Natco Foods Limited - Limited company accounts 18.2

REGISTERED NUMBER: 00782674 (England and Wales)

NATCO FOODS LIMITED

STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2018

Page

Company information

1

Strategic report

2

Report of the directors

3

Independent auditors' report

4

Statement of comprehensive income

6

Balance sheet

7

Statement of changes in equity

8

Notes to the financial statements

9

DIRECTORS:

R P Thanwani

L T Pagarani

R D Rajwani

L Pagarani

SECRETARY:

R P Thanwani

REGISTERED OFFICE:

Unit 2 Swan Business Park

Osier Way

Buckingham

MK18 1TB

REGISTERED NUMBER:

00782674 (England and Wales)

AUDITORS:

F W Berringer & Co

Chartered Accountants

and Statutory Auditors

Lygon House

50 London Road

Bromley

Kent

BR1 3RA

The directors present their strategic report for the year ended 31 December 2018.

PRINCIPAL ACTIVITIES

The principal activity of the company during the year was that of importation, distribution and sale of foodstuffs. There have been

no changes in the company's activities in the year under review.

REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS

The directors report a loss on ordinary activities before taxation of £287,671 (2017: £23,099), the result for the year is after

generous charitable donations totalling £123,460 (2017: £465,685). Operating profit before interest was £101,661 (2017:

£621,635). Turnover decreased from £59.39 million to £58.89 million as a result of challenging market conditions. The general

economic situation and agricultural commodity market trends have resulted in a decrease in gross margins from 12.59% to 11.73%.

Overheads were controlled during the year.

Key performance indicators are turnover, margins and product mix. Non financial indicators are also used including product

availability, customer returns and service levels to measure business performance in meeting the needs of our customers.

The directors consider the results for the year to be satisfactory and expect a profitable trading year in 2019, despite the continuing

difficult trading conditions in the food industry.

PRINCIPAL RISKS AND UNCERTAINTIES

The company operates in a sophisticated market and its performance is related to world harvests. It manages this risk by

diversified sourcing. It manages the risk of losing key customers by nurturing relationships and providing an enhanced responsive

service.

The main financial risks arising from the company's activities are credit risk, interest rate risk, currency risk and liquidity risk.

These are monitored by the board of directors.

The company's policy in respect of credit risk is to require appropriate credit checks on new customers before sales are made. The

information from these credit ratings is then factored into future dealings with the customers.

The company's policy in respect of interest rate and liquidity risk is to maintain a mixture of long term and short-term debt finance

and readily accessible bank deposit accounts to ensure that the group has sufficient funds for operations.

The company's policy in respect of currency risk is to forward purchase currency to settle trading transactions and thereby minimise

any exchange rate exposure.

ON BEHALF OF THE BOARD:

L Pagarani - Director

23 July 2019

The directors present their report with the financial statements of the company for the year ended 31 December 2018.

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2018.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2018 to the date of this report.

R P Thanwani

L T Pagarani

R D Rajwani

L Pagarani

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic report, the Report of the directors 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 of 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;

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of

which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order

to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

ON BEHALF OF THE BOARD:

L Pagarani - Director

23 July 2019

Opinion

We have audited the financial statements of Natco Foods Limited (the 'company') for the year ended 31 December 2018 which

comprise the Statement of comprehensive income, Balance sheet, Statement of changes in equity and Notes to the financial

statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their

preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting

Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2018 and of its loss for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

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 Auditors' responsibilities for the audit of the financial statements

section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit

of the financial statements in the UK, including 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

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic report and

the Report of the directors, but does not include the financial statements and our Auditors' report thereon.

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.

In connection with our audit of the financial statements, 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 audit or

otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are

required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other

information. 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 Strategic report and the Report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic report and the Report of the directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not

identified material misstatements in the Strategic report or the Report of the directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you 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.

Responsibilities of directors

As explained more fully in the Statement of directors' responsibilities set out on page three, 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 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.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial

statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's

website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.

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 Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the

opinions we have formed.

Paul Allan BSocSc FCA (Senior Statutory Auditor)

for and on behalf of F W Berringer & Co

Chartered Accountants

and Statutory Auditors

Lygon House

50 London Road

Bromley

BR1 3RA

23 July 2019

TURNOVER

3

58,888,403

59,385,046

Cost of sales

51,981,978

51,908,739

GROSS PROFIT

6,906,425

7,476,307

Distribution costs

2,900,257

2,936,958

Administrative expenses

3,904,508

3,917,714

6,804,765

6,854,672

OPERATING PROFIT

5

101,660

621,635

Exceptional items

6

123,460

465,685

(21,800

)

155,950

Interest payable and similar expenses

7

265,871

179,049

LOSS BEFORE TAXATION

(287,671

)

(23,099

)

Tax on loss

8

(73,939

)

(84,389

)

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(213,732

)

61,290

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(213,732

)

61,290

FIXED ASSETS

Tangible assets

9

2,933,791

2,906,521

Investments

10

4

4

2,933,795

2,906,525

CURRENT ASSETS

Stocks

11

11,454,441

12,372,308

Debtors

12

7,803,590

6,295,005

Cash at bank

1,146,002

217,554

20,404,033

18,884,867

CREDITORS

Amounts falling due within one year

13

16,910,391

15,097,088

NET CURRENT ASSETS

3,493,642

3,787,779

TOTAL ASSETS LESS CURRENT LIABILITIES

6,427,437

6,694,304

CREDITORS

Amounts falling due after more than one year

14

(20,805

)

-

PROVISIONS FOR LIABILITIES

18

(231,398

)

(305,338

)

NET ASSETS

6,175,234

6,388,966

CAPITAL AND RESERVES

Called up share capital

19

3,250,000

3,250,000

Retained earnings

20

2,925,234

3,138,966

SHAREHOLDERS' FUNDS

6,175,234

6,388,966

The financial statements were approved by the Board of Directors on 23 July 2019 and were signed on its behalf by:

L Pagarani - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2017

3,250,000

3,077,676

6,327,676

Changes in equity

Total comprehensive income

-

61,290

61,290

Balance at 31 December 2017

3,250,000

3,138,966

6,388,966

Changes in equity

Total comprehensive income

-

(213,732

)

(213,732

)

Balance at 31 December 2018

3,250,000

2,925,234

6,175,234

1.	STATUTORY INFORMATION

Natco Foods Limited is a private company, limited by shares , registered in England and Wales. The company's registered

number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with applicable United Kingdom accounting standards,

including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the United Kingdom and

Republic of Ireland' ('FRS 102'), and with the Companies Act 2006. The financial statements have been prepared on the

historical cost basis except for the modification to a fair value

basis for certain financial instruments as specified in the accounting policies below.

Going concern

After reviewing the company's forecasts and projections, the directors have a reasonable expectation that the company has

adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to

adopt the going concern basis in preparing its financial statements.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as

permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d).

Preparation of consolidated financial statements

The financial statements contain information about Natco Foods Limited as an individual company and do not contain

consolidated financial information as the parent of a group. The company is exempt under Section 400 of the Companies

Act 2006 from the requirements to prepare consolidated financial statements as it and its subsidiary undertakings are

included by full consolidation in the consolidated financial statements of its parent, T Choithram & Sons (London) Limited,

.

Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements and estimates.

Assumptions have been made regarding the fair value of foreign exchange forward contracts as described in note 25.

The directors have also made key assumptions regarding the recoverability of trade debtors and have provided accordingly,

as outlined in note 12.

Stock valuation is reviewed at the end of the year, and key assumptions are made in relation to net realisable values and

obsolete or slow-moving stocks. Where necessary the directors include a provision against the stock value, as detailed in

note 11.

The directors consider the useful economic life of fixed assets and estimate depreciation accordingly. Depreciation rates are

noted in the accounting policies and the depreciation totals for the year are included in note 9.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added

tax and other sales taxes.

Turnover is derived from the sale of goods and recognised when the significant risks and rewards of ownership of the goods

have transferred to the buyer, the price is fixed or determinable and the collection of the amount due is reasonably assured.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Short leasehold

-

0 - 10% on cost

Plant and machinery

-

15 - 25% on net book value

Fixtures and fittings

-

20% of the net book value

Motor vehicles

-

25% of the net book value

Tangible fixed assets, other than investment properties, are stated at historical cost less accumulated depreciation and any

accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the

location and condition necessary for it to be capable of operating in the manner intended by management.

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if

there is an indication of a significant change since the last reporting date. Gains and losses on disposals are determined by

comparing the proceeds with the carrying amount and are recognised within 'other operating income or losses' in the

Income Statement.

Impairment of assets

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered

an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is

estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced

to its estimated recoverable amount, and an impairment loss

is recognised immediately in profit or loss.

If an impairment loss subsequently reverses, the carry amount of the asset is increased to the revised estimate of its

recoverable amount, but not in excess of the 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.

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost less impairment.

Stocks

Stocks are valued at the lower of cost and net realisable value. Cost is calculated as follows:-

Raw materials - Cost of purchase on first in, first out basis.

Work in progress and finished goods - Cost of raw materials and labour together with attributable overheads.

Net realisable value is based on estimated selling price less further costs to completion and disposal.

Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair

value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any

impairment.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments

with original maturities of three months or less and bank overdrafts. Bank overdrafts, when

applicable, are shown within borrowings in current liabilities.

Creditors

Short term trade creditors are measured at the transaction price. Other financial liabilities, including bank loans, are

measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective

interest method.

The company provides for annual leave accrued by employees as a result of services rendered in the current period, and

which employees are entitled to carry forward and use within the next 12 months. The provision is measured at the salary

cost payable for the period of absence

Taxation

Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past

reporting periods using the tax rates and laws that that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.

Deferred tax assets are only 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.

If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is

reversed.

Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will be

assessed for tax in a future period, except where:

- the group is able to control the reversal of the timing difference; and

- it is probable that the timing difference will not reverse in the foreseeable future.

A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and

liabilities that are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of

deferred tax recognised.

Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the reporting

date that are expected to apply to the reversal of the timing difference.

With the exception of changes arising on the initial recognition of a business combination, the tax expense (income) is

presented either in profit or loss, other comprehensive income or equity depending on the transaction that resulted in the tax

expense (income).

Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax

assets and deferred tax liabilities are offset only if:

- the company has a legally enforceable right to set off current tax assets against current tax liabilities, and

- the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either

the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net

basis, or to realise the assets and settle the liabilities simultaneously.

Derivative financial instruments

Derivative financial instruments are recognised at fair value using a valuation technique with any gains or losses being

reported in profit or loss. Outstanding derivatives at reporting date are included under the appropriate format heading

depending on the nature of the derivative.

Foreign currencies

Foreign currency transactions of individual companies are translated at the rates ruling when they occurred. Foreign

currency monetary assets and liabilities are translated at the rate of exchange ruling at the balance sheet date. Any

differences are taken to the profit and loss account.

Functional currency and presentation currency

The financial statements are presented in sterling (£), the currency of the primary economic environment in which the

company operates (its functional currency).

Related undertakings

The term related undertakings has been used in these financial statements to refer to companies which are controlled by the

majority shareholders of the group but in which the company has no direct holding or interest.

Pensions

Contributions to the company's defined contribution scheme are charged to the profit and loss account in the year in which

they become payable.

Leased assets

Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are

treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments

payable over the term of the lease. The corresponding leasing commitments are shown as amounts payable to the lessor.

Depreciation on the relevant assets is charged to the profit and loss account.

Lease payments are analysed between capital and interest components so that the interest element of the payment is charged

to the profit and loss account over the period of the lease and represents a constant proportion of the balance of capital

repayments outstanding. The capital part reduces the amounts payable to the lessor.

All other leases are treated as operating leases. Their annual rentals are charged to the profit and loss account on a

straight-line basis over the term of the lease.

Finance costs

All finance costs are recognised in profit or loss in the period in which they are incurred.

Reserves

The Company's reserves are as follows:

- Called up share capital reserve represents the nominal value of the shares issued.

- Profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.

3.

TURNOVER

The turnover and loss before taxation are attributable to the principal activities of the company.

An analysis of turnover by geographical market is given below:

2018

2017

£

£

Europe and UK

57,886,571

58,453,387

USA

305,429

370,752

Canada

284,527

231,688

Middle East

411,876

329,219

58,888,403

59,385,046

The total turnover for both the current and previous period related to the sale of goods.

4.	EMPLOYEES AND DIRECTORS

2018

2017

£

£

Wages and salaries

3,879,287

3,647,266

Social security costs

353,473

336,393

Other pension costs

61,803

42,939

4,294,563

4,026,598

The average number of employees during the year was as follows:

2018

2017

Production

43

49

Warehouse

62

59

Sales and administration

42

48

147

156

2018

2017

£

£

Directors' remuneration

18,000

18,000

5.	OPERATING PROFIT

The operating profit is stated after charging:

2018

2017

£

£

Depreciation - owned assets

455,206

433,697

- assets held under finance leases

5,558

4,770

(Profit)/loss on disposal of fixed assets

924

5,621

Foreign exchange differences

(48,967

)

52,616

Auditors' remuneration - audit services

9,250

8,495

Auditors' remuneration - non-audit services

9,250

8,495

Operating lease rentals - land & buildings

997,750

997,750

Exceptional items (charitable donations)

123,460

465,685

(Gain)/loss on derivative assets

-

18,397

Stock recognised as an expense during the year

48,467,888

49,724,894

Directors' remuneration

18,000

18,000

The remuneration was paid to one director.

6.	EXCEPTIONAL ITEMS

2018

2017

£

£

Exceptional items

(123,460

)

(465,685

)

The exceptional items during the year relate to donations to charities, which included donations to the Human Capability

Foundation (£4,798 - 2017: £415,000) a charity in which Luke Pagarani is a trustee.

7.

INTEREST PAYABLE AND SIMILAR EXPENSES

2018

2017

£

£

Interest payable

263,063

179,049

Hire purchase

2,808

-

265,871

179,049

8.

TAXATION

Analysis of the tax credit

The tax credit on the loss for the year was as follows:

2018

2017

£

£

Current tax:

UK corporation tax

-

3,105

Deferred taxation

(73,939

)

(87,494

)

Tax on loss

(73,939

)

(84,389

)

Reconciliation of total tax credit included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained

below:

2018

2017

£

£

Loss before tax

(287,671

)

(23,099

)

Loss multiplied by the standard rate of corporation tax in the UK of 19% (2017 - 19.250%)

(54,657

)

(4,447

)

Effects of:

Expenses not deductible for tax purposes

176

1,082

Differences between depreciation for the period and capital allowances

81,955

6,470

Group relief

(27,474

)

-

Deferred taxation movement

(73,939

)

(87,494

)

Total tax credit

(73,939

)

(84,389

)