Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2024
The directors present their strategic report for the year ended 31st August 2024.
The directors are pleased to report that 2024 has been another profitable year, despite the difficult trading conditions. The challenges in 2024 included ongoing geo-political instability, changes in government in the UK, global elections and pressures in the labour market. Despite these challenges, the directors believe that there will be more opportunity for their highly skilled services, not least given the increase in defence sector spending in the UK, Europe and beyond.
Turnover declined by 4.5% compared to the previous year. Gross profit margins have also decreased from 41.4% compared to 39.3% in the current year. EBITDA has increased from 22.1% in the previous year to 23.0% in the current year. In the light of the challenges faced by the company, the directors have taken a number of measures to monitor and mitigate the ongoing risks presented by rising factory costs and material supply chain disruption. In order to mitigate these risks, cost mitigation measures have been introduced, which include a reduction in overheads and third-party expenditure where practicable. In addition, investment in staff training and production efficiencies have been implemented which have resulted in a positive impact in gross profit margins achieved in the current year. Given the nature of the company activities and the proven resilience of the business, the directors believe that these short-term challenges can be managed. The company has a strong balance sheet together with significant cash reserves to ensure that the business continues to operate for the longer term. The directors continue to work closely with suppliers to ensure ongoing costs are managed and the company has continuous supply in order to meet delivery timetables despite ongoing geo-political challenges that have contributed to supply chain disruption. The company liquidity ratio has decreased from 5.7 in 2023 to 3.2 at the end of 2024. The decrease in liquidity in the year follows the restructuring of the group as part of the Bennett family succession planning, seeing the ownership of the company pass down a generation. The directors remain committed to an ongoing programme of capital expenditure to ensure that Propak remains at the forefront of production technology. During the year, machinery and equipment was reviewed and adapted to aid improving efficiencies of the business, as well as aid in the penetration of new markets. In addition, the directors have invested in their state-of-the-art premises based in Hertfordshire to ensure that the company remains an attractive and fulfilling working environment for their highly skilled workforce. This overall review has meant that Propak continues to be the destination of choice for their customer base and facilitates winning new business. The company is also committed to Quality Assurance and has an active Lean Six Sigma policy. In addition, the company is accredited with AS 9100 and Bronze standard in Supply Chain 21 (SC21), being one of the first sheet metal companies in the UK to achieve this recognition since the inception of the SC21 process. The company are also Rolls Royce and BAE approved. This adds breadth to the customer offer and opens up potential new sources of income, including the aerospace industry. The company continues to invest on enhancements to mitigate cyber security risks. The investments included maintaining their Cyber Essentials Plus status and DART Process (MOD) together with continuous upgrade of computer servers, firewalls and anti-virus software whilst maintaining the standalone firewalls on machinery. These enhanced security measures have been continually maintained throughout the current year in order to comply with International Aerospace Supply Chain requirements, which has been developed in conjunction with BAE Systems, Northrop Grumman and Rolls Royce. In addition to the above accreditations, the company holds BAE and MBDA approval for plating and painting processes undertaken at the company's state of the art facilities. The company is also JOSCAR approved in connection with government procurement requirements.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2024
Business risks
The company operates in the market of precision sheet metal solutions, in which there are risks of competition from within the UK and of overseas supply. The company mitigates these risks and differentiates itself by focusing on innovative design, technical expertise, customer service and continual investment in state of the art facilities along with the directors belief that the staff of all ages and skills are exemplary. Financial risks The company's principal financial instruments comprise bank balances, other debtors and other creditors. The main purpose of these instruments is to finance the company's operations. The nature of the financial instruments used by the company is such that their market value does not fluctuate as a result of changes in market prices. The company's approach to managing other risks applicable to the financial instruments concerned is included within the directors' report. The company also faces wage pressure given the highly skilled workforce combined with inflationary pressures in the UK economy. The directors regularly review salary levels to ensure that they remain competitive to attract and retain talent. In addition, rising costs are reviewed in conjunction with investments in technology to drive efficiencies and an overall review of the pricing structure for the company’s services. The company also has a robust cash management strategy to ensure that any such risks arising can be managed from existing reserves. Future Developments So far, the new financial year continues to bring significant uncertainty given the ongoing geo-political instability, global inflation and the impact of higher costs as a result of the new UK government’s approach to employment related taxes. This global economic turbulence does not look to be ending in the short term. Looking at macro-economic trends, this has already seen volatility in foreign currency rates and pressures on global interest rates. Given the underlying UK inflationary pressures, it seems likely that interest rates may remain higher for longer and wage pressures not disappearing in the short term. This trend is also expected to lead to challenges to liquidity in the coming months as suppliers and customers will face their own cash flow issues. There are a number of elections in Europe scheduled for 2025 and the new government administration in the USA has been suggesting trade tariffs and sanctions levied on its global supply partners. This uncertainty combined with the low consumer confidence in the UK following the elections in 2024 points to continued slow economic growth in the short term. The UK government has pledged commitment to large infrastructure projects and defence spending is likely to also increase. These defence spending increases are also likely to be seen in North America and Europe which brings opportunity to Propak given the skillset and customer base. Inflation continues to be a key risk following supply chain disruption caused geo-political events and supply chain liquidity issues. The business faces material price volatility together with ongoing pressures on labour costs. Labour costs are also being driven upwards following short supply in the market as well as ongoing cost of living pressure fuelled by inflation and sustained higher interest rates. The directors assert that they have a strong balance sheet that is robust enough to withstand volatility. The company has substantial cash balances, net assets and is historically profitable. In addition, the directors also feel the ongoing risk mitigation strategies will be adequate in dealing with any new risks that may manifest in the coming years. The company has also continued to enhance procurement strategies in order to manage short term material price volatility and the risk of stock outs. The directors are committed to further investments in the business in the coming year and plan to invest in new plant and machinery. The planned investments include upgrading the motor fleet together with state-of-the-art production technology as required. The directors also recognise the ongoing importance of cyber security as this remains critical element of their business. The directors plan further enhancements in Cyber security and DART processes in the next twelve months, ensuring continued data integrity and security throughout the business.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2024
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 AUGUST 2024
The directors present their report and the financial statements for the year ended 31 August 2024.
The directors are responsible for preparing the Strategic Report, the Directors' Report and the 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 Company's financial statements and then apply them consistently;
∙make judgements 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 Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to £1,821,197 (2023 - £1,989,815).
Dividends paid in the year amounted to £5,250,000 (2023 - £219,823).
The directors who served during the year were:
There have been no significant events affecting the Company since the year end.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2024
The auditors, Menzies 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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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PROPAK SHEET METAL LIMITED
We have audited the financial statements of Propak Sheet Metal Limited (the 'Company') for the year ended 31 August 2024, which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position, the Statement of Cash Flows 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 Company 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 Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PROPAK SHEET METAL LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PROPAK SHEET METAL 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 financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
•The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant including UK Companies Act, employment law, health and safety, pensions legislation and tax legislation. •We understood how the Company is complying with those legal and regulatory frameworks by making inquiries to management and those responsible for legal and compliance procedures. We assessed the extent of compliance with these legal and compliance procedures as part of our procedures on the related financial statement items. •The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognize non-compliance with laws and regulations. The assessment did not identify any issues in this area. •We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur. We identified the risk of override of controls as the area where the financial statements were most susceptible to material misstatement due to fraud. Audit procedures performed by the engagement team included: •Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud; •Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process; •Challenging assumptions and judgments made by management in its significant accounting estimates; and •Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations. The assessment did not identify any issues in these areas.
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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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PROPAK SHEET METAL 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
Chartered Accountants
Statutory Auditor
Ashcombe House
5 The Crescent
Surrey
KT22 8DY
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 AUGUST 2024
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STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 25 form part of these financial statements.
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STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2024
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ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 AUGUST 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
Propak Sheet Metal Limited is a private company limited by shares, registered in England and Wales. The company's registered number, registered office and trading address can be found on the Company Information page.
The principal activity of Propak Sheet Metal Limited is manufacture of metal products and other related works. The presentation currency of the financial statements is the Pound Sterling (£).
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 management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
2.Accounting policies (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
2.Accounting policies (continued)
The Company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
Basic financial assets
Basic financial assets, which include trade and other debtors, cash and bank balances, are initially measured at their transaction price (adjusted for transaction costs except in the initial measurement of financial assets that are subsequently measured at fair value through profit and loss) and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.
Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other debtors due with the operating cycle fall into this category of financial instruments.
Key source of estimation uncertainty - Dilapidation provision A key area of judgement is in relation to provisions for dilapidations. Management have considered the potential costs of refurbishment and its likelihood of occurring. The directors use surveyors to estimate the cost of said refurbishment and a provision is included based thereon. Key source of estimation uncertainty - Work in progress The valuation of work in progress is based on the cost of the material and labour plus attributable overheads based on the normal level of activity. The directors estimate the stage of completion of work in order to assess the valuation at the year end.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2024
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