The directors present the strategic report for the year ended 31 December 2023.
In the year ended 31 December 2023 the Group achieved a turnover of $179.5m (2022 - $183.6m) and the adjusted EBITDA for 2023 was $27.3m which represents 15.2% of turnover (2022 - 14.5%).
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The demand for product in the Highway Safety and the EGM markets is steady and expected to remain high in the foreseeable future. This has resulted in the Group generating stable financial results in both the current and prior periods. |
The Group and Company face a variety of risks and uncertainties. The board consider the main risks and uncertainties to be:
Unpredictability of gas market
Natural gas is the leading input into our manufacturing process and our costs are influenced by both the condition of the gas market and the gas price. The significant volatility we have seen in recent years is likely to continue as a result of economic factors, such as Russia’s invasion of Ukraine and rising inflation.
Financial and treasury risks
The Group undertakes transactions in multiple currencies and manages working capital positions across a number of different markets and geographies. The Group actively monitors, evaluates and manages these currency, working capital, interest rate, cash flow and funding risks and exposures to ensure that all financial commitments can be met as they fall due. The group has related party debt with a US partner company in amount of $95.1m. This is not repayable until 2027. This is denoted in USD and is not subject to foreign exchange exposure. The group also utilises a small amount of available external facilities. However, these are not deemed material in the context of these financial statements.
All of the above mentioned risk factors should be considered in connection with any forward-looking statements in these financial statements.
In line with its treasury risk management policy, the Company has adopted a strategic approach to mitigate foreign exchange risk arising from loan notes receivable denominated in foreign currencies. To hedge the volatility in foreign exchange gains and losses that may arise from movements in exchange rates, the Company has issued preference shares denominated in the same foreign currencies and to the same notional value as the loan note receivables.
Under FRS 102, these preference shares are classified as financial liabilities in the statement of financial position. The resulting foreign exchange movements on these liabilities are expected to offset the corresponding movements on the receivable balances, thereby creating a natural hedge.
This economic hedge is designed to stabilise the profit and loss impact of foreign currency fluctuations and reduce volatility in reported earnings. While the hedge does not qualify for hedge accounting under FRS 102, the matching of currency denomination and value between the asset and liability provides a commercially effective mechanism for managing this risk.
The directors consider the key performance indicators of the business to be turnover, gross margin and adjusted EBITDA. The business is tracked by region and product line (note 3). This data is used to assist making decisions on the allocation of tools between our various business units, and future capex requirements.
During the financial year, the directors have complied with their duty to have regard to the matters in section 172 (1) (a)-(f) of the Companies Act 2006. The directors believe that they have acted in a way they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole.
Stakeholder engagement
The directors consider that the key stakeholders of the Group are those impacted by the inputs and outputs of the Group, specifically these are (in no particular order): shareholders, customers, suppliers, employees, banks and financial institutions, government organisations and regulators. The Group, through the directors, engage with each stakeholder at the appropriate level of detail and frequency depending on their specific requirements and level of influence and interest. The directors use a variety of methods to do this, as described below.
Principal decisions
Principal decisions are those that are material to the Group and also to the above stakeholder groups. During the financial year, the Group has taken a number of operational and strategic decisions which the directors consider are for the benefit of the Group, with a view to promoting its long term success and sustainability. These include the review and approval of capital investment decisions, entry into new markets, review of acquisition targets and the preparation and review of the annual budget which drives the Group’s long-term strategy.
Employee involvement
In order to consider the interests of employees in key decisions, regular contact and exchanges of information between directors, managers and staff are maintained through a variety of channels. These mainly take the form of departmental meetings, the formation of project teams, internal and external training, workshops, seminars and performance appraisals.
The Group seeks to employ the best staff in each of its departments, from trading and operations through to finance, HR, legal, engineering and IT. Employees are integral to the success of the Group and performance is recognised accordingly.
Engaging with suppliers, service providers, customers and others
During the financial year, the directors have endeavoured to foster the Group’s mutually beneficial business relationships with suppliers, service providers, customers and others in a business relationship with the Group. This was achieved through positive interactions during meetings, written communication, telephone communications and site visits where necessary.
The Group is a leading supplier to government agencies, contractors, producers of road marking materials and industrial consumers.
The directors ensure that the Group acts responsibly, and in compliance with the applicable laws and regulations when sourcing commodities from third-party suppliers.
The Group’s supply chains include multinational, national, regional and local suppliers. Suppliers are critical partners to the Group’s commitment to deliver value and to operate in a manner that is responsible, transparent and respects the human rights of all.
The Group has set out expectations for ethical business practices, safety and health, human rights and environment in supplier standards, which apply to all of the Group’s suppliers and which the directors expect to incorporate into the Group’s supplier contracts. The Group undertakes due diligence of current and potential suppliers to understand their business practices.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results of the Group for the year are set out on page 9.
No ordinary dividends were paid nor are proposed to be paid.
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 largest raw material is cullet, or recycled glass. The Group recycles ~1 billion pounds of glass per year. The Group's unique furnace technology enables the Group to be more energy efficient than competitors (10-40% less energy-intensive). The Group's products provide environmentally-friendly product substitutes to various industries.
The Group uses recycled glass as an input in the manufacturing of its glass microspheres which provides the following advantages:
Helps the environment: Uses recycled materials diverted from landfills.
Supports recycling: Allows customers to fulfill requirements for recycled content in their products.
During the reporting period, the group emitted a total of 747,114 mWh of energy and 152,013 tonnes of CO2e which is categorised as follows:
The group has used the GHG Reporting Protocol – Corporate Standard and have used the 2023 UK Government’s GHG Conversion Factors for Company Reporting. The group has used the location based method to report on energy consumption.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per stock produced which is the recommended ratio for the sector.
During the prior year’s SECR reporting, an administrative error resulted in the inclusion of energy consumption and carbon emissions data from plants located in the US segment of the wider Group, rather than solely from the UK Group entities required to report under SECR regulations. This error was limited to the selection of reporting sites and did not affect the accuracy or verification of energy consumption data collected at each individual site. The error was therefore in the scope of data included, not in the data measurement or calculation process. The misreporting relates exclusively to the SECR disclosures and has no impact on the Group’s financial statements, accounting estimates, or any other financial reporting.
The Group has reviewed and enhanced its data governance and reporting procedures to prevent recurrence and ensure that future SECR disclosures accurately reflect the UK Group’s operational footprint. Corrected SECR data for the prior period has been included in this year’s sustainability disclosures for completeness and transparency.
We have audited the financial statements of Potters UK Acquisition Company Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, 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.
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.
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 $1,408k (2022 - $9,124k loss).
Potters UK Acquisition Company Limited (“the company”) is a private limited company incorporated in England and Wales. The registered office is Suite 1, 7th Floor 50 Broadway, London, United Kingdom, SW1H 0BL.
The Group consists of Potters UK Acquisition Company Limited and all of its subsidiaries ("the Group"). See note 14 for a list of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in USD ($), which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $1,000.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 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, Potters UK Acquisition Company Limited, together with all entities controlled by the parent company (its subsidiaries).
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 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. Subsidiaries acquired during the year are consolidated using the purchase method. Where a non-controlling interest in a subsidiary exists their share of the profits and post-acquisition reserves is calculated based upon their percentage ownership of the subsidiary.
The financial statements have been prepared on a going concern basis which the directors believe to be appropriate for the following reasons.
The Group’s business activities, along with factors likely to affect its future developments are set out in the Strategic Report on page 1.
The directors have prepared projected cashflow information for the twelve months from the date of approval of these financial statements, including possible downside scenarios, which principally reflect the risk of lower than forecast sales, alongside an increase in energy prices. The directors consider that the net funds currently available will provide sufficient liquidity to finance the Group for the next twelve months under both their base and downside scenarios. The forecast for the business looks stable with moderate growth expected over the next several years, with the Group expecting to generate positive cash flows. Where necessary, the Group is in a position to obtain finance via intercompany loans to fund growth in the future.
The Group has considerable net funds, holding a cash balance of $21.3m at the year-end. The Group continues to trade strongly with flagship customers and holds a significant investment in stock. No repayment on the debenture loan balance of $97.1m is due until 2027.
As a consequence, the directors believe that the Group is well placed to manage its business risks successfully and will have sufficient funds to continue to meets its liabilities as they fall due for at least twelve months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.
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.
Freehold land is not depreciated.
Assets are only depreciated from the point at which they are brought into use. As such, assets under construction are not depreciated. Once brought into use the asset is transferred to the relevant asset class and depreciation commences.
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 and associates 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.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cash flows are discounted to their present value, using a pre-tax discount rate, that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
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.
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.
The group operates a defined benefit plan for certain employees. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependent upon several factors including but not limited to age, length of service and remuneration. A defined benefit plan is a pension plan that is not a defined contribution plan.
The liability recognised in the balance sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the balance sheet date less the fair value of plan assets at the balance sheet date (if any) out of which the obligations are to be settled
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
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.
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 critical judgements that the directors have made in the process of applying the company’s policies that have the most significant effect on the amounts recognised in the statutory financial statements are discussed below:
In assessing whether there have been any indicators of impairments of assets, including intangible assets, the directors have considered both external and internal sources of information such as market conditions, counterparty credit ratings and experience of recoverability.
Where an indication of impairment does exist, the directors will carry out an impairment review to determine the recoverable amount, which is the value in use. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the asset or the cash generating unit and a suitable discount rate in order to calculate present value.
There have been no material indicators of impairments identified during the current financial year.
The group operates a number of defined benefit pension plans. These are held in subsidiaries in the following locations; Belgium, France, Belgium, Japan and the United Kingdom. The estimation of the defined benefit obligation liabilities depends on such factors as life expectancy of the members, future inflation assumptions and the discount rate used to calculate the present value of the liabilities. The group uses previous experience and impartial actuarial advice to select the values of these critical estimates. The estimates adopted, and the sensitivity of key estimates, are disclosed in note 22.
The company had no employees during 2023 or 2022.
The average monthly number of persons (including directors) employed by the group during the year was:
Their aggregate remuneration comprised:
The Group directors do not take any remuneration via the worldwide group headed by Potters UK Acquisition Company Limited. Instead they are remunerated by the Group's ultimate parent in the USA. The Company incurs management charges from the US group of companies as disclosed in note 27, which includes an element for cost of services provided by the directors, however as it is not possible to reasonably segregate such costs from the overall management charge, no disclosure is provided of the total remuneration cost incurred by the Group.
The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25% (rather than remaining at 19%, as previously enacted). This new law was substantively enacted on 24 May 2021. For the financial year ended 31 December 2023, the current weighted averaged tax rate was 23.52%.
Accordingly, all deferred tax balances at the reporting date are therefore measured at 25%, except for overseas deferred tax balances which are recognised at the applicable local rate of tax.
The Group tests cash generating units ("CGU's"), including goodwill allocated to the CGU, annually for impairment. Goodwill and CGU's are assessed for impairment by comparing the carrying values with the value-in-use calculation, which is determined by calculating the net present value ("NPV") of future cashflows arising from the original acquired business.
The carrying value of land, included within land and buildings above, comprises:
Details of the company's subsidiaries at 31 December 2023 are as follows:
The registered office address for the subsidiaries is:
(1) De Brand 24 3823 LJ, Amersfoort, The Netherlands
(2) 5, rue Guillaume Kroll, L-1882, Luxembourg
(3) 1959 Upper Water Street, Suite 900, Halifax, N.S. B3J3N2, Canada
(4) c/o Cormoron GmbH, Am Zirkus 2, 10117, Berlin
(5) c/o Minter Ellison, Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW 2000
(6) 100-102 Boundary Road, Laverton, Victoria 3028, Australia
(7) 131/1 Moo 4 Rattanakosin, 200 Pee Road (Bagna-Trad km 29), Tambol Bangbor, Amphur Bangbor, Samutprakarn, 10560 Thailand
(8) 1959 Upper Water Street, No. 800 Halifax N.S. B3J3N2, Canada
(9) 254-36 Shimokawarazaki, Tsukuba City Ibaraki Prefecture 300-2662, Japan
(10) Av. del Libertador 498, 13th Floor, South City of Buenos Aires, Argentina
(11) Avenida Carr. Mexico-Pachuca Km. 29.5 Santo Tomas Chiconautla, Estado de Mexico C.P. 55068, Mexico
(12) Avenida Prefeito Sa Lessa, 381 Distrito Industrial Fazenda Botafogo 21.530-040, Rio De Janeiro, Brazil
(13) Avenue du Marquis 4 6220 Fleurus, Belgium
(14) Heemsteedseweg 22 3992 LS Houten, Netherlands
(15) Morschheimer Straße 11 D-67292 Kirchheimbolanden, Germany
(16) PI Santa Rita, C.Acustica 10-12 08755 Castellbisal, Spain
(17) PL-58-309 Walbrzch VI. Wroclawska 16, Poland
(18) Pontefract Road, Barnsley, South Yorkshire, S71 1HJ
(19) Rue Louis Bleriot Za Du Fief Du Roy 16100, Chateaubernard, France
(20) S.I. Ste Agathe, Rue Lavoisier 57192, Florange, France
(21) Z.I. du Pont Panay BP67 03500 St. –Pourcain-sur Sioule, France
During the year, it was decided that the four Australian subsidiaries would be merged into another group undertaking, Potters Industries Pty Ltd. The four entities which were merged were Potters Chemicals Holdings Australia Pty Ltd, Potters Industries Acquisition Pty Ltd, Potters Chemicals Pty Ltd and Potters Australia Acquisition Pty Ltd. These four entities were deregistered and all their assets and liabilites were merged into Potters Industries Pty Ltd.
Details of associates at 31 December 2023 are as follows:
The registered office address for the associate is:
(1) Calle Isaac Peral, 1, 28914, Leganes, Madrid, Spain
Stocks are stated after provisions for impairment of $645k (2022 - $557k).
Trade debtors are stated after provisions for impairment of $839k (2022 - $604k).
Borrowings are secured as described in note 20.
There is $3,315k outstanding on a working capital line of credit with a maturity of up to 90 days after borrowings are made on the line. Interest rates for each line of credit are based on a 1 to 9 month EURIBOR rates (not lower than 0) plus a margin that can range between 1.05% to 2.75%.
Loans and guarantees under the credit agreement are secured by a first priority security interest on properties belonging to subsidiaries and located in Fleurus, Belgium and Florange, France. They are further secured against 100% of the shares in Sovitec International B.V. The credit agreement contains various non-financial and financial covenants; each limits the ability of certain subsidiary companies to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments, or declare and pay dividends. The Group was in compliance with all such requirements as at 31 December 2023 and as at 31 December 2022.
The Group also has several loan notes payable which are denominated in Japanese Yen, which enables the Group to borrow up to 250,000k Japanese Yen. Borrowings incur interest at either TIBOR ("Tokyo Interbank Offered Rate"), plus a margin or the short-term prime rate. The borrowing rate was 0.67% and 0.58% as at 31 December 2023 and as at 31 December 2022, respectively. Borrowings under the agreement are payable at the option of the Group throughout the term of the agreements. Borrowings outstanding under these arrangements were $1,844k and $1,984k as at 31 December 2023 and as at 31 December 2022, respectively.
Debenture loans within the Parent company represent $95,113k secured USD loan notes with maturity in 2027 and carrying interest (at a fixed rate of 4.25% plus a variable rate LIBOR 6M not lower than 0.75%). At the balance sheet date, the balance comprises $91,223k of principle and $3,890k of accrued interest. This loan is listed on The International Stock Exchange ("TISE").
On 5 December 2023, the company issued 71,660,829 preference shares to Potters Acquisition Holdings (Jersey) Limited. These preference shares were treated as fully paid up out of the credit standing in the profit and loss reserve. These shares entitle the holder to a fixed dividend per annum and are redeemable at the earlier of an exit event or on demand by the shareholder. In accordance with FRS 102 Section 22: Liabilities and Equity, the preference shares have been classified as financial liabilities, as the terms of the instrument impose on the company a contractual obligation to deliver cash, either upon an exit event or at the request of the holder.
The preference shares are therefore included within loans and overdrafts in the statement of financial position. As at the reporting date, the liability relating to these shares amounted to $53,870k.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above relates to the utilisation of tax losses against future expected profits.
In addition to the deferred tax asset above, the Group has additional unrecognised gross tax losses of $137.5m.
Deferred tax assets and liabilities are carried at the rate prevailing in the jurisdiction in which they arise.
The group operates defined contribution pension schemes for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund. At the reporting date, the group owed $178k (2022 - $165k) to the scheme and this amount is included within accruals and deferred income.
The company does not operate a defined contribution pension scheme.
Seven subsidiaries operate defined benefit pension schemes for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company does not operate a defined benefit pension schemes.
Under the defined pension benefit schemes, employees are entitled to retirement benefits varying between 1% and 70% of final salary on attainment of a retirement age of 60-67, depending on location and employee-specific contracts. No other post retirement benefits are provided.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 31 December 2023 by Carlos Sauri Campos, in respect of Ballotini Panamerican S. de R.I. de CV, by Broadstone Consultants and Actuaries Limited, in respect of Potters-Ballotini Limited, and by Mercer for all other subsidiaries operating defined benefit schemes. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.
The amounts included in the balance sheet arising from obligations in respect of defined benefit plans are as follows:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans funded as follows:
Movements in the fair value of plan assets
Fair value of plan assets at the reporting period end
On 1 December 2023, the company undertook a capital reduction by reducing the amount standing to the credit of its share premium account by $67,505k. The reserve arising from the reduction was treated as a realised profit and credited to the profit and loss reserve.
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:
The Group does not have any key management personnel beyond those provided by the US. Costs for these personnel are settled via management charge, similar to directors as explained in note 7.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date: