proper Pubs) in FY24, with over thirty conversions in the year, taking this division to over 200 pubs in total. This has required significant capital investment but positions the pubs well in the value market and has generated excellent returns. Our operators have also embraced their role as community champions, raising funds to install defibrillators on the outside of their pubs and supporting a range of local and national charities. The direct investment in the community has meant that local people have responded with regular use of our pubs, which in turn generates the returns to justify the investment. We were delighted to be named as ‘Best Community Pub Company 2024’ in the highly competitive Publican Awards in March. In the leased and tenanted division, we continue to work closely with our licensees and to support their businesses where appropriate. During the height of the inflationary pressure, we introduced a cap on annual rent increases of 6%, despite inflation running at over 12%. In contrast to some of our competitors, we took a longer term view that it was important to ensure the ongoing viability of our community pubs, especially where the demographic was unable to pay rapidly increasing prices for their drinks. Although energy commodity prices have fallen during the year, we have completed our roll out of energy saving equipment in cellars and behind the bar. We have also increased our investment on other sustainability measures to improve EPC Ratings and reduce operational costs for licensees. We continue to work with the British Beer & Pub Association and others to make improvements to the non-domestic energy market via OFGEM, and to press for reductions in the very high Alcohol Duty and Business Rates paid by pubs.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
We have maintained our focus on continuous improvement, using the Go MAD methodology which we introduced the previous year. We have also continued our work on employee engagement and promoting diversity and inclusion throughout the year. The office and field based teams reported very strong engagement scores in our annual survey and are very committed to the Company Values of One Team, We Care, and Make a Difference. I am also delighted to report that we have grown our investment in related charities such as Pub Is the Hub, PubAid and Drinkaware.
Finally, on the regulatory and legislative front, we continue to work closely with the Pubs Code Adjudicator, to the benefit of licensees. Admiral Taverns wishes to maintain and enhance its reputation for integrity and authenticity and demands the highest standards of its people. Compliance with the important obligations of the Pubs Code is seen as a minimum standard of performance. We were delighted to perform strongly in the PCA annual survey of tenant satisfaction and to improve our performance in the important area of property services. By developing our business in this way, we believe we can lead the market on both financial performance and quality of service for our licensees and operators.
Performance review
The trading results presented for the Admiral Taverns Group ("the Group" or "Admiral Taverns") are for 52 weeks to 26 May 2024. The period was the second full financial year incorporating the results of the Hawthorn Pub Company (“Hawthorn”), comprising 674 pubs, which was acquired in August 2021. At the year end the Group operated 1,387 pubs across its Leased and Tenanted and Operator Managed Estates. Underlying trading has been strong with the Group exceeding budgets helped by high levels of investment and the measures put in place to manage the high inflation and soaring energy costs that have impacted the pub industry. Admiral Taverns’ focus on wet led community pubs continues to deliver sustainable profitable growth which in turn has funded £36.8m of investment in our pub estate in the last year (2023 - £27.7m). The Group has grown its Operator Managed pubs, trading as Proper Pubs, to over 200 sites achieving strong returns on investment whilst also maintaining investment and attractive returns from investments in the Leased and Tenanted estate. The Group generated an underlying operating profit of £38.0m for the period (2023 - £25.9m) and an underlying loss after tax of £0.1m (2023 - £2.5m underlying loss). The result of rising interest rates increased the cost of servicing the Group’s debt facilities to £40.2m from £29.4m in 2023. The Group ended the period with £37.3m of cash and net debt of £319.0m (2023 - £331.8m). The Group revalued its property assets on 26 May 2024 based on trading for the financial year. The approach was taken to value each pub, in accordance with accounting standards, as a separate “cash generating unit” in line with previous years. This resulted in a net book value of £613.2m (2023 - £560.7m) for the Group’s freehold and leasehold properties of which £580.3m (2023 - £532.9m) relates to freehold property. The year end value implies a multiple of 7.2x Pub EBITDA for the period and is supported by the growth in profit per pub, high levels of investment in the estate and the profit in excess of book value on sites sold during the year. The year end revaluation identified 140 properties where the value had fallen giving rise to an impairment charge of £11.2m and 659 properties where the value had increased by £77.4m. 94 pubs with a net book value of £23.5m were disposed of during the period for an aggregate consideration, net of fees, of £26.4m. Increases in the value of the Group’s property assets cannot be recognised in the income statement but instead are credited to the revaluation reserve. Similarly, any impairment of a property is first debited against any previous upward revaluation held for that property in the revaluation reserve with the balance being debited to the income statement. This resulted in a charge to profit and loss of £5.6m (2023 - debit £5.9m) and credit to the revaluation reserve of £71.8m (2023 - £28.7m). Intermediate Capital Group (“ICG”) provide the Group’s third party debt facilities (“the Facilities”) which totalled £356.3m (2023 - £392.1m) at year end following a voluntary prepayment of the facility of £25.0m in October 2023. The main financial covenant comprises a quarterly test of the ratio of Net Debt to EBITDA (“the Leverage Test”). The Group was and remains comfortably ahead of the prescribed covenant levels.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
In February 2022, the Group also entered into an interest rate cap agreement which caps the floating rate element on £200m of its Facilities at 2% from March 2023 until March 2025, helping to insulate the Group from the effects of rising interest rates. The cost of the cap was £1.9m. The fair value was £6.1m at the period end (2023 - £8.7m).
The Group has continued to trade ahead of Management’s expectations through September 2024 helped by buoyant drink sales.
Inflation continues to influence trading but much of the Group’s drinks and logistics costs are covered by long term agreements limiting price rises from suppliers through this period. In addition, a large portion of the Group’s revenues, linked to the sale of beer and rental income, have an element of inflation driven increases, although the Group has voluntarily capped these increases to assist its licensees through this difficult period. The Group has a hedging strategy for its own energy requirements for its Operator Managed estate through to 2025 comprising forward purchases of gas and electricity directly from the wholesale market, bypassing utility retailers. However, tenants are responsible for procuring their own utilities and struggled during the first half of the year to renew expiring fixed price contracts in the current market. This eased in the second half of the year as energy prices and price inflation fell. In response to energy price inflation, the Group has invested £1.0m in energy saving technology in its operator managed and leased and tenanted pubs. This investment has been made with no cost to our licensees and forms part of the Group’s wider ESG strategy which also focusses on replacing energy inefficient lighting and heating in our pubs, installing additional insulation and converting our vehicle fleet to electric vehicles. The Group has also achieved ‘zero to landfill’ for waste from our Operator Managed pubs. The Group continues to explore opportunities to add sites to its community focussed, wet led pub estate. This has resulted in the Group acquiring 37 sites from Fuller, Smith & Turner plc post year end on 25th June 2024 and a further 18 sites from Martsons plc on 26th September 2024.
Principal risks and uncertainties
General economic and political conditions The last few years have seen significant political and economic uncertainty in the UK which has been compounded by rising interest rates, rapidly rising inflation and the war in Ukraine impacting energy costs and other essential supplies, whilst also squeezing consumers’ disposable income. The pub industry remains sensitive to economic conditions and the impact these have on consumer confidence and business investment. The current level of political and macro uncertainty is unhelpful and it is very difficult to predict how consumers will react in the short term and how businesses can plan with confidence for the future. As Management are unable to control external factors, in the short term we continue to focus on the delivery of internal improvements in the business such as reinforcing the calibre of the Group’s operational management to provide licensees with valuable support, investing in our estate of pubs to improve both facilities and their condition and enhancing the competitiveness of our pubs through focusing on improving their retail offers. A number of the Group’s key input costs are covered by long term purchasing and service agreements that limit annual price increases. As a consequence, the Group has been able to cap inflation index driven increases in our tenancy agreements, supporting our licensees through this current period of rapidly rising costs.
Coronavirus Pandemic
The Pandemic had a seismic impact on the hospitality sector, with Government mandated trading restrictions and closure of pubs in an attempt to slow infection rates. This severely impacted the ability of pub licensees to trade which in turn impacted the Group’s ability to generate revenue from the sale of beverages and to charge and collect rent on pubs in previous financial periods. The Group chose to offer significant levels of financial support to its licensees by cancelling or reducing rent, crediting licensees for unused out of date stock and providing support to collect relief grants made available by the UK Government during the Pandemic.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
However, with the chosen strategy to support licensees to the best of the Group’s ability and to shoulder the financial burden and focus on preserving licensees livelihoods, has enabled trading to bounce back quickly to pre Pandemic levels following the lifting of trading restrictions. This has been clearly demonstrated by the bounce back in trade seen in the previous and current financial period. In addition, the community nature of the pub estate favours more local socialising reducing the need for the Group’s consumers to travel.
With a high uptake of vaccines and boosters in the UK and successfully suppressing the impacts of the virus, the Directors believe the worst impacts of the Pandemic on the Group are behind us and do not believe it is likely that blanket closure of pubs of the likes seen in 2020 and early 2021 will recur. However there maybe future trading impacts from local restrictions in hospitality venues, such as the introduction of ‘vaccine passports’ or mandated limits on pub capacity. Such possibilities have been factored into financial forecasts and are expected to be only temporary. This, combined with the rapid recovery of trading following the lifting of restrictions in 2021 has led the Board to conclude that whilst there may be short term trading impacts, there will be no long term impact on the wet led, community based pub model operated by the Group from the Coronavirus Pandemic. Small Business, Enterprise & Employment Act 2015 – Statutory Pubs Code The Pubs Code 2016 was implemented on 21st July 2016 and we have been operating under a statutory code since that date. There are six large Pub Owning Businesses, of which Admiral Taverns is one, which are governed by the Pubs Code. The Pubs Code Adjudicator (“PCA”) has the powers to ascribe fines of up to 1% of turnover should it be proven that the company was in breach of the Code. There is therefore a risk that by not complying with the Code, Admiral Taverns will face financial penalties as well as reputational damage from any adverse publicity. A member of Admiral Taverns' senior leadership team has been appointed to the role of Code Compliance Officer and is accountable for overseeing our adherence to the Code. We complete annual internal audits of our compliance with the statutory obligations of the Code and these audits have been carried out independently of the Compliance Officer. The audit provides a rigorous test of our internal processes and controls and enables us to make further improvements and mitigate any potential future risks. In addition to our internal audit, Pub Owning Businesses must provide the PCA with an annual compliance report. The latest compliance report covered the period from the 1st April 2023 to 31st March 2024 and was approved (before it was submitted) by the Chair of the Audit Committee. A summary of the compliance report has been included in this annual report (below) and was also published on the company website. Recruitment, retention and development of employees and licensees More than ever, recruiting, developing and retaining high calibre people (employees and licensees) remains central to the delivery of our strategic plans and business objectives and there is a risk to our ability to meet our financial forecasts if we are unable to do this effectively. During Summer 2019, we were delighted to move our central operations team into a modern, open plan office building in Chester, significantly enhancing our working environment. As a direct result of the Coronavirus Pandemic we introduced flexible working, allowing our people to work from home supported by investments in IT. This has proved to be effective and is being adopted as a working model for certain office functions in the future, allowing us to maximise the usage of our Chester site with the integration of the Hawthorn business which was completed in June 2022. Information systems, technology and data security The Group’s operations are reliant on its information systems for accounting, reporting and internal financial control processes. A significant cyber security breach or loss of data or a disruption to any of these systems could impact on the Group’s ability to deliver turnover and profit. In June 2022 the Group upgraded its financial and accounting platform to the latest version of Navision, combining the legacy systems from Admiral and Hawthorn. This has been an enabler for the Group to further review and develop its information technology capability. In 2022 the Group also implemented a Group wide property management and maintenance system, improving service for licensees and automating back office processes.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
A comprehensive business continuity plan is in place, and is reviewed regularly, including an off-site disaster recovery facility. There are also comprehensive controls in place to ensure information technology systems run effectively, including regular back ups and off site storage. The Group continues to work with third party specialists to ensure that it has appropriate controls in place to protect the businesses information and systems and management regularly monitor and test that these controls are adequate.
UK Property values At the end of the period the Group had 1,387 pubs valued at £613.2m. The estate is revalued annually to its market value, and as a result, fluctuations in the UK property market could impact the value of the Group’s estate and its ability to dispose or acquire pubs at an appropriate value. The Group undertakes a rigorous annual estate review process through which every property in Admiral Taverns' portfolio has an appropriate strategy and we continue to dispose of a small number of properties each year according to strategic and financial considerations. Despite the sale of 94 properties during the year the value of our pub portfolio was largely maintained with our unique granular management style being able to “unlock” potential improvements in our portfolio either through investment in the property condition, through the improved calibre of licensee recruited to operate the businesses or a combination of both and this is reflected in improvements in property valuations. Financial covenant and interest rate risk The Group has external banking facilities that include two financial covenants; first, a net leverage test (net Debt as a ratio to EBITDA) that is reported quarterly and annually, and which relates to the Group’s debt facilities and is assessed on a consolidated group basis; and second, a capital expenditure cap. Covenant headroom is reviewed regularly through forecasting which is integrated into the Group’s monthly reporting and business planning processes. As part of the refinancing of the Group in connection to the acquisition of Hawthorn, a Pandemic Protection mechanism has been introduced, allowing the Group to suspend testing of the net leverage test in the event of further mandated pub closures, and replacing it with a minimum liquidity test for the period of the closure. Changes to interest rates in the financial market could impact the ability of the Group to meet its obligations under these debt facilities. To mitigate the risk of interest rate increases, the Group entered into an interest rate cap in early 2022 for a period from March 2023 to March 2025. Working capital risk The Group’s business model operates on a short working capital cycle and in relation to the sale of tied products to its pubs, will invariably have received payment for those goods from licensees ahead of the requirement to make creditor payments to suppliers. However, the Group can be exposed to the risk of bad debts or shortening supplier credit terms, and these would both have an adverse impact on group cash flows. To protect the Group from bad debt exposure, the Group performs credit checks and take references for all licensees and expect each licensee to deposit a “rent bond” at the commencement of their occupational agreements. Bad debt risk is minimised by employing a small team of dedicated credit controllers whose role is to monitor licensee debt on a regular basis. Under normal circumstances the requirement for bad debt provisioning remains at low levels and giving the confidence that policies and procedures are fit for purpose. However as a direct result of the Pandemic an increased bad debt provision has been charged in recognition of the challenges facing the industry. To protect the Group against changes to credit terms with major suppliers, the commercial team work closely with the Group’s suppliers to encourage good working relationships on competitive and appropriate terms. The Group operates a rolling (weekly) cash flow forecast model to monitor and assess cash requirements which is reviewed by the Chief Financial Officer every week to further minimise the potential risk from changes in working capital. The Group is highly cash generative due to the predominately freehold nature of its pub estate and at the 24th October 2024 the Group had cash balances of £12.2m of free cash and £12.0m of undrawn credit facilities. This provides the necessary comfort that the Company and Group would be well placed to deal with any short term working capital issues.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
Statutory and legal compliance
If the Group fails to comply with health and safety legislation and cause serious injury or loss of life to one of its employees or licensees (or their customers), it would have a significant impact on our reputation and could lead to economic loss. Likewise, failure to comply to recent GDPR legislation, would have a detrimental impact on the Group. Admiral Taverns takes its responsibilities seriously and has a health and safety committee which is chaired by an Executive Board Director. This committee ensures that the Group has fully documented policies and procedures across all areas (Health & Safety, GDPR and other compliance areas) and where appropriate ensures that employees are trained and comply with these policies. This approach means the Group is minimising our exposure and risk of non-compliance.
A director of a company must act in the way s/he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
∙The likely consequences of any decision in the long term;
∙The interests of the company's employees;
∙The need to foster the company's business relationships with suppliers, customers and others;
∙The impact of the company's operations on the community and the environment;
∙The desirability of the company maintaining a reputation for high standards of business conduct, and
∙The need to act as between members of the company.
The key decisions made by the Group in this year relate to ensuring the continued trading recovery of the Group’s pubs post the Covid Pandemic, investing in and growing the profitability of the Groups pubs and assisting licensees navigate the challenging financial environment presented by high inflation and a volatile economic outlook for the United Kingdom. The Group are keen to always epitomise the culture and values of the business in every day decisions, particularly at a time of change and economic challenge. During the period the Group invested heavily in its pubs to the benefit of licensees, operators and Group profitability. The Group also continued to support £1.0m of capital investment in energy saving technology in the pub estate to help reduce power usage and grew and invested in the house team created to help licensees procure competitively priced utility supplies. The Group focus on frequent, open communication to licensees and employees, organizing regular ‘town hall’ style meetings with the entire workforce. The Group has also maintained a constant review of cashflow and solvency to ensure continued trading was always appropriate. The Group therefore believe that they have always acted in good faith, and in a way that is most likely to promote the success of the company, for the benefit of its members and stakeholders as a whole.
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PSSF Brady Holdco (UK) Limited
Group strategic report (continued)
For the Period Ended 26 May 2024
The Admiral Taverns Pubs Code Compliance Report was approved by the Chair of the Audit Committee on 31st July 2024 and was submitted to the Pubs Code Adjudicator (“PCA”) on 5th August 2024. The Chair had been provided with and reviewed the internal audit report in compliance with the Pubs Code regulations which was completed on 18th June 2024.
The Audit Committee was led through the annual compliance report by the Group’s Code Compliance Officer who was appointed on 1st January 2024. This report covers the period from 1st April 2023 to 31st March 2024 (the relevant period) and is the latest report to be produced and published since the Pubs Code came into force. We confirm that during the relevant period the Group has been in compliance with the Pubs Code in all material respects. It has also not been part of any investigation, enforcement nor has it received any representation from the PCA in relation to any unfair business practices. We further confirm that all necessary steps have been taken to ensure compliance with any Advice or Guidance issued by the PCA.
This report was approved by the board on 3 December 2024 and signed on its behalf.
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PSSF Brady Holdco (UK) Limited
Directors' report
For the Period Ended 26 May 2024
The Directors present their report and the financial statements for the period ended 26 May 2024.
The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments 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 Group 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 the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the period, after taxation, amounted to £6,218,000 (2023 - loss 2,521,000).
No dividends were paid in the period.
The directors who served during the period were:
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PSSF Brady Holdco (UK) Limited
Directors' report (continued)
For the Period Ended 26 May 2024
Streamlined Energy and Carbon Reporting" (SECR) report
This report details Admiral Tavern's Greenhouse Gas (GHG) emissions and energy use for the financial year 2024. Methodology: Admiral Taverns has collated data relating to its scope one, two and three emissions and energy use for activities over which it has financial control. All of Admiral Tavern's Emissions and Energy Use relates to UK activities, there are no overseas activities. The table below summarises emissions and energy use in recent years: Calculations have been made in line with HM Government Environmental Reporting Guidelines and the GHG Protocol methodology.
Observations:
The largest single element is gas consumption in managed houses which will predominantly be used for heating and hot water in these premises, in addition to some cooking. Total gas consumption has reduced significantly in recent years which shows improved energy efficiency within the estate. However this can also, in part, be attributed to the change in methodology in the last two reporting periods (actual consumption data now being available for most of the reporting period for the majority of sites, replacing the methodology of deriving consumption from utility spend data and calculated sample unit rates - the changes in energy prices during FY22 may have resulted in inaccuracies in reported consumption, moving forwards these inaccuracies will be largely eliminated as actual consumption data continues to be collected for most sites). Total emissions have reduced by 3.8% when compared to FY23, this is largely due to the decrease in gas consumption described above. Despite the overall reduction in emissions, electricity consumption increased slightly which may reflect fuel-switching from gas to electric of things like heating equipment, in addition to emissions from business mileage also increasing slightly in the last year. When comparing the intensity ratio, this is much lower than in FY23 (9.9% reduction) which demonstrates a more efficient use of energy. Scope 3 emissions associated with water supply and treatment were voluntarily included in FY22, however this data was unavailable for FY23 and as such FY22 emissions are re-stated within this report to allow like-for-like comparison.
In recent years, Admiral Taverns has invested in improving energy efficiency and sustainability including conducting energy surveys in some properties and the ongoing development of a sustainability plan. The first steps of this have already been taken, including a £1m investment across their estate into energy saving technology relating to cellar cooling and refrigeration management.
To help deliver this sustainability plan, Admiral Taverns has engaged with Hospitality Energy Saving Ltd and is currently working to establish short, medium, and long-term strategies to reduce energy consumption and carbon emissions throughout the business. The latest phase of this work involved energy surveys and auditing to comply with the ESOS regulations, with an action plan being prepared to realise potential energy savings.
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PSSF Brady Holdco (UK) Limited
Directors' report (continued)
For the Period Ended 26 May 2024
Early positive results of this engagement can already be seen and are illustrated in the significant reduction shown in the intensity ratio metric stated above.
The Company’s going concern assessment as been considered as part of the Group assessment as it acts as a holding company and is therefore dependent on the going concern of the Group. In assessing Going Concern the Directors have considered the limiting factors that may prevent them from supporting a going concern assumption for the Group. These are:
∙Insufficient cash resources to pay creditors as and when they become due; and
∙An inability to meet certain financial covenants (the Leverage Test) in the Group’s amended loan facilities agreement with ICG, which could lead to an event of default which would trigger a demand for repayment of the loan facilities.
Cash Resources As of 22nd November 2024, the Group had £20.8m of free cash and undrawn, committed credit facilities of £12.0m. The pub estates continue to trade well meeting management’s expectations and generating cash. Pub disposals remain on track and Management have yet to see any impact on pub values as a result of the UK’s Financial Crisis. The Group has hedged its own utility costs and over half its interest rate exposure under its debt facilities. The robust cash position is also supported by the large freehold asset base. Leverage Test The Leverage Test (a quarterly covenant test of the ratio of net debt to EBITDA over the preceding 12 month period) was reset in August 2021 as part of the extension of the existing facilities to fund the Hawthorn Acquisition. This included raised levels of covenant headroom and the addition of certain Pandemic Protection clauses, suspending the leverage test in the event of further large scale, Government mandated closures of pubs and replacing it with a minimum liquidly requirement or maintaining at least £5m of liquid cash resources during the impacted period. The Group's forecasts show the Leverage Test is met. Conclusion The Directors have concluded that sufficient resources exist for the Group to meet its liabilities as they fall due for the twelve months from the date of approval of the accounts. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
On 25 June 2024 the Group purchased 37 pubs from Fuller Smith and Turner Plc for £18.3m. This was funded by a £13m extension of the Group's loan facility with the balance from the Group's cash reserves.
A further 18 sites were acquired from Martsons Plc on 26th September 2024 for £11.0m. This was funded from the Group’s cash reserves.
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PSSF Brady Holdco (UK) Limited
Directors' report (continued)
For the Period Ended 26 May 2024
The auditors, BDO LLP, will be proposed for reappointment in accordance with section 489 of the Companies Act 2006.
This report was approved by the board on
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PSSF Brady Holdco (UK) Limited
Independent auditors' report to the members of PSSF Brady Holdco (UK) Limited
We have audited the financial statements of PSSF Brady Holdco (UK) Limited (“the Parent Company”) and its subsidiaries (“the Group”) for the period ended 26 May 2024 which comprise Consolidated profit and loss account, Consolidated statement of comprehensive income, Consolidated balance sheet, Company balance sheet, Consolidated statement of changes in equity, Company statement of changes in equity, Consolidated statement of cash flows, Consolidated analysis of net debt and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report.
Independence We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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PSSF Brady Holdco (UK) Limited
Independent auditors' report to the members of PSSF Brady Holdco (UK) Limited (continued)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group strategic report and the Directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
∙the Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.
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PSSF Brady Holdco (UK) Limited
Independent auditors' report to the members of PSSF Brady Holdco (UK) Limited (continued)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, 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: Non-compliance with laws and regulations Based on:
∙Our understanding of the Group and the industry in which it operates;
∙Discussion with management and those charged with governance; and
∙Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations.
We considered the significant laws and regulations to be the applicable accounting framework, UK tax legislation.
Our procedures in respect of the above included:
∙Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
∙Review of correspondence with tax authorities for any instances of non-compliance with laws and regulations;
∙Review of financial statement disclosures and agreeing to supporting documentation; and
∙Discussions with the Group's tax advisors.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
∙Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
∙Obtaining an understanding of the Group’s policies and procedures relating to:
∙Detecting and responding to the risks of fraud; and
∙Internal controls established to mitigate risks related to fraud.
∙Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
∙Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
∙Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
∙Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.
Based on our risk assessment, we considered the areas most susceptible to fraud to be in relation to management override of controls and manual journal postings to revenue.
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PSSF Brady Holdco (UK) Limited
Independent auditors' report to the members of PSSF Brady Holdco (UK) Limited (continued)
Our procedures in respect of the above included:
∙Testing journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation;
∙Testing journal entries posted to revenue for any unusual journals or unusual user postings; and
∙Assessing significant estimates made by management for bias by challenging the assumptions and judgements made by management in their significant accounting estimates and judgements including, valuation of the pub estate, measurement of provisions and going concern
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that 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, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed 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 are to become aware of it.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
55 Baker Street
W1U 7EU
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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PSSF Brady Holdco (UK) Limited
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PSSF Brady Holdco (UK) Limited
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PSSF Brady Holdco (UK) Limited
Registered number: 10934427
Consolidated balance sheet
As at 26 May 2024
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PSSF Brady Holdco (UK) Limited
Registered number: 10934427
Consolidated balance sheet (continued)
As at 26 May 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 3 December 2024.
The notes on pages 26 to 47 form part of these financial statements.
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PSSF Brady Holdco (UK) Limited
Registered number: 10934427
Company balance sheet
As at 26 May 2024
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The profit of the Company for the year was £6,981,000 (2023 - £6,024,000).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 26 to 47 form part of these financial statements.
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PSSF Brady Holdco (UK) Limited
Consolidated statement of changes in equity
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Company statement of changes in equity
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Consolidated statement of cash flows
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Consolidated statement of cash flows (continued)
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Consolidated Analysis of Net Debt
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
PSSF Brady Holdco (UK) Limited is a private company, limited by share capital, incorporated in England and Wales. The Registered Office is One St. Peters Square, Manchester, M2 3DE.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Profit and loss account in these financial statements.
The Group has elected to present its Profit and loss account in a manner which enables underlying activity to be separately identified. In order to derive underlying activity, the Group has separately categorised within the profit and loss account property related items arising as a result of the annual valuation of the core estate, the realisation or movement in value of the disposal estate or the release of negative goodwill associated with the realisation of licensed assets and exceptional items.
Exceptional items, which are classified by virtue of their size or nature as needing to be separately identified to show a full understanding of the underlying performance of the Group, are explained further in note 11.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated profit and loss account from the date on which control is obtained. They are deconsolidated from the date control ceases.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
2.Accounting policies (continued)
The Company’s going concern assessment as been considered as part of the Group assessment as it acts as a holding company and is therefore dependent on the going concern of the Group. In assessing Going Concern the Directors have considered the limiting factors that may prevent them from supporting a going concern assumption for the Group. These are:
∙Insufficient cash resources to pay creditors as and when they become due; and
∙An inability to meet certain financial covenants (the Leverage Test) in the Group’s amended loan facilities agreement with ICG, which could lead to an event of default which would trigger a demand for repayment of the loan facilities.
Cash Resources As of 22nd November 2024, the Group had £20.8m of free cash and undrawn, committed credit facilities of £12.0m. The pub estates continue to trade well meeting management’s expectations and generating cash. Pub disposals remain on track and Management have yet to see any impact on pub values as a result of the UK’s Financial Crisis. The Group has hedged its own utility costs and over half its interest rate exposure under its debt facilities. The robust cash position is also supported by the large freehold asset base. Leverage Test The Leverage Test (a quarterly covenant test of the ratio of net debt to EBITDA over the preceding 12 month period) was reset in August 2021 as part of the extension of the existing facilities to fund the Hawthorn Acquisition. This included raised levels of covenant headroom and the addition of certain Pandemic Protection clauses, suspending the leverage test in the event of further large scale, Government mandated closures of pubs and replacing it with a minimum liquidly requirement or maintaining at least £5m of liquid cash resources during the impacted period. The Group's forecasts show the Leverage Test is met. Conclusion The Directors have concluded that sufficient resources exist for the Group to meet its liabilities as they fall due for the twelve months from the date of approval of the accounts. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Consolidated profit and loss account in the same period as the related expenditure.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
2.Accounting policies (continued)
Operating profit is stated after all expenses except for profit or loss on disposal of property, plant and equipment which is considered to be outside the operating cycle of the business.
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of the Group's share of its identifiable assets and liabilities of the acquiree at the date of acquisition.
Positive goodwill is amortised to the profit and loss account over its estimated economic life, which is
deemed to be 20 years. The negative goodwill is recognised in the profit and loss account as the non-monetary pub estate assets are realised through sale.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
2.Accounting policies (continued)
All fixed assets are initially recorded at cost or fair value if acquired through a business combination. Thereafter, property fixed assets are recorded at valuation, all other assets are recorded at depreciated cost. All assets are subject to depreciation and, in the event that indications of impairment exist, impairment review.
Property assets are revalued annually by the directors. Valuation movements arising as a result of the annual revaluation above depreciated historic cost are reflected through the Other Comprehensive Income, whereas valuation movements below depreciated historic cost are reflected through the Profit and Loss Account in arriving at operating profit. The carrying value of properties held under lease agreements is derived after taking into account the cost of the head lease. In the event that the cost of the head lease exceeds the gross value of the leased asset, the corresponding net credit balance is recorded within provisions. Expenditure on additions and improvements to the licensed estate is capitalised at cost as the expenditure is incurred. Such expenditure is then subject to depreciation over an expected average useful life of 7 years. Short leasehold properties, being properties with 50 years or less of the lease remaining unexpired, are depreciated on a straight line basis over the unexpired term of the lease. Freehold land is not depreciated. Freehold buildings are only depreciated in the event that residual value at the end of their useful economic life is assessed as being materially below book value.
Fixtures, fittings and equipment which are to be retained by the Group are depreciated on a straight line basis over 3 years. Fixtures, fitting and equipment which the Group aims to sell to licensee are depreciated on a straight line basis over 4 years.
The carrying values of tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. Where a property is earmarked for disposal at the balance sheet date, and the carrying value exceeds the anticipated net proceeds on disposal, a provision for the anticipated loss on disposal is recorded.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the profit and loss account.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
2.Accounting policies (continued)
The Group has made Dilapidations provision in anticipation of the cost of future repairs and renovations that will need to be made in line with the lease obligations.
The Group uses interest rate cap to adjust interest rate exposures. The cap is initially recognised at fair value on the date a derivative contract is entered into and is subsequently revalued to fair value and shown on the balance sheet at the year end with movements in fair value reflected through the profit and loss account.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
Taxation The Group establishes provisions based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further details are contained in note 21. Fixed assets The valuation was prepared using the open market value on an existing use basis. Pubs on the market or with a deal progressing are valued at the appropriate sales price. Most other pubs are valued on an income multiple basis. Income multiples take into account the geographical location of the pub and the tenure. Further details are contained in note 12.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
10.Taxation (continued)
The standard rate of Corporation Tax in the UK has not changed since 1 April 2017 and is currently 25% (2023 - 25%). Accordingly, the company’s profits for this accounting period are taxed at an effective rate of 25% (2023 - 20%). The increase of the main rate of corporation tax from 19% to 25% from 1 April 2023 was announced in the Finance Bill 2021, which was substantively enacted on 24 May 2021.
Any future profits will be taxed at the appropriate rate. Deferred tax as at 26 May 2024 has been calculated at 25%; being the substantively enacted rate at which the deferred tax is expected to reverse.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
* Indirectly held investment
1. The entities are unlisted, 100% holdings and incorporated in the United Kingdom with registered addresses of Milton Gate, 60 Chiswell Street, London, EC1Y 4AG. 2. The entities are unlisted, 100% holdings and incorporated in the United Kingdom with registered addresses of One St Peter's Square, Manchester, M2 3DE. 3. The above entities are unlisted, 100% holdings and incorporated in the Guernsey with registered addresses of De Catapan House, Grange Road, St Peter Port, Guernsey, GY1 2QG. 4. The Group has 100% holding of Units of the Trust and it has a registered address of IFC 5, St Helier, Jersey, JE1 1ST. 5. The above entities are unlisted, 100% holdings and incorporated in the Guernsey with registered addresses of PO Box 142, Suite 2, Block C, Hirzel Court, Guernsey, GY1 3HT.
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
The Group operates a defined contribution pension scheme in respect of the employees of the Group. The scheme and its assets are held by independent managers. The pension charge for the period to 26 May 2024 represents contributions due from the Group and amounted to £705,000 (2023 - £410,000).
There were contributions outstanding at the period end of £96,000 (2023 - £88,000).
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PSSF Brady Holdco (UK) Limited
Notes to the financial statements
For the Period Ended 26 May 2024
A further 18 sites were acquired from Martsons Plc on 26th September 2024 for £11.0m. This was funded from the Group’s cash reserves.
The company’s ultimate parent undertaking and controlling party is PSSF Brady (Cayman) Limited, an entity incorporated in the Cayman Islands.
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