The directors present the strategic report for the year ended 30 June 2024.
The directors report that this was a mixed performance for the Group. Whilst HS Products Ltd (the components division) had a challenging year with both a decline in sales and a reduction in operating profit. The Harrison Spinks Beds division had a strong year with strong growth in both sales and operating profit. Harrison Spinks Beds Ltd has seen increased bottom-line performance through a combination of sales growth, brand development and business efficiency initiatives. Sales overall grew 6% across all sales channel, through both our UK channels and internationally. UK sales were bolstered by successful new range launches with all our key customers, with the introduction of our Cortec™ glue free pocket spring system. Our international performance continues to improve, driven by a strategic review, leveraging the strong Harrison Spinks brand story and more tailored product ranges to meet the specific needs of our international customers. Our rest of world sales have grown by over 40% during this period.
The impact of business efficiency initiatives during this period has been significant in terms of contribution to the overall results. Through a combination of operational and quality improvements (including the new spring technology) we have seen a significant improvement on our return rates. Other initiatives which have had a positive impact are logistics management, weaving developments (with the introduction of new warping capabilities) and waste management across all aspects of our business.
We are proud of the unique position we hold in the UK and wider bed and mattress market. The Harrison Spinks brand position has been enhanced with the launch of the ‘Cut from a different cloth’ marketing campaign, which clearly differentiates us in a busy and competitive market sector. We continue to invest in our people, who at the heart of our unique business. We have increased training and enhanced colleague benefits in many areas. Additionally, we have streamlined our management team which allow us to operate in a dynamic and agile manner, to address the various challenges the business needs to address to drive the business forward. To help drive future growth, we continue to invest in innovation and sustainability initiatives, which will see the introduction of further new spring technologies and the installation of our ground breaking fillings machinery which will keep Harrison Spinks at the forefront of luxury, natural and handcrafted bed and mattresses.
The components division (HS Products Ltd) has seen a significant decline in sales for this financial year, down 17.5% from the previous year. This is mainly due to certain key customers seeing a decline in their volumes along with opting for lower value products. Through this challenging trading period, strict control of costs was needed to ensure the company remained profitable with a declining turnover. This resulted in an adverse financial result than the previous year with operating profit down 25.6% against last year. This was then further assisted by a number of Innovate UK grant funded projects, relating to digitisation of our wire drawing facility, introduction of our microcoil technology into automotive seats and latterly rail seating, resulting in profit before tax being 10.2% down on last year. During this trading period, the business faced a number of challenges with regard to importing raw materials from China, due to significantly increasing container costs and delays to shipping times. This also impacted a number of our export customers who saw their delivered prices for our goods increase.
We continued to invest in future innovations in the groups coil and wire drawing operations. Movement of wire drawing lines from the main site in Leeds were relocated to the wire drawing facility in Scunthorpe to enable this site to be the main site for this production. Through the digitisation project, we have been able to start the process of further improving our wire quality. This is critical in allowing us to produce the straightest, most consistent wire in our industry to run on our coiling equipment. Our development department continued to work on next generation coiling and coil assembly machinery.
At Harrison Spinks, innovation continues to be key to our future success. Continually evolving glue-free pocket spring systems is key to our success. We have a global reputation to uphold, and whilst we are often copied, we need to stay ahead of the competition. Our spend on intellectual property during the financial period is significant, and this is to help ensure our competitors are unable to directly or indirectly copy what we design within our company. We have continued to invest in brand building to set the core pillars for the next chapter in the growth and development of the Spinks brand. We are passionate about changing the way the world sits and sleeps and are driven by our vision to be world leaders in comfort through our sustainable and innovative technology.
As our vision is to be ‘world leaders in comfort through our sustainable and innovative technology’, we are committed to leading the industry on circularity. Our business is getting noticed globally for offering sustainable solutions and this is very much our strategic focus for future years. Our annual Impact Report was published in April 24, demonstrates our integrated ESG approach and plan to become the most responsible manufacturers and leading the way in circularity. We continue to be committed sourcing traceable ethical products and are focused on reducing our carbon footprint by working closely with our suppliers (particularly steel), reducing embedded carbon and steel mass in our current and new innovations.
We are also immensely proud to be awarded the King’s Award for Sustainability (April 24) which sits alongside our King’s Award for Innovation.
Principal risks and uncertainties
The group ensures that in all of its commercial and operational dealings, risk mitigation is a major factor and is reviewed and considered at all times. The main risks facing the group arises from uncertainties regarding raw material costs and the UK economy and therefore the resulting impact of this on both profitability and margins. Energy prices have continued to rise during this period and measures to minimise energy usage has been widespread throughout the group.
The group continues to look for new opportunities and areas of efficiency and development. The directors are confident that through the strict control of overheads and taking advantage of opportunities in the market place as and when they arise, the business will continue to maintain its performance in the current economic climate. Cost-cutting across the whole group was a major focus during the period to ensure that we could make savings at a time when costs were increasing. By diversifying into transportation and upholstered seating, we help mitigate the risks imposed from the global mattress market we predominantly supply.
Employment has been an issue during the period with rising wage costs and employees being enticed away from our business. Further improvements to our overall employment benefits have been looked at with a commitment to try to improve year on year where financially possible, these include a “wellbeing day” for all staff along with increased pension contributions.
KPI 2024 2023 Measure
Turnover (£) 52,044,544 49,488,204 Sales in Year
Gross profit % 41.4% 35.5% Gross profit/sales
Profit before tax % 16.5% 6.4% Profit before tax/sales
The directors meet regularly to review all the key performance indicators ensuring that the company is maximising its added value in each of the key areas. The main measures that are used include revenue growth, operating margins and free cash flow. In addition to this, the changing landscape of costs over the years has meant forecasting has been employed to a greater extent which allows us to continue to deliver greater value to our customers.
As well as the financial KPIs adopted, the directors are also committed to certain non-financial KPIs in order to manage the impact of the business on its stakeholders. There is a commitment to customer satisfaction through the use of Quality monitoring initiatives. There is also a big focus on retaining quality staff as we understand that an essential element of delivering a consistent, reliable product and service is retaining key people and providing appropriate training.
The board of directors of Spinko Limited consider that both individually and together for the year ended 30 June 2024 they have acted in the way they consider, in good faith, would be the most likely to promote the success of the company for the benefit of its members and stakeholders as a whole and, in doing so, to 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 customers, suppliers 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 delivery, performance and business conduct; and
The need to act fairly between members of the company
The directors recognise that the business is reliant on maintaining its reputation for high standards of delivery, conduct, professionalism and care for its employee and this is always given high priority. We are a business built on our standards and reputation and would not take a decision which would have a detrimental impact on this, whether in the short term or long term. We are dedicated to ensuring we maintain our culture whilst achieving our purpose. This is taken into consideration in boardroom discussions and decisions.
The Board has always highlighted that the loyal and dedicated skilled workforce is a key part of our success. Continuing to invest in our workforce, ensuring their safety and regular engagement with them is a key part to our management approach. Where improvement to employment benefits are possible, the board with endeavour to improve where financially possible.
The directors recognise the success and reputation of business relies on positive relationships with all its stakeholders including colleagues, customers and suppliers, all of whom have an interest in our business and the impact of the decisions we take.
As a business we are committed to leading the way on manufacturing quality products with sustainability at the heart of our offer. Our strategy to be ‘world leaders in comfort through our sustainable and innovative technology’ will ensure we are building the business with solid foundations and values for the benefit of future generations.
Colleagues – We recognise the enormous contribution of all our colleagues and the success and growth of the business is heavily dependent on their contribution. We massively value their passion and commitment and are grateful for the support shown during the year. We are committed to the training and development of colleagues across the business and will look to introduce a formal appraisal system in the next financial year.
Customers – Providing quality products and services is at the core of our vison as we aim to be their most trusted partner. Providing our valued customers with market leading, innovative and sustainable mattresses, springs and wire is central to our success and allows us to stand out in a competitive market. Working in partnership with customers to provide quality differentiated and exclusive products where appropriate will drive our future success.
Suppliers – We value the contribution from our trusted and valued suppliers and the part they play in heling us to provide the highest quality and most sustainable products in the market.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2024.
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:
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.
Subsequent to the year end, ultimate control of Harrison Spinks Beds Ltd by virtue of majority shareholding was transferred to an Employee Ownership Trust, promoting long-term stability and ensuring that staff are beneficiaries of future profit.
The auditor, Azets Audit Services Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The Companies (Directors Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 implemented the government's policy on Streamline Energy and Carbon Reporting (SECR). The Regulations came into effect on 1 April 2019 and the group is required to report the emissions and energy consumption for this year to 30 June 2024 to coincide with the financial reporting period.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £million of turnover, the recommended ratio for the sector.
The overall footprint is lower and tonnes CO2e per £million of turnover has reduced to 45.98 (2023 - 52.74). This is as a result of the group successfully continuing a scheme of replacing fleet vehicles with low emission electric alternatives during the financial year.
The group intends to reduce its emissions further through tree planting schemes and increased electrification of owned vehicles. The company will also be looking to swap all energy tariffs to renewable alternatives in line with contract renewal periods.
These strategies, alongside other ongoing initiatives such as ensuring lighting is energy efficient and machines such as compressors are more energy efficient, will ensure the group continues to meet its objectives of reducing its carbon footprint.
We have audited the financial statements of Spinko Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2024 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
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;
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; and
Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting period.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 17 to 39 form part of these financial statements.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,043,843 (2023 - £3,056,826 profit).
Spinko Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is The Innovation Centre, Westland Road, Leeds, LS11 5SB.
The group consists of Spinko Limited 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 pound sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £1.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties 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 the parent of a group that prepares publicly available consolidated financial statements, 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 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The company has taken advantage of the disclosure exemptions of Section 33.1A of FRS102 which permit it to not present details of its transactions with members of the group where relevant group companies are all wholly owned.
The consolidated group financial statements consist of the financial statements of the parent company Spinko 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 30 June 2024. 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 balance sheet 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.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods 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.
Turnover from the sale of beds, mattresses and springs 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 turnover 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.
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.
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.
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).
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 is estimated to be less than its carrying amount, the carrying amount of the asset 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 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 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 at bank and in hand 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 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
Transactions in currencies other than pound 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
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.
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.
In assessing whether there have been any indicators of impairment to any assets, the directors have considered both external and internal sources of information such as market conditions, counterparty credit ratings and experience of recoverability and where applicable, the ability of the asset to be operated as planned. There have been no indicators of impairments identified during the current financial year.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The company establishes a provision for receivables that are estimated not to be recoverable. When assessing recoverability the directors have considered factors such as the aging of the receivables, past experience of recoverability, and the credit profile of individual or groups of customers.
The company establishes a provision for stocks that are estimated not to be recoverable. When assessing recoverability the directors have considered factors such as the aging of the stocks, damaged and or obsolete stocks and past experience of recoverability.
The group depreciates tangible assets, and amortises intangible assets over their useful lives. The estimation of the useful lives of tangible assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied. The estimation of useful lives of intangible assets is based on any contractual or legal rights associated with the assets, or the period in which the group expects to use the asset if shorter.
Judgement is also applied when determining the residual values for fixed assets. When determining the residual value, the directors have assessed the amount that the group would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful life. Where possible this is done with reference to external market prices.
The group makes estimates of the open market value of investment properties. Management takes into account advice from third parties, including valuations performed externally for loan security purposes and by using all knowledge and information available.
The company establishes a provision for credit notes to be given retrospectively to customers. These are often based on historic levels of provisions given and therefore can be subject to a degree of management judgement.
Rebate provisions
A certain level of estimation or judgement is required for certain agreements in assessing the level of qualifying sales and whether performance obligations have been met, which in turn drive the obligation to make payments to customers. This estimation is based on historical actual sales or projections. The group only recognises rebate agreements where there is documented evidence of an agreement with an individual customer and when associated performance conditions are met.
Turnover is wholly attributable to the principal activities of the group.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The company has no employees other than the directors (see note 7).
The actual charge/(credit) for the year can be reconciled to the expected 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 profit and loss account.
The fair value of the investment property has been arrived at on the basis of a valuation carried out at 24 February 2022 by Eddisons Chartered Surveyors, who are not connected with the company. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties.
Details of the company's subsidiaries at 30 June 2024 are as follows:
*Dormant subsidiaries
Details of material joint ventures at 30 June 2024 are as follows:
Amounts owed by group undertakings are interest free and repayable upon demand.
Other debtors due after more than one year relate to loans to connected companies. Loan 'B' accrues interest at 8% per annum and is repayable in full on 1 March 2029. Loan 'A' accrues interest at 6% per annum plus base rate and is repayable in full on 14 May 2031. Loan 'C' accrues interest at 6% per annum plus base rate and is repayable by instalments over the period to 31 August 2033.
The long-term loans are secured by fixed charges over certain freehold land and buildings.
Interest is charged at 2.75% annually. The loan will mature in October 2027 and will be repaid via monthly instalments up until that date.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse in line with the useful life of the assets against which the capital allowances are allocated.
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.
Dividends may be declared and paid on Ordinary shares only or on both classes of shares as the directors determine.
Each Ordinary share carries an entitlement to one vote whilst each Ordinary A share is entitled to 0.001 votes.
On a winding up of the company, any surplus remaining after all debts and obligations have been settled shall belong to and will be distributed to the holders of Ordinary shares only.
This reserve represents cumulative retained profits and losses less dividends paid.
Foreign exchange reserve
The reserve represents foreign exchange differences on the year end foreign exchange balances within equity.
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:
A cross guarantee has been provided by Spinko Limited, HS Products Ltd and Harrison Spinks Beds Ltd in respect of group borrowings. At 30 June 2024 this amounted to £Nil (2023 - £138,133).
During the year the group entered into the following transactions with related parties:
The total remuneration of key management personnel in respect of services to the group amount ot £902,343 in respect of 6 employees (2023 - £258,247 in respect of 2 employees being the directors of the company).
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Amounts due from entities under common control accrued interest of £870,519 (2023 - £622,326).
The following amounts were recognised as an expense in the period in respect of bad and doubtful debts due from related parties:
Subsequent to the year end, ultimate control of Harrison Spinks Beds Ltd by virtue of majority shareholding was transferred to an Employee Ownership Trust.