The Hawick Cashmere Company Limited - Period Ending 2018-12-31

Registration number: SC128179

The Hawick Cashmere Company Limited

Annual Report and Unaudited Financial Statements

for the Year Ended 31 December 2018

Deans Accountants And Business Advisors Ltd
Chartered Accountants and Business Advisors
27 North Bridge Street
Hawick
Borders
TD9 9BD

The Hawick Cashmere Company Limited

Contents

Company Information	1
Accountants' Report	2
Balance Sheet	3 to 4
Statement of Changes in Equity	5
Notes to the Financial Statements	6 to 14

The Hawick Cashmere Company Limited

Company Information

Chairman

J A Thomson

Directors

Lord C R Sanderson of Bowden C D R Sanderson G W Scott E R Thomson J A Thomson M D Thomson E E S Young

Company secretary

M D Thomson

Registered office

Trinity Mills Duke Street Hawick TD9 9QA

Solicitors

Wright, Johnston and Mackenzie LLP 302 St Vincent Street Glasgow Strathclyde G2 5RZ

Accountants

Deans Accountants And Business Advisors Ltd Chartered Accountants and Business Advisors 27 North Bridge Street Hawick Borders TD9 9BD

Page 1

DEANS

Chartered Accountants

Chartered Accountants' Report to the Board of Directors on the Preparation of the Unaudited Statutory Accounts of
The Hawick Cashmere Company Limited for the Year Ended 31 December 2018

In order to assist you to fulfil your duties under the Companies Act 2006, we have prepared for your approval the accounts of The Hawick Cashmere Company Limited for the year ended 31 December 2018 as set out on pages 3 to 14 from the company's accounting records and from information and explanations you have given us.

As a practising member firm of the Institute of Chartered Accountants of Scotland (ICAS), we are subject to its ethical and other professional requirements which are detailed at http://www.icas.com/ethics/icas-code-of-ethics.

This report is made solely to the Board of Directors of The Hawick Cashmere Company Limited, as a body, in accordance with the terms of our engagement letter. Our work has been undertaken solely to prepare for your approval the accounts of The Hawick Cashmere Company Limited and state those matters that we have agreed to state to the Board of Directors of The Hawick Cashmere Company Limited, as a body, in this report in accordance with ICAEW Technical Release 07/16 AAF. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than The Hawick Cashmere Company Limited and its Board of Directors as a body for our work or for this report.

It is your duty to ensure that The Hawick Cashmere Company Limited has kept adequate accounting records and to prepare statutory accounts that give a true and fair view of the assets, liabilities, financial position and profit of The Hawick Cashmere Company Limited. You consider that The Hawick Cashmere Company Limited is exempt from the statutory audit requirement for the year.

We have not been instructed to carry out an audit or a review of the accounts of The Hawick Cashmere Company Limited. For this reason, we have not verified the accuracy or completeness of the accounting records or information and explanations you have given to us and we do not, therefore, express any opinion on the statutory accounts.

......................................

Deans Accountants And Business Advisors Ltd
Chartered Accountants and Business Advisors
27 North Bridge Street
Hawick
Borders
TD9 9BD

26 April 2019

Page 2

The Hawick Cashmere Company Limited

(Registration number: SC128179)
Balance Sheet as at 31 December 2018

	Note	2018 £	2017 £
Fixed assets
Tangible assets	4	435,057	343,988
Investment property	5	280,000	280,000
Investments	6	50	50
		715,107	624,038
Current assets
Stocks	7	1,687,493	1,719,174
Debtors	8	2,009,589	1,957,260
Cash at bank and in hand		333,744	111,794
		4,030,826	3,788,228
Creditors: Amounts falling due within one year	9	(1,522,522)	(1,246,637)
Net current assets		2,508,304	2,541,591
Total assets less current liabilities		3,223,411	3,165,629
Creditors: Amounts falling due after more than one year	9	(383,827)	(328,494)
Provisions for liabilities		(61,782)	(67,990)
Net assets		2,777,802	2,769,145
Capital and reserves
Called up share capital	10	329,500	329,500
Share premium reserve		110,000	110,000
Capital redemption reserve		95,500	95,500
Other reserves		112,590	112,590
Profit and loss account		2,130,212	2,121,555
Total equity		2,777,802	2,769,145

For the financial year ending 31 December 2018 the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.

Directors' responsibilities:

•	The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476; and
•	The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.

These financial statements have been prepared in accordance with the special provisions relating to companies subject to the small companies regime within Part 15 of the Companies Act 2006.

These financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime and the option not to file the Profit and Loss Account has been taken.

The notes on pages 6 to 14 form an integral part of these financial statements.

Page 3

The Hawick Cashmere Company Limited

(Registration number: SC128179)
Balance Sheet as at 31 December 2018

Approved and authorised by the Board on 26 April 2019 and signed on its behalf by:
 

.........................................

C D R Sanderson
Director

.........................................

E R Thomson
Director

The notes on pages 6 to 14 form an integral part of these financial statements.

Page 4

The Hawick Cashmere Company Limited

Statement of Changes in Equity for the Year Ended 31 December 2018

	Share capital £	Share premium £	Capital redemption reserve £	Other reserves £	Profit and loss account £	Total £
At 1 January 2018	329,500	110,000	95,500	112,590	2,121,555	2,769,145
Profit for the year	-	-	-	-	8,657	8,657
Total comprehensive income	-	-	-	-	8,657	8,657
At 31 December 2018	329,500	110,000	95,500	112,590	2,130,212	2,777,802

	Share capital £	Share premium £	Capital redemption reserve £	Non-distributable reserve £	Profit and loss account £	Total £
At 1 January 2017	329,500	110,000	95,500	-	2,049,197	2,584,197
Profit for the year	-	-	-	-	184,948	184,948
Total comprehensive income	-	-	-	-	184,948	184,948
Transfers	-	-	-	112,590	(112,590)	-
At 31 December 2017	329,500	110,000	95,500	112,590	2,121,555	2,769,145

The notes on pages 6 to 14 form an integral part of these financial statements.

Page 5

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

1	General information

The company is a private company limited by share capital, incorporated in Scotland.

The address of its registered office is:
Trinity Mills
Duke Street
Hawick
TD9 9QA

These financial statements were authorised for issue by the Board on 26 April 2019.

2	Accounting policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of compliance

These financial statements have been prepared in accordance with Financial Reporting Standard 102 Section 1A - 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and the Companies Act 2006.

Basis of preparation

These financial statements have been prepared on a going concern basis, under the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value.

The financial statements are presented in Sterling (£) and rounded to the nearest £0.

Judgements

Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgements and estimates have been included:

Inventory Provisioning - when calculating the inventory provision, management considers the nature and condition of the inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials.

Impairment of debtors - the company makes an estimate of the recoverability value of trade debtors and other debtors. When assessing impairment of trade debtors and other debtors, management considers factors including current rating of the debtor, the ageing profile of debtors and historic experience.

Useful economic lives of tangible assets - the annual depreciation charge for tangible assets is sensitive to change in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on economic utilisation,and the physical condition of the assets.

Revenue recognition

Turnover comprises the fair value of the consideration received or receivable for the sale of goods and provision of services in the ordinary course of the Company’s activities. Turnover is shown net of value added tax, returns and rebates.

Sale of Goods - Wholesale
Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods has transferred to the buyer. This is usually at the point that the customer has signed for the delivery of the goods.

Sale of goods – Retail
Sale of goods are recognised on sale to the customer, which is considered the point of delivery. Retail sales are usually by cash, credit or payment card.

The company does not operate any loyalty programmes.

Page 6

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

Government grants

Government grants in respect of capital expenditure are credited to a deferred income account and are released to profit over the expected useful lives of the relevant assets by equal annual instalments.

Grants of a revenue nature are credited to income so as to match them with the expenditure to which they relate.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates.

Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.

Tax

The tax expense for the period comprises current tax and deferred tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.

Current or deferred taxation assets and liabilities are not discounted.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company operates and generates taxable income.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits in the company. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation allowance is set off against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current or future taxable profit.

Tangible assets

Tangible assets are stated at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The cost of tangible assets includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation

Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:

Asset class	Depreciation method and rate
Land	nil
Buildings	4% straight line
Plant and machinery	15% reducing balance & 10% straight line
Fixtures and fittings	15% reducing balance & 25% straight line
Motor vehicles	25% straight line

Investment property

Investment property is carried at fair value, derived from the current market prices for comparable real estate. The value uses observable market prices, adjusted if necessary for any difference in the nature, location or condition of the specific asset. Changes in fair value are recognised in profit or loss.

Investments

Investments in joint ventures are stated at cost less accumulated impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Page 7

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

Trade debtors

Trade debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business.

Trade debtors are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade debtors is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the first-in, first-out (FIFO) method.

The cost of finished goods and work in progress comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. At each reporting date, stocks are assessed for impairment. If stocks are impaired, the carrying amount is reduced to its selling price less costs to complete and sell; the impairment loss is recognised immediately in profit or loss.

Trade creditors

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.

Trade creditors are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.

Borrowings

Interest-bearing borrowings are initially recorded at fair value, net of transaction costs. Interest-bearing borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the Profit and Loss Account over the period of the relevant borrowing.

Interest expense is recognised on the basis of the effective interest method and is included in interest payable and similar charges.

Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.

Assets held under finance leases are recognised at the lower of their fair value at inception of the lease and the present value of the minimum lease payments. These assets are depreciated on a straight-line basis over the shorter of the useful life of the asset and the lease term. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation.

Lease payments are apportioned between finance costs in the Profit and Loss Account and reduction of the lease obligation so as to achieve a constant periodic rate of interest on the remaining balance of the liability.

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Page 8

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

Defined contribution pension obligation

The company operates defined contribution pension schemes and contributes to the personal pension schemes of certain employees. Contributions are recognised in the profit and loss account in the period in which they become payable in accordance with the rules of the scheme.

Financial instruments

Classification
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its' liabilities.
 Recognition and measurement
Where shares are issued, any component that creates a financial liability of the company is presented as a liability in the balance sheet. The corresponding dividends relating to the liability component are charged as an interest expense in the profit and loss account.
 Impairment
At the end of each reporting period financial instruments measured at fair value are assessed for objective evidence of impairment. The impairment loss is recognised in the profit and loss account.
 

Derivative financial instruments and hedging

Derivatives
The company uses derivative financial instruments to reduce exposure to foreign exchange risk. The company does not hold or issue derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in the fair value of derivatives are recognised in the profit or loss in finance costs or income as appropriate.
 Hedging
The company does not currently apply hedge accounting for interest rate and foreign exchange derivatives.
 

3	Staff numbers

The average number of persons employed by the company (including directors) during the year, was 62 (2017 - 59).

Page 9

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

4	Tangible assets

	Land and buildings £	Furniture, fittings and equipment  £	Motor vehicles  £	Plant and Equipment £	Total £
Cost or valuation
At 1 January 2018	270,763	306,580	15,100	2,336,482	2,928,925
Additions	-	85,304	18,492	58,392	162,188
Disposals	-	-	(15,100)	(3,850)	(18,950)
At 31 December 2018	270,763	391,884	18,492	2,391,024	3,072,163
Depreciation
At 1 January 2018	215,216	294,625	9,792	2,065,304	2,584,937
Charge for the year	3,288	2,497	2,865	57,713	66,363
Eliminated on disposal	-	-	(10,344)	(3,850)	(14,194)
At 31 December 2018	218,504	297,122	2,313	2,119,167	2,637,106
Carrying amount
At 31 December 2018	52,259	94,762	16,179	271,857	435,057
At 31 December 2017	55,547	11,955	5,308	271,178	343,988

Included within the net book value of land and buildings above is £52,259 (2017 - £55,547) in respect of freehold land and buildings.
 

5	Investment properties

	2018 £
At 31 December 2017 and 2018	280,000

Investment property is valued at open market value.

The property at Stow-on-the-wold was valued by Carter Jonas MRICS FAAV on 17 November 2017.

The property at Kelso was valued by D M Hall MRICS on 17 November 2017.

6	Investments

	2018 £	2017 £
Investments in joint ventures	50	50

Joint ventures	£
Cost
At 1 January 2018	50
Provision
Carrying amount
At 31 December 2018	50
At 31 December 2017	50

Page 10

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

7

Stocks

	2018 £	2017 £
Raw materials and consumables	307,650	257,451
Work in progress	96,674	120,090
Finished goods and goods for resale	1,283,169	1,341,633
	1,687,493	1,719,174

8

Debtors

	2018 £	2017 £
Trade debtors	1,399,465	1,396,019
Prepayments	64,169	55,265
Other debtors	545,955	505,976
	2,009,589	1,957,260
Less non-current portion	(75,182)	(81,722)
	1,934,407	1,875,538

Details of non-current trade and other debtors

£75,182 (2017 -£81,722) of Trade debtors is classified as non current.

Page 11

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

9

Creditors

Creditors: amounts falling due within one year

	Note	2018 £	2017 £
Due within one year
Bank loans and overdrafts	11	932,466	724,533
Trade creditors		436,486	334,644
Taxation and social security		20,169	33,475
Accruals and deferred income		130,331	129,980
Other creditors		3,070	24,005
		1,522,522	1,246,637

Creditors: amounts falling due after more than one year

	Note	2018 £	2017 £
Due after one year
Loans and borrowings	11	383,827	322,925
Deferred income		-	5,569
		383,827	328,494

	2018 £	2017 £
Due after more than five years
After more than five years by instalments	206,759	92,508

	-	-

10	Share capital

Allotted, called up and fully paid shares

	2018		2017
	No.	£	No.	£
Ordinary shares of £1 each	329,500	329,500	329,500	329,500

11	Loans and borrowings

	2018 £	2017 £
Non-current loans and borrowings
Bank borrowings	367,541	306,691
Finance lease liabilities	-	16,234
Other borrowings	16,286	-
	383,827	322,925

Page 12

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

	2018 £	2017 £
Current loans and borrowings
Bank borrowings	36,673	46,962
Bank overdrafts	873,879	645,183
Finance lease liabilities	16,166	32,388
Other borrowings	5,748	-
	932,466	724,533

Bank borrowings

Bank Loans - the carrying amount at year end is £404,214 (2017 - £353,653). HSBC holds a first legal charge over 2 Brewery Yard, Stow-on-the-Wold, North Shop, Spread Eagle House, Bridge Street, Kelso and the factory premises at Trinity Mills, Duke Street, Hawick and a bond and floating charge over the whole of the Company's assets.

Other borrowings

Hire Purchase - The carrying amount at year end is £16,166 (2017 - £48,622). The hire purchase agreement is secured on the relevant asset.

12	Financial commitments, guarantees and contingencies

Amounts not provided for in the balance sheet

The total amount of financial commitments not included in the balance sheet is £10,168 (2017 - £15,474). Operating lease commitments with no security given by the company.

13	Related party transactions

Summary of transactions with entities with joint control or significant interest

The company supplies goods and services to such entities in the normal course of business. The company has provided a guarantee in favour of HSBC in respect of the liabilities of certain companies over which it has significant influence. At the balance sheet date, those companies had no liability owing to HSBC.
 
The company has provided unsecured loans to such entities during the year.
 

Loans to related parties

2018	Entities with joint control or significant influence £
At start of period	450,004
Repaid	(17,100)
Interest transactions	17,100
At end of period	450,004

Page 13

The Hawick Cashmere Company Limited

Notes to the Financial Statements for the Year Ended 31 December 2018

2017	Entities with joint control or significant influence £
At start of period	450,004
Repaid	(17,100)
Interest transactions	17,100
At end of period	450,004

14	Financial instruments

Categorisation of financial instruments

	2018 £	2017 £
Financial assets that are debt instruments measured at amortised cost	2,280,080	2,014,460
	2,280,080	2,014,460
Financial liabilities measured at fair value through profit or loss	(7,373)	(1,111)
Financial liabilities measured at amortised cost	(1,752,779)	(1,382,104)
	(1,760,152)	(1,383,215)

Derivatives

Currency Contracts

The company enters into forward currency contracts to mitigate the exchange rate risk to certain foreign currency receivables. At 31 December 2018, the outstanding contracts all mature within 2 months of the year end. (2017: 11 months). As at 31 December 2018, the company was committed to sell US$ 300,000 and receive a fixed sterling amount.

The forward currency contracts are measured at fair value, which is determined using valuation techniques that utilise observable inputs. The key assumptions used in valuing the derivatives are the forward exchange rates for GBP:USD and GBP:CHF.

The company has no interest rate derivative financial instruments (2017: none)

Page 14