The directors present the strategic report for the year ended 31 December 2023.
Turnover for the Group was £35,313k compared to £49,323k in 2022, a decrease of 28% due to a combination of a moderate retraction in the home fragrance market following two years of substantial growth and some prior overstocking in some of the group’s biggest customers. The market retraction also resulted in some further revenue reductions in our glass decoration business. This led to a loss before tax of £4,562k compared to a Profit before Tax of £79k in 2022. There was optimism in the industry until mid-year, leaving us unable to reduce our costs as quickly as our revenue declined in the year.
The focus of 2023 was on stabilising the Group through recovery of Gross Profit and reducing costs. Gross Profit improved by 3.0ppts vs. 2022 and our true Administrative Expenses decreased by £288k in the year if we exclude the £1,517k impairment of Goodwill from earlier transactions. More importantly, the reduction in Administrative Expenses actioned in 2023 equate to £1,333k on an annual basis.
The group managed to reduce average staffing numbers from 529 in 2022 down to 394 in 2023 which is a reflection of the above activity and realising the benefits of significant investment in manufacturing automation.
The principal business risk is associated with declining sales in both Home Fragrance and Glass Decoration and the need to manage fixed costs in line with revenue. The Group shifted focus to winning new business in 2023, and the benefits of this will be felt in 2024 onwards due to the long conversion timeline in the industry. We invest heavily in our people, our R&D development and in our operational infrastructure to ensure we continue to provide the best service to our customers.
The Directors constantly consider any potential issues which may impact upon the business and take appropriate action to deal with them.
The consolidated statement of financial position is £2,717k at December 2023, compared to £6,520k at December 2022. Significant action was taken to reduce our stock from £8,270k in 2022 to £5,474k through new inventory-management procedures. In addition to this, we managed to reduce our debtors from £10,889k to £5,754k with new collection processes.
The group's key financial and other performance indicators during the year were as follows:
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| 2023 | 2022 |
Sales (decline) / growth | % | (28) | 37 |
Gross margins | % | 34 | 31 |
The above KPIs reflect the reduction in revenue but also the action taken in the year to improve Gross Profit.
2023 was a challenging period for the Group with a significant decline in revenues compared to 2022. The decline in revenues lead to a reduction in profitability and also triggered the impairment of the Goodwill in two earlier acquisitions. The Board responded with a stabilisation plan to improve Gross Profit and reduce our Administrative Expenses, with some of this benefit being realised in 2023.
We see 2024 continuing to stabilise, with a further slight decline in revenue being offset by the full year annualization of cost savings and further improvements on Gross Profit through ongoing efficiency projects. Despite the challenging year, we have maintained strong customer and supplier relationships and believe these provide a solid foundation for us to return to growth in the coming years. The board anticipates a significantly improved financial performance and a return to profitable growth in 2025 as the lower cost base and improved Gross Profit % are carried through into a recovery on revenue following the award of significant new business.
The group is successfully formalising agreements with our existing customers to secure continued collaborative relationships while also looking to diversify the risk by adding new opportunities and markets across all the group companies. The group continues to monitor potential acquisition opportunities that would match our core functions and growth strategies. The board believes that the group is in a very strong position to take advantage of the opportunities available and looks forward to the forthcoming year and beyond with cautious optimism.
Under section 172 of the Companies Act 2006, the Directors have a duty to act in good faith in a way that is most likely to promote the success of the company for the benefit of its members as a whole, having regard to the likely consequences of decisions for the long term, the interests of the company's employees, the need to foster relationships with other stakeholders, the impact on the community and the environment and maintaining a reputation for high standards of business conduct. Key decisions made by the board during the year were considered with the aforesaid duty to act in good faith.
All business decisions are taken with due regard to the primary stakeholders who impact the performance of the business including: Our Employees; Our Customers; Our Suppliers; and Our Shareholders.
We constantly monitor current market conditions and explore opportunities to increase shareholder value. Our dependence on one large customer is a recognised risk for the company. The company manages this risk by formalising the ties between us and out main customers while also seeking out new customers and markets to diversify the risk. We continue to invest in our R&D function to provide products that new and existing customers want at competitive prices and by maintaining strong relationships with customers.
We continue to invest internally in our people and methods to ensure we can maximise our opportunities and satisfy our customer expectations. We have invested in progressive programmes of training, communication and consultation as well as in our employees wellbeing. We aim to provide equal opportunities to all current and prospective employees in a diverse and inclusive environment. Supplier relationships are important across all areas of the business. The company has developed key and positive long-term relationships that have ensured a stable and sustainable supply chain.
We aim to continue to develop our people, systems and product portfolio to promote the success of the company for the benefit of its members as a whole, having regard to the likely consequences of decisions for the long term, the interests of the company's employees, the need to foster relationships with other stakeholders, the impact on the community and the environment (as detailed in the "Carbon Reporting" section) and holding ourselves to high standards of business conduct.
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 10.
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:
The group has an established, structured approach to risk management. The group's activities expose it to a variety of financial risks, including the effects of credit, liquidity and cash flow, and interest rate risks. The group has adopted risk management policies that seek to mitigate these risks in a cost effective manner. Financial assets that expose the group to financial risk consist primarily of trade debtors and cash. Financial liabilities that expose the group to financial risk consist principally of trade creditors and loans.
Credit risk is the risk of loss in the value of financial assets due to counterparties failing to meet all or part of their obligations. The credit management policy of the group ensures that the appropriate credit checks are made on customers prior to any sales being made. Credit accounts for individual customers are assigned on a case by case basis after reviewing the financial stability of the customer.
Liquidity risk is the risk that the group does not have sufficient liquid assets to meet its obligations as they fall due. Liquidity is maintained at a prudent level and the group ensures there is an adequate liquidity buffer to cover contingencies. The group maintains sufficient cash and open committed credit lines from its bankers to meet its funding requirements.
The group has interest bearing liabilities. Interest rate risk re unfavourable movements in interest rates are not perceived as being material to the accounts due to the arrangements in place.
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
See disclosures within the Strategic Report regarding future developments of the group.
Going concern
The financial statements have been prepared on a going concern basis.
The group meets its day to day working capital requirements through cash generated from operations and external borrowings.
The group was in breach of the financial covenants agreed with its bankers as at 31 December 2023 and thereafter. The bank has acknowledged the breaches but have not waived the breaches and have reserved any right or remedy that they have now, or in the future, in connection with, or arising from, a covenant breach.
The directors are in regular communication with the group’s bankers and following a review of forecasts the bank has agreed additional finance to the group through to June 2025. Following on from the discussions with the bank, the directors have at present no reason to believe the bank would take any action to demand immediate repayment of any of the loans within 12 months of the approval of these financial statements nor withdraw their support of future funding.
In the assessment of going concern the directors have made the assumption that the bank will continue to be supportive, not recall the debt in advance of the original repayment terms and provide finance to the group should there be a need.
The directors have prepared cash flow forecasts which cover at least 12 months from the date of approval of these financial statements. The forecasts indicate that the group should have sufficient funds, through its operating cash flows and existing cash balances, to meet its liabilities as they fall due for that period, subject to the ongoing support of the bank.
The directors are confident in the ability of the group on the basis that it has improved its operational performance through securing new contracts and has made significant cost savings, secured additional short term bank finance and has obtained the support of its majority shareholder to provide short term working capital should this be necessary for a minimum period of 12 months from the date of approval of the financial statements.
Although the forecast prepared support the ability of the group to remain a going concern and to be able to trade and meet its debts as they fall due, the underlying cash flow timing assumptions used in forecasting are highly judgemental and difficult to predict and could be subject to significant variation.
Based on the factors set out above the directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, as the group have not had a formal waiver of the loan covenant breaches and are forecasting to rely on bank and shareholder support, this represents a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern and therefore to continue realising its assets and discharging its liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.
During the year ended 31 December 2023, THF Group Ltd has gathered data regarding scope one, two, and three carbon emissions (as defined by the GHG Protocol) from its UK Operations as defined by the requirement of the Streamlined Energy and Carbon Reporting (SECR) legislation
During the year ended 31 December 2023, THF Holdings Group Ltd has continued to gather data regarding scope one, two, and three carbon emissions (as defined by the GHG Protocol) from its UK Operations as defined by the requirement of the Streamlined Energy and Carbon Reporting (SECR) legislation.
Energy (kWh) | 2023 | 2022 |
Scope 1 (emissions from gas and fuel for fleet vehicles) | 359,828 | 450,286 |
Scope 2 (emissions from electricity and gas) | 530,945 | 882,110 |
Scope 3 (emissions from business travel in employee cars) | 30,750 | 62,117 |
Total energy | 921,523 | 1,394,513 |
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Emissions (tCO2e) |
|
|
Scope 1 (emissions from gas and fuel for fleet vehicles) | 82 | 107 |
Scope 2 (emissions from electricity and gas) | 111 | 198 |
Scope 3 (emissions from business travel in employee cars) | 9 | 14 |
Total SECR emissions | 202 | 319 |
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Specific Carbon Consumption |
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SCC (tCO2e / £000 revenue) | 0.006 | 0.007 |
The combined Scope 1, Scope 2 and Scope 3 carbon emissions for the period recorded was 202 tCO2e (319 tCO2e - 2022). The energy consumed in the period is 921,523 kWh (1,394,513 kWh - 2022). The Specific Carbon Consumption (SSC) for the period is calculated a 0.006 tCO2e/£000 revenue (2022 – 0.007)
During the period of reporting a number of practical actions to reduce energy consumption have been undertaken across all our sites. The main element being the installation of a 250-kw Solar Pannel array on our site at Fernhurst. This provides all the electricity for that site on some days and allows for feed in to the grid when not required. We have also switched the production boilers to electric from gas to take advantage of this.
We have audited the financial statements of THF Holdings Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, 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
Material uncertainty relating to going concern
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and 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.
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 £2,116,699 (2022 - £473,862 profit).
THF Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 1 McMillan Close, Saltwell Business Park, Low Fell, Gateshead, Tyne & Wear, United Kingdom, NE9 5BF.
The group consists of THF Holdings Ltd and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company THF Holdings Ltd 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group statement of financial position at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The financial statements have been prepared on a going concern basis.
The group meets its day to day working capital requirements through cash generated from operations and external borrowings.
The group was in breach of the financial covenants agreed with its bankers as at 31 December 2023 and thereafter. The bank has acknowledged the breaches but have not waived the breaches and have reserved any right or remedy that they have now, or in the future, in connection with, or arising from, a covenant breach.
The directors are in regular communication with the group’s bankers and following a review of forecasts the bank has agreed additional finance to the group through to June 2025. Following on from the discussions with the bank, the directors have at present no reason to believe the bank would take any action to demand immediate repayment of any of the loans within 12 months of the approval of these financial statements nor withdraw their support of future funding.
In the assessment of going concern the directors have made the assumption that the bank will continue to be supportive, not recall the debt in advance of the original repayment terms and provide finance to the group should there be a need.
The directors have prepared cash flow forecasts which cover at least 12 months from the date of approval of these financial statements. The forecasts indicate that the group should have sufficient funds, through its operating cash flows and existing cash balances, to meet its liabilities as they fall due for that period, subject to the ongoing support of the bank.
The directors are confident in the ability of the group on the basis that it has improved its operational performance through securing new contracts and has made significant cost savings, secured additional short term bank finance and has obtained the support of its majority shareholder to provide short term working capital should this be necessary for a minimum period of 12 months from the date of approval of the financial statements.
Although the forecast prepared support the ability of the group to remain a going concern and to be able to trade and meet its debts as they fall due, the underlying cash flow timing assumptions used in forecasting are highly judgemental and difficult to predict and could be subject to significant variation.
Based on the factors set out above the directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, as the group have not had a formal waiver of the loan covenant breaches and are forecasting to rely on bank and shareholder support, this represents a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern and therefore to continue realising its assets and discharging its liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.
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.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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 income statement.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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 statement of financial position 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.
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 income statement 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 income statement, 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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.
No key assumptions and other sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year have been identified.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2022 - 4).
The actual 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:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement.
More information on impairment movements in the year is given in note 11.
The carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 December 2023 are as follows:
For the year ending 31 December 2023 the following subsidiaries were entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies:
Function Fitness South East Limited (company registered number 13257817)
THF Homes Limited (company registered number 13137765)
THF Digital Limited (company registered number 13553184)
THF Glassware Limited (company registered number 13439289)
For the year ending 31 December 2023 the following subsidiaries were entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies:
Oakleaf Candles Limited (company registered number 04597481)
Contract Candles Limited (company registered number 03077491)
Coloured Bottles Limited (company registered number 11365981)
Company The HSBC coronavirus business interruption loan is denominated in sterling with a nominal interest rate of 3.99% over the Bank of England base rate, and the final instalment is due on 1 December 2026. The carrying amount at year end is £773,333 (2022 - £1,093,333). |
The HSBC flexible business loan is denominated in sterling with a nominal interest rate of 2% over the Bank of England base rate, and the final instalment is due on 7 February 2029. The carrying amount at year end is £1,357,878 (2022 - £1,570,834). |
HSBC Business loan is denominated in sterling with a nominal interest rate of 4% over the Bank of England base rate, and the final instalment is due on 31 May 2026. The carrying amount at year end is £532,517 (2022 - £698,159). Due to a breach of bank covenants within THF Holdings Ltd, long term loan balances totalling £1,901,257 have been reclassified as due within one year in the financial statements. HSBC have confirmed that no action is to be taken in respect of the breaches at this point, but they have not provided any formal waiver of the breaches. Group |
HSBC Bounceback loan is denominated in sterling with a nominal interest rate of 2.5%, and the final instalment is due on 14 February 2027. The carrying amount at year end is £31,565 (2022 - £41,292). HSBC Mortgage is denominated in Sterling with a nominal interest rate of 4.9%, and the final instalment is due on 31 December 2042. The carrying amount at year end is £229,465 (2022 - £224,965). |
HSBC Bounceback is denominated in Sterling with a nominal interest rate of 2.5%, and the final instalment is due on 31 January 2024. The carrying amount at year end is £31,566 (2022 - £41,293). |
HSBC term loan is denominated in Sterling with a nominal interest rate of 2.4%, and the final instalment is due on 31 May 2025. The carrying amount at year end is £53,306 (2022 - £85,811). |
HSBC Import Facility loan is denominated in Sterling with a nominal interest rate of 10.45%. The carrying amount at year end is £2,365,635 (2022 - £Nil). Security The loans are secured by a debenture including a fixed charge over all present freehold and leasehold property; first fixed charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and first floating charge over all assets and undertaking both present and future dated 21 January 2015. The invoice financing creditor totalling £4,420,681 (2022 - £8,923,963) is secured by a debenture including a fixed charge over all property, a first fixed charge and a first floating charge over all assets dated 13/07/2005. |
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
This reserve records the amount above the nominal value received for shares sold by way of a share-for-share exchange as part of a group re-organisation to make the company the parent of the THF Holdings Ltd group.
This reserve records the value of asset revaluations and fair value movement on assets recognised in other comprehensive income.
This reserve records retained earnings and accumulated losses.
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: