Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2023
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CHESNEYS GROUP LIMITED
COMPANY INFORMATION
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CHESNEYS GROUP LIMITED
CONTENTS
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CHESNEYS GROUP LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their strategic report of the company and the group for the year ended 31 December 2023.
The purpose of this report is to provide an insight into the company’s performance in 2023 whilst also highlighting some of the challenges, risks, and opportunities in 2024 and beyond. Background Chesneys is internationally recognised as the leading brand in the luxury heating sector, offering its clients a uniquely diverse portfolio of beautiful products. A family run business which started in London 40 years ago that now has subsidiaries in China and USA and sells its products to international markets. Chesneys Group Ltd is a company incorporated in England and Wales with a wholly subsidiary, Chesneys Inc, in USA and a joint venture in China which produces bespoke fireplace surrounds primarily for Chesneys in the UK and USA. In July 2020, the business undertook a corporate restructuring shedding all debt and replacing it with a new shareholder, Compass Group, owning the entire company.
We provide our customers with high quality indoor and outdoor heating products in addition to Fireplace surrounds.
Our fireplace surrounds are meticulously manufactured at our factories in China along with third parties based in Europe. With over 40 year’s experience in this sector, Chesneys can offer bespoke designs in traditional materials as well as more exotic and unique marbles. Chesneys products have led the field in both design and functionality with many competitors copying our designs. The latest iteration of our stoves, launched in 2024, demonstrate this once again by becoming the most environmentally friendly stove available by beating the current regulatory standards by 7x. Our products are available online, via our own retail outlets in London and from nearly 200 third party distributors across the country catering to the web shopper and also those customers which prefer to see our products in person before purchase. Chesneys also offers a project management and installation service for those clients with multiple installations or multi-building developments. Our products are distributed from our warehouse in Nottingham. A location ideally suited to national distribution. In addition, a satellite warehouse is operated out of London to satisfy our large business within London and the home counties. Chesneys prides itself on its high-quality products and outstanding customer service which our customers have come to expect.
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CHESNEYS GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
For the 12 months ending on 31st December 2023, the consolidated group achieved net sales of £14m (2022: £15.2m), generating an EBITDA of £74k (2022: £544k). 2023 was a very challenging year for one of our largest products, wood burning stoves. Stove demand dramatically reduced compared to 2022, impacting both sales and profitability. The Stove Industry Alliance figures show that the UK market was down 36% year on year for Ecodesign stoves. Determining why customer demand has changed in any one year is difficult but it may be due to higher interest rates or a reversion from the higher demand seen in 2022. Whilst the exact reason maybe unclear, Chesneys has continued to invest in its stove range to ensure that it can offer customers the best in class experience.
Net assets were £133k, a reduction of £204k compared to the previous year and cash balances were £230k at the year end down £266k on the previous year. As with any major R&D project, we faced setbacks and challenges in overhauling our stoves which delayed the launch of our new products until January 2024. The considerable effort that has been put into the design of the new stove range has been rewarded as Chesneys now has the most efficient and environmentally friendly stove on the UK market. 2024 was a transformational year for Chesneys with more new product launches than ever in its history. Two new wood burning stove models have been launched in January with a third coming later in the year. Additionally, the new technology will be transitioned into the existing wood burning stove product range over the first half of 2024. With more new products to come in both gas, bio-ethanol and electric, 2024 will be a very exciting year. The current Enterprise Resource Management system will be upgraded along with a Customer Relationship Management system to enhance the efficiency of the business. Not only will our processes be streamlined but much better visibility of the business will allow enhanced management. Whilst there were many achievements in 2024, the business also experienced some supply chain difficulties which impacted orders and inflated production costs. In addition, product launch delays hindered performance. Both issues contributed to the loss experienced in 2024 but have now been resolved as we look forward to 2025.
The nature of our products mean that our supplier lead times can be up to 16 weeks. In times of changing demand, it can be challenging to ensure that we stock the correct quantity to fulfil demand. Therefore, the business is susceptible to both over and under stocking. The business endeavours to mitigate such risk with careful planning but cannot be avoided completely.
Whilst our products tend to be at the luxury end of the range, which provides some insulation from the vagaries of the economy, a sharp downturn in economic activity will cause lower sales and volumes. The long lead times mean that it would take a number of months to adjust production and inventory to match demand which would impact profitability. 2024 was a very exciting year seeing the launch of many new products which will lead the industry and allow Chesneys to capture market share. These products are truly cutting edge with the latest technology delivering enhanced performance whilst at the same time being the most environmentally friendly on the market. Some of these products will open up international expansion into Europe and potentially the USA. Our recent collaboration with English Heritage will produce a collection of fireplaces and baskets taking inspiration from stately homes around the UK.
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CHESNEYS GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Chesneys has always been at the forefront of innovation in its main product categories whether it be replica fireplaces, new stoves or novel outdoor living appliances. Whilst 2024 saw a slate of new product launches, our R&D department will continue our roadmap with more product launches in 2025.
Our model for new products involves in-house design and capital but, most importantly, ensures that all Intellectual Property resides with Chesneys. This approach is the most cost effective but carries the risk that the new product may not repay the capital in the design process. We are comfortable with this risk reward profile given our knowledge of the marketplace and manufacturing processes. Chesneys strong brand has been built over many years and is the combined effort of everyone who works here. We are very proud that our employees feel as passionately about the brand as we do and thank them for their continued hard work and support. Going concern The Group has generated a loss before tax for the year ended 31 December 2023 of £209k (2022: proft of £390k) and has net current liabilities at 31 December 2023 of £1,037k (2022: £768k). Although Chesneys Group Limited (the Company) generated a profit after tax of £74k (2022: £572k), 2023 was a tough year across all channels, but especially Trade which in line with the overall market experienced much lower sales of wood burning stoves, with the Group generating a loss after tax of £276k (2022: profit of £269k). Whilst 2024 has been a transformational year in many respects, it has been a challenging year for the Group resulting in a net loss for the year ended 31 December 2024, which has put a strain on cash flow. The following two factors in particular contributed to the loss, both of which have now been resolved and will each be a significant element of the company’s growth in sales and profitability in 2025. Chesneys experienced a halt to production/dispatch of fire surrounds for 4 months during 2024. This had a severely negative impact. Orders were cancelled, revenues delayed and inflated short term production costs elsewhere were incurred. Reliable manufacturing has since been set up in a new location delivering much improved margins which will enhance earnings in 2025, particularly through the UK retail channel and US subsidiary, where fire surrounds are the main product sold. 2024 Q1 should have seen the launch of new wood burning and gas stove ranges following two years of extensive and expensive R & D. The launch was delayed, which negatively impacted performance as stove sales are the mainstay of the trade arm and the old range was experiencing a decline in sales, reflecting 15 year old technology. The new range was not launched in full with display models installed at all dealerships until the start of Q4 2024 and order intake for Q4 was up 56% vs 2023 and was ahead of the UK market, which saw stove sales for the quarter decline by 16% YOY. A new gas stove range using the same designs that have proved so popular for wood stoves will launch in Q1 2025, and a similarly positive outcome is anticipated. Whilst these issues have resulted in short-term cashflow pressures, management is forecasting strong UK Trade sales for 2025 based on the sales of new wood stoves since their launch and the introduction of new gas stoves, and a healthy uplift in Retail driven by improved purchasing costs which will drive improved margins and increased sales. January 2025 saw both of these increases achieved and the Retail order intake up by 100% year on year. Management have prepared budgets and cash flow forecasts on a regular basis to monitor the performance and financial position of the business. The cash flow forecast has been stress tested by reducing forecast revenues by 5%. This analysis supports the view that sufficient cash will be generated to sustain the business for a period of at least 12 months from the date of signing these financial statements. Therefore following this assessment, the directors consider that it is appropriate to have prepared the accounts on the going concern basis.
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CHESNEYS GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
In so doing the directors recognize that this assessment is based upon the availability of future funding to sustain the business through its current cash flow challenges. The group requires financing for working capital requirements and is currently in discussions to arrange a further loan facility. Whilst discussions over the new loan facility are at an advanced stage, the new loan has not yet been finalized and approved. Management remain confident that the funding will be secured but recognize that in the unlikely event that this funding should not be secured then the quantum and timing of future cash flows will be insufficient to enable the Company and Group to meet their obligations in the normal course of business and therefore a material uncertainty exists that may cast significant doubt on the ability of the Company and Group to continue as a going concern.
This report was approved by the board and signed on its behalf.
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CHESNEYS GROUP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
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;
∙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.
No dividends will be distributed for the period ended 31 December 2023.
The directors who served during the year were:
Both the directors who are eligible offer themselves for election at the forthcoming first Annual General Meeting.
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CHESNEYS GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The Chinese based subsidiary, Yantai Euro Stone Ltd, was closed off in 2024 and all balances written off.
The auditors, HaysMac LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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CHESNEYS GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHESNEYS GROUP LIMITED
We have audited the financial statements of Chesneys Group Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the 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.
We draw attention to note 2.2 in the financial statements, which indicates that in assessing the going concern position of the Company and Group, the directors are reliant on raising further loan financing. As stated in note 2.2, these events or conditions, along with the other matters as set forth in note 2.2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s or the parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
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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CHESNEYS GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHESNEYS GROUP 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 year 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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CHESNEYS GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHESNEYS GROUP LIMITED (CONTINUED)
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CHESNEYS GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHESNEYS GROUP 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.
IIrregularities, 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:
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements for the company and trade regulations and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and tax regulation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to revenue and management bias in accounting estimates. Audit procedures performed by the engagement team included: •Inspecting correspondence with regulators and tax authorities; •Discussions with management including consideration of known or suspected instance of non-compliance with laws and regulation and fraud; •Evaluating management’s controls designed to prevent and detect irregularities; •Identifying and testing accounting journal entries, in particular those journal entries which exhibited the characteristics we had identified as possible indicators of irregularities; and •Challenging assumptions and judgements made by management in their critical accounting estimates
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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.
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CHESNEYS GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHESNEYS GROUP LIMITED (CONTINUED)
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
Statutory Auditors
10 Queen Street Place
EC4R 1AG
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CHESNEYS GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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CHESNEYS GROUP LIMITED
REGISTERED NUMBER: 12726816
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
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CHESNEYS GROUP LIMITED
REGISTERED NUMBER: 12726816
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2023
The notes on pages 20 to 41 form part of these financial statements.
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CHESNEYS GROUP LIMITED
REGISTERED NUMBER: 12726816
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 20 to 41 form part of these financial statements.
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