The directors present the strategic report for the year ended 31 December 2023.
Inspirit Paddington Topco is the parent company of a group within which Pelta Medical Papers Ltd is the main trading company and therefore asseses its performance based on the results and performance of Pelta Medical Papers Ltd which was acquired on 31 October 2021. Whilst the comparative period in these accounts covers the 14.5 month period ended 31 December 2022 the strategic report below has used Pelta Medical Papers comparative performance indicators for the period from 1 January 2022 to 31 December 2022. This is to ensure figures are comparable.
Pelta Medical Papers Ltd is a manufacturer of sterile barrier papers used for the packaging of both re-usable and single-use medical devices. Production is carried out at the specialised paper mill situated in Milnthorpe, UK, and products are sold globally to customers in 48 countries (2022: 48). Surplus capacity is used to manufacture grease resistant paper for quick service restaurants.
During 2023, the business continued the implementation of a focused business strategy towards the medical packaging market, which resulted in the Sales mix of medical versus non-medical grade paper growing by 3% to 66% of total volume.
The strategy will see Pelta Medical Papers Ltd transform into a focused partner to the medical packaging industry; with continued investment to upgrade the manufacturing facility to medical standards and to add enhanced quality capability; through development and expansion of the medical products portfolio; and achieve an industry leading position in the business’ Environmental, Social, Governance (ESG) position.
Overview
The company’s key financial and other performance indicators during the year were as follows;
| 2023 | 2022 | % Change |
Total Revenue (£’000) | 45,421 | 58,108 | -21.8% |
Trading EBITDA (£’000) | -2,598 | 1,263 | -305.7% |
Trading EBITDA margin | -5.7% | 2.2% | -7.4 points |
Sales Tonnes | 24,932 | 35,518 | -29.8% |
Production Tonnes | 24,895 | 34,196 | -27.2% |
Following on from the challenges of the European energy cost crisis, the business entered into a hedged position at the end of 2022 to protect it from volatile swings in the wholesale market through 2023. As a result, the business was unable to access favourable market rates in 2023 as prices fell. Energy costs remained a significant proportion of variable costs in 2023 and despite an overall reduction in total cost (£14,421k in prior year, down 14.5% to £12,327 in 2023), the cost per tonne increased 18.5% to £493/t (from £416/t in prior year). The difference between the price of forward bought energy versus open market prices in 2023 was £3,995k, which would have resulted in a positive Trading EBITDA of £1,632k.
A further challenge to the business was global de-stocking, which saw a dramatic fall in demand from Q2 through Q4 in all subsegments. Both sales and production tonnes saw significant reductions year on year, with revenue falling 21.8% to £45,421k from prior year (£58,108k).
Despite the market backdrop during 2023 the business made good progress with the implementation of various strategic initiatives. With the enriched medical Sales mix resulting in an overall improvement in average selling price (ASP) from prior year to partly offset the energy cost hedge; and achievement of Ecovadis Silver ESG certification.
Innovation and business development remained firmly in focus as a new high-added value product was launched to address an opportunity identified in North America, and the continued market interest in usage of high-end reinforced medical papers created a strong pipeline of projects that are now in validation phase.
During 2023 a strategic reorganisation of the Management Board team was undertaken to accelerate the business transformation and growth in the target markets.
Given the positive trading performance once adjustment is made for the hedged energy position, which is a realised position from Q2 2024 onwards; and also following a recovery in market demand, with January and February 2024 sales circa 25% up on the latter months of 2023.
Net fixed asset additions in 2023 amounted to £1,101k (2022: £1,644k). Major projects totalled £1,048k, with major investments in upgrading the mill to bring it inline with medical production requirements. Minor projects totalled £53k.
Depreciation charged in the year was £778k (2022: £860k) and capital employed (total assets less current liabilities) as at 31st December 2023 totalled £8.6m (2022: £12.4m).
Pelta Medical Papers Ltd is affected by the general economic climate, changes in exchange rates and other factors that are more specific to the company. Pelta Medical Papers Ltd endeavours to minimise risk through preventive measures. Wherever possible, risk is hedged or insured against. The following describes the factors that are significant in assessing Pelta Medical Papers Ltd’s operating risk and financial risk.
Operating risks
Description of Risks | Risk Management |
Variations in market prices and volumes for products | The customer base is subject to change. Customer agreements are made with consideration and respect of pricing, volumes, payment, stock terms and conditions. These are typically re-negotiated regularly on a three-six month basis. Major customers are incentivised through retrospective bonus agreements. |
Customer dependence and credit risk
| Customers range from being large international, listed packaging groups through to privately-owned SMEs. Typically carrying out conversion of paper into bags and wrappings. Customer agreements and relations go back many years. Credit terms vary with market and product and credit is insured and managed by the Finance Team. |
Fibre price risk
| Pulp supply agreements are negotiated and secured with suppliers through a pooled purchasing association. |
Energy price risk
| A purchasing strategy is in place to mitigate the risk of market price increases by arranging forward contracts. |
Environmental impact | Permits are obtained from The Environment Agency to regulate and minimise environmental impact. Key staff are trained in environmental issues to ensure the impact is managed. |
Seasonal variations
| Pelta Medical Paper Ltd is relatively unaffected by seasonality. Orders remain constant throughout the year, with the only impact being a 2 week shutdown of production in Summer, and reduced sales volumes prior to Christmas. |
Financial risks
Description of Risks | Risk Management |
Currency risk - transaction exposure | All currency transactions are made at spot rate. Where possible we ensure that receipts in currency are utilised to pay suppliers in the same currency. Currency exposure is restricted by trading in Euros, GBPs and US Dollars. |
The Directors of the Company must act in accordance with a set of personal duties. These duties are detailed in s172 of the UK Companies Act 2006 summarised as follows:
A director of a company must act in the way 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 fairly as between members of the company.
In particular Pelta Medical Papers Ltd's Directors ensure:
Sustainable wood supply - All purchasing of wood raw material is based on the FSC® and PEFC™ Chain of Custody standards
Responsible supply chain - covers areas such as statutory compliance, business ethics, human rights and labour law, health and safety and the environment
Engaging workplaces - Sustainable leadership capable of effectively leading, engaging, communicating and driving change
Resource-efficient production - quality and environmentally certified in accordance with ISO 9001 and ISO 14001
Responsible business - Group-wide policies, standards and processes, which contribute towards consistent development, implementation and follow-up of steering documents
In November 2024, the company acquired the share capital of a European paper mill.
Post year end, in December 2024, Pelta Medical Papers Ltd entered administration.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Pelta Medical Papers Ltd carries out research and development in existing and new products and processes. The costs of such activities are charged directly to the profit and loss account, along with the relevant 'RDEC'.
The group continues to open channels for communication and consultation with all employees and their representatives on a variety of matters. Information is widely available as to the local performance on the external internet.
It is the group’s policy to agree terms of payment with suppliers before the onset of trade with the supplier. Once agreed it is the company’s policy to abide by those terms. Where no terms exist the company will apply its default terms unless the supplier is classed as a local supplier in which case the supplier will be paid promptly.
The group and company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This Streamlined Energy and Carbon Reporting (SECR) Report encompasses information in relation to energy usage and associated carbon emissions for the period from 1 January 2023 to 31 December 2023.
The methodology is taken from HM Government’s Environmental Reporting Guidelines, March 2019. Emission factors are taken from the UK Government GHG Conversion Factors for Company Reporting 2023 factors, version 1.1. In addition to these, methodologies used to derive emissions in accordance with compliance to the UK Emissions Trading Scheme and Climate Change Agreement are utilised.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per net tonnes of paper, the recommended ratio for the sector.
During 2023, the Group has installed an advanced energy monitoring system on aspects of the power and gas distribution network. The information from this is being considered via a strategic program looking at further improving energy efficiency and considering decarbonisation strategy. In addition to this, the Group has undertaken an independent energy audit, and set a near-term science-based carbon reduction target via the Science Based Targets initiative (SBTi).
The Directors have prepared the accounts using the going concern assumption, more details of which are set out in Note 1.5 to the financial statements.
We have audited the financial statements of Inspirit Paddington Topco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Emphasis of matter
Material uncertainty related to going concern
We draw attention to note 1.5 in the financial statements, which indicates uncertainty over funding and future cash flows of the company. As stated in note 1.5, these events and conditions indicate that a level of uncertainty exists that may cast doubt on the company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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.
Extent to which the audit was considered 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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £9,025 (2022 - £0 profit).
Inspirit Paddington Topco Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 2 Babmaes Street, London, England, SW1Y 6HD.
The group consists of Inspirit Paddington Topco Limited and all of its subsidiaries.
The comparative period covers from incorporation on 15 October 2021 to 31 December 2022. Therefore, the comparative amounts are not entirely comparable.
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 modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The company has taken advantage of the exemption in FRS 102 33.1A Related Party Disclosures from the requirement to disclose transactions with group companies on the grounds that consolidated financial statements in which this company is included are prepared by the ultimate parent company and are publicly available.
The consolidated group financial statements consist of the financial statements of the parent company Inspirit Paddington Topco Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The Directors have prepared detailed cash flow forecasts to satisfy themselves that the group and the company will be able to operate for the foreseeable future and therefore it is reasonable to adopt the going concern basis of preparation in the financial statements.
In common with many businesses post-acquisition, the Group is dependent upon additional funding being obtained and the delivery of performance improvement initiatives before the end of the going concern period. Although discussions with a financing party are well advanced and there are no reasons to suggest this will not be forthcoming, financing has currently not yet been secured. Whilst discussions in relation to funding are well advanced, the short term cash flow forecasts show the group is reliant on funding and ongoing trading receipts being received on a prompt basis. The Group expects to return to a cash generative position following receipt of funding and execution of performance improvement initiatives, however, as with all performance improvement plans until it is delivered the success is uncertain. These factors detailed indicate the existence of an uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include adjustments that would result if the Group was unable to continue as a going concern.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Other income consists of supplier rebates and sales of other materials which are not related to the principal activities of the company.
Freehold land is not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in or immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in or depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in the periods during which services are rendered by employees.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
Research and development
Expenditure on research and development activities is recognised in the profit and loss account as an expense as incurred.
Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the amount required to settle the obligation at the reporting date.
In the application of the group’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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The useful life and depreciation rate of tangible fixed assets is reviewed annually and amended when necessary.
On completion of the acquisition of Pelta Medical Papers Ltd the group received a vendor loan of £1.5m. Repayments due on this loan were contingent on the trading performance of the subsidiary, the loan has therefore been classified as a non-basic financial liability held at fair value through profit and loss.
On 8 February 2023 it was agreed that the vendor loan would be settled for £1.2m. As a result of the loan being settled with a third party within close proximity of the period end it was deemed appropriate to use this as the period end fair value for the period ended 31 December 2022. The resulting gain of £260k was recognised in the profit and loss account in the period ended 31 December 2022.
As this loan has now been fully repaid there is no balance as at 31 December 2023.
Negative goodwill represents the excess of the fair value of net assets acquired over the cost of acquisition of a business. The negative goodwill has been pro rataed between the non-monetary assets acquired and recognised in the periods in which the non-monetary assets are recovered. For the stock element of negative goodwill this has been deemed to be the point of stock being sold or fully provided for. For the fixed asset element of negative goodwill this has been deemed to be in line with the depreciation on the underlying assets.
As at the year end the negative goodwill balance was £1,378,168 (2022: £1,511,675). During the financial year the amount of negative goodwill released to the profit and loss account was £133,507 (2022: 4,688,551)
Exceptional Expense
During the period ended 31 December 2023 the group underwent restructuring. The exceptional expenses in this year are for costs relating to the restructuring.
During the period ended 31 December 2022 the group acquired Pelta Medical Papers Ltd. The exceptional expense in this year relates to the costs associated with the acquisition and costs associated with rebranding and transition post acquisition.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge/(credit) for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2023 are as follows:
Financial assets
Financial assets held as at the prior year end are stated net of pulp futures totalling £96,654 with the remaining balance relating to the value held in a margin account in relation to these futures. The financial assets are valued at the latest market value for the futures as at the year end per StoneX Financial Ltd. During the year fair value gains of £118,828 (2022: £643,870) were recognised in relation to these assets. All pulp futures are due to settle within one year.
Financial liabilities
On completion of the acquisition of Pelta Medical Papers Ltd a vendor loan was received for £1.5m. Repayments due on this loan were however contingent on trading performance of the subsidiary and the loan has therefore been classified as non-basic financial liability which is therefore held at fair value through profit and loss.
On 8 February it was agreed that the vendor loan would be settled for £1.2m. As a result of this being settled with a third party for £1.2m within close proximity to the year end it was deemed appropriate to use this as the year end fair value. This resulted in a £260k gain in the profit and loss in the year ended 31 December 2022.
Other creditors totalling £5,626,618 (2022: £4,415,675) are secured by a fixed and floating charge over all assets of Pelta Medical Papers Ltd.
Bank loans are repayable in 46 equal quarterly instalments of £27,778. Interest on bank loans is charged monthly at an interest rate of 5.15% plus the Bank of England base rate.
Bank loans are secured by way of a fixed and floating charge over all assets of Pelta Medical Papers Ltd and Inspirit Paddington Bidco Limited.
Other loans totalling £1,923,649 relate to preference shares. These accrue interest at a rate of 10% per annum. These are redeemable on demand at the discretion of the group. As a result they have been classified as due in more than one year as this is the intention of the group.
The loans from group undertakings and other loans totalling £202,064 are repayable in full on 1 November 2025. Interest on these loans accrues annually at a rate of 10%.
Employer pension contributions owing at the year end were £31,544 (2022: £27,867).
Employees of the company are, where appropriate, included in the Pelta Medical Papers Ltd company Pension Scheme which is of a defined contribution type. The assets of the scheme are held in trustee administered funds.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
The remuneration of key management personnel is as follows.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
Subsequent to the year end 112 shares were issued in Inspirit Paddington Bidco which has reduced the shareholding that Inspirit Paddington Topco owns in Pelta Medical Papers Ltd to 73.26%. Furthermore, the group has taken an additional loan of £1m.
In November 2024, the company acquired the share capital of a European paper mill.
Pelta Medical Papers Ltd entered administration in December 2024.