PALACE_CHEMICALS_LIMITED - Accounts
PALACE_CHEMICALS_LIMITED - Accounts
The directors present the strategic report for the year ended 31 August 2018.
As shown in the company’s statement of comprehensive income, revenue for the year has decreased by 2.2% and profit before tax has reduced as a result. However, the directors are pleased to report that the underlying performance of the business is not inconsistent with the previous period as the company had seen the benefit from a one off contract in the year to 31 August 2017. In the challenging market conditions that existed in the year, in addition to increased pressure on employment costs, the directors consider this to be a very strong performance.
The company continues to maintain strong controls over fixed costs and other overheads whilst also investing in manufacturing capability, quality, marketing and research and development to enable it to achieve its profitability targets.
There are a number of risks and uncertainties that can impact on the performance of Palace Chemicals Limited, some of which are beyond the control the company. The company monitors market trends and risks on an ongoing basis and takes corrective action as and when required. In addition, the directors are aware of the risks Brexit may have on the business.
Competitive pressure in all the markets it operates in are an ongoing risk to the company. To manage this risk the company maintains strong relationships with its customers with high levels of customer service and product quality, range and value.
Fluctuations in the price and supply of key raw materials, including purchases from overseas, may also affect the profitability of the business. Purchasing policies and practices mitigate, where practicable, these risks.
Liquidity, foreign currency and credit risks are set out in the directors’ report.
Key performance indicators continue to be used throughout the business, and the financial indicators such as turnover, gross profit margin, profit before tax, trade debtors and stock levels are set out in the body of the accounts.
The cash balance at the year end was positive and the company maintains strong cash control which has enabled it to meet its obligations to suppliers and other creditors as they fall due.
The directors also consider other non-financial indicators to monitor the performance of the business. These include:
The company’s ability to react to market conditions with a flexible approach to their manufacturing and distribution capabilities.
Research and development. The company continues with a robust policy to develop new products to enhance its position in the marketplace.
Employees - The company continues to invest in its strategies for the training, development and retention of employees. Average headcount for 2018 was 79 (2017: 80).
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 August 2018.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 7.
A dividend of £606,267 (2017: £606,267) was paid to Micrown Limited during the year.
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The company’s principal foreign currency exposures arise from trading with overseas companies. Company policy permits but does not demand that these exposures may be hedged in order to fix the cost in sterling.
Investments of cash surpluses are made through banks and companies which must fulfil credit rating criteria approved by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
The external commercial environment is expected to remain competitive in 2018/19 but management remain confident that the company will maintain its current level of performance in the future.
In accordance with the company's articles, a resolution proposing that DSG be reappointed as auditor of the company will be put at a General Meeting.
select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable UK 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.
give a true and fair view of the state of the company's affairs as at 31 August 2018 and of its profit 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 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 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 included in the annual report, other than the financial statements and our auditor’s 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 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.
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.
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 Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s 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 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.
Palace Chemicals Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 49, Compass Industrial Park West, Speke, Liverpool, L24 1YA.
The financial statements are prepared under the historical cost convention modified to include the revaluation of leasehold land and buildings at deemed cost.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
FRS 102 allows a qualifying entity a number of disclosure exemptions subject to certain conditions being satisfied. These are the notification to the company's shareholders of the intention to take advantage of the allowable exemptions and the company receiving no objections to this intention.
On the basis that the company has satisfied the above stated conditions it has taken advantage of the following exemptions:
(i) exemption from preparing a statement of cash flows, on the basis that it is a qualifying entity whose parent company prepared consolidated financial statements include a Statement of Cash Flows;
(ii) exemption from disclosing transactions and balances with companies that are wholly owned subsidiaries within the same group.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
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 despatch of the goods or upon collection), 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.
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.
Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the land and buildings is usually considered to be their market value.
Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and losses are recognised in profit or loss.
At each reporting period end date, the company 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.
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.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in 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, including creditors, bank loans and loans from fellow group companies, 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 though 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.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Management reviews the carrying amount of trade receivables on a regular basis to identify items where recoverability may be in doubt. The timing and quantum of any impairment of receivables is a matter of management judgement. Details of such impairments are detailed in Note 15 to these financial statements.
The company maintains material levels of stock in order to satisfy current and future sales orders. Management reviews stock on a regular basis to ensure that there is no material accumulation of items that are obsolete or otherwise impaired. The timing and quantum of any stock impairment is a matter of management judgement which is also partially dependent on projected sales activity which is an area of uncertainty. Details of such impairments are detailed in Note 14 to these financial statements.
Management review the useful economic life and residual value of their fixed assets. The assets are then depreciated over their useful economic life less any residual value. Both the useful economic life and residual value of an asset are a matter of management judgement. Details of the depreciation rates can be found in Note 1.4 to these financial statements.
An analysis of the company's turnover is as follows:
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2017 - 3).
The directors are considered to be the key management personnel.
Investment income includes the following:
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:
If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
An impairment loss of £117,344 (2017: £159,930) has been recognised against stock.
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Of the deferred tax liability set out above, £28,100 is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
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.
The charge to profit or loss in respect of defined contribution schemes was £13,497 (2017: £8,297).
The separate classes of shares shall be considered as being identical in all respects except for dividend levels which are set for each class.
There is a bank cross guarantee with Micrown Limited, the parent company. The potential exposure to the company at 31 August 2018 is £nil (2017: £nil).
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:
The parent company is Micrown Limited, a company incorporated in Great Britain and registered in England and Wales. The registered office is Unit 49 Compass Industrial Park West, Speke, Liverpool, L24 1YA. Micrown Limited prepares consolidated financial statements which includes Palace Chemicals Limited.
The smallest and largest group into which the results of this entity are consolidated is that headed by Micrown Limited.