The directors present the strategic report for the year ended 31 August 2024.
Overall Strategy
The shareholders, who work daily in the business, have considerable experience in the Scotch Industry, enabling us to develop a portfolio of premium single malts and blends that reflect our entrepreneurial flair. This part of the busiess augments the established, spirit trading operation, where extensive stock of fine scotch whiskies allows the Company to continue to grow our strong reputation in core markets. As a full service spirit company, we support all our clients from spirit production to final product and warehousing. This is complemented by a developing programme of capital investment across the business.
Review of Business
2024 saw the business deliver results that were consistent in many ways with the state of the scotch whisky market, where dips in turnover and profitability are the norm. However, the Shareholders and Board were delighted with the result this year, as some of these negative impacts were minimised through the dedication and hard work of our team and network of partners in our supply chain.
Our brands continue to sell well in our key markets of the UK, Europe and the Far East in addition to expansion into new regions and developing new routes to market. Brand recognition has increased positively within the UK, with numerous rewards received in the 2024 Scotch Whisky Awards, as well as the prestigious honour of Spirits Bottler of the Year received in the Spirits Business Awards 2024. The business was delighted to received these accolades and recognition, particularly given the line of competitors which included many more established businesses.
The supply to over 40 markets worldwide means we need to stay abreast of a broad range of political, social and economic factors. Regular engagement with our local partners and network of professional advisors, allows to navigate and mitigate these risks.
Financial Risk Management
The Company is financed using various financial instruments, with the primary one being an asset based lending facility provided by HSBC. This instrument, as well as trade debtors and creditors, carry various financial risks noted below.
Currency Risk
We trade predominantly in Sterling, with a small percentage of business in Euro and US Dollars. Some of the exposure in this area is naturally reduced by purchases in the same currency. We consider the balance of risk to be immaterial.
Liquidity Risk
Challenges within the whisky environment over the last few years have meant liquidity is more of an issue across our supply chain and customer network. We operate banking facilities that allow us to have adequate resources to meet our obligations and mitigate these risks
Interest Rate Risk
With sizeable levels of borrowing in place to support our capital development and maturing stock programme, movements in rates are of particular interest to us. Our management considers the Company to have adequate levels of operating profit to cover charges within the long term and reducing interest rate environment.
Credit Risk
The Company uses a policy of payment in advance and other advantageous methods to manage credit risk from trade debtors. Trading history, reputation and reference are also considered when we establish a new relationship, which further reduces our exposure in this area.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 August 2024.
The results for the year are set out on page 10.
The directors paid dividend totalling £421,395 in the current financial year (2023: £388,000).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Gillespie and Anderson, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments, engagement with suppliers, customers and others and financial risk management objectives and policies where applicable.
The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements which comprise:
The Profit and Loss Account;
The Balance Sheet;
The Statement of Changes in Equity; and
The related notes 1 to 27.
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
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 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
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
The information given in the Director's Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The Director's Report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Director's Report.
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
The financial statements are not in agreement with the accounting records and returns; or
Certain disclosures of directors’ remuneration specified by law are not made; or
We have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
To address the risk of fraud through management override of controls and management bias, we: assess the rationale behind significant or unusual transactions identified through audit testing and assess where management judgement used in determining accounting estimates were indicative of potential bias.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non- compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the Director and other management and the inspection of regulatory and legal correspondence.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
Our approach and assessment were as follows:
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
Enquire of management and review supporting documentation concerning the company's policies and procedures relating to:
identify, evaluate and comply with laws and regulations and their awareness of any instances of non- compliance;
detect and respond to the risks of irregularities, fraud and their knowledge of any actual, suspected or alleged fraud;
internal controls established to mitigate risks related to, unusual items, fraud or non-compliance with laws and regulations.
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
Obtain an understanding of the legal and regulatory framework that the company operates in, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of the company. The key laws and regulations we considered in this context included the Companies Act 2006 and Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, together with health and safety regulations, money laundering regulations, employment legislation and data protection legislation.
Discuss among the engagement team how and where irregularities might occur in the financial statements and potential indicators of fraud. Identify potential audit risks in relation to income recognition, authorisation of expenses and possible management override of controls.
Communicate relevant identified laws and regulations and potential irregularity risks to all engagement team members and remain alert to any indications of unusual items, fraud or non-compliance with laws and regulations throughout the audit.
Review all Minutes of Meetings of those charged with governance, Reports and correspondence with HMRC and legal advisers.
Perform audit testing which covers the audit assumptions of: existence, completeness, rights and obligations, accuracy and valuation in respect of income recognition and expenditure incurred.
Evaluate the overall presentation, structure and content of the financial statements, including disclosures, by performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to an irregularity or fraud. Agree financial statement disclosures to underlying documents.
Assess whether the financial statements represent the underlying transactions and events in a manner that achieves compliance with relevant laws and regulations.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor's 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.
Brave New Spirits Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Unit 254, Corinium House, Barnwood Point Business Park, Corinium Avenue, Gloucester, England, GL4 3HX.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The directors have assessed the Balance Sheet and likely future cash flows at the date of approving these financial statements. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and to meet its financial obligations as they fall due for at least 12 months from the date of signing these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
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 credited or charged to profit or loss.
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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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 company after deducting all of its liabilities.
Basic financial liabilities 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 company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company 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 company.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge 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:
Included in other debtors are amounts due from the directors of £54,626 (2023: £77,299). See note 22 for movements in year.
Included in other debtors are amounts of £1,515,864 (2023: £465,383), due from Witchburn Distillery Ltd, a connected company through common shareholders.
Loan to directors and connected companies are unsecured, interest free and have no fixed repayment terms.
Trade debtors are stated net of bad debt provisions of £4,784 (2023: £Nil).
Stock financing and bank loans/overdrafts include borrowings from HSBC of £14,317,292 (2023:£nil), relating to a stock financing facility.
Stock financing and bank loans/overdrafts, due within 1 year and after 1 year, include amounts owed to HSBC that are repayable monthly, with interest charged at a rate of 2.25% above Bank of England base rate.
Included in other creditors are amounts of £156,134 (2023: 109,389) owed to a related party that is repayable on demand and does not bear interest.
Bank loans and overdrafts included amounts owed to Clydesdale Bank that were repayable monthly, with interest charged at a rate of 2.35% per annum above Bank of England base rate.
Bank loans and overdrafts included amounts owed to Clydesdale Bank in relation to a General Export Facility Loan that was repayable January 2025 with interest being charged and payable monthly in arears at a rate of 2.25% per annum over Bank of England base rate.
Bank loans and overdrafts included amounts owed to Clydesdale Bank in relation to a Revolving Credit Facility that was repayable by September 2026, with interest being charged and payable monthly in arears at a rate of 2.25% per annum over Bank of England base rate, with a non utilisation fee of 0.65% per annum above Bank of England base rate.
Amounts owed to Glen Strath PTE Ltd were repayable on demand, with fixed interest of £250,000 over the period of the loan.
See note 24 for details of securities given.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
Contributions totalling £4,859 (2023: £3,104) were payable to the plan at the reporting date and are included in creditors.
The Company's other reserves are as follows:
The share premium reserve contains the premium arising on issue of equity shares, net of issue expenses.
The profit and loss reserve represents cumulative profits or losses, net of dividends paid and other adjustments.
The capital redemption reserve represents amounts arising from the purchase of own share capital.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts due from Witchburn Distillery Ltd, a connected company through common shareholdering, as at 31 August 2024, was £1,515,864 (2023: £465,383). Within the financial year there were amounts advanced of £1,050,481 with no repayments.
Loans from connected companies are unsecured, interest free and have no fixed repayment terms.
The company is controlled by its shareholders, Adam Hochul and Alexander Springensguth.
Standard Security granted on 20 October 2022 in favour of Clydesdale Bank Plc over 331 Charles Street, Glasgow in respect of all present and future obligations of the company. Contains a negative pledge. This charge was satisfied in full on the 10 June 2024.
Charge granted on 13 October 2021 in favour of HSBC Bank Plc over cash deposit lodged with HSBC Bank Plc in respect of any amounts owed by the company. Contains a negative pledge.
Debenture granted on 4 March 2022 in favour of Clydesdale Bank Plc over the whole of the property, assets and rights (including uncalled capital) which are or may from time to time while this Debenture is in force be compromised in the property and undertakings of the company. Contains a negative pledge. This charge was satisfied in full on 10 June 2024.
The following additional charges were issued in this financial year:
Debenture granted on 5 June 2024 in favour of HSBC Invoice Finance (UK) Limited. Contains a fixed and floating charge. The floating charge is over all property or undertakings of the company. Contains a negative charge.
Assignment of contract monies granted on 5 June 2024 in favour of HSBC Bank Plc. By Brave New Spirits Ltd and Witchburn Distillery Ltd in respect of a debt purchase agreement. Contains a fixed charge and a negative pledge.
Debenture granted on 5 June 2024 in favour of HSBC Bank Plc. Contains a fixed and floating charge. The floating charge is over all property or undertakings of the company. Contains a negative charge.
Standard Security granted on 12 June 2024 in favour of HSBC UK Bank Plc over all and whole subjects lying to the north of 331 Charles Street, Glasgow, G21 2RD.
Cross Guarantee in favour of HSBC UK Bank Plc by Brave New Spirits Ltd and Witchburn Distillery Ltd.