Harlow Timber Systems (Eastern) Limited - Limited company accounts 18.2

REGISTERED NUMBER: 01293560 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 30 June 2019

for

Harlow Timber Systems (Eastern) Limited

Previously known as

Bolt Building Supplies Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

6

Report of the Independent Auditors

8

Statement of Comprehensive Income

10

Balance Sheet

12

Statement of Changes in Equity

13

Notes to the Financial Statements

14

DIRECTORS:

J R Harlow

P V J Harlow

R V D Harlow

D Poli

D Broyd

SECRETARY:

D Poli

REGISTERED OFFICE:

c/o Harlow Bros Limited

Hathern Road

Long Whatton

Loughborough

Leicestershire

LE12 5DE

REGISTERED NUMBER:

01293560 (England and Wales)

SENIOR STATUTORY AUDITOR:

Christopher David Hutton FCCA

AUDITORS:

Charnwood Accountants & Business Advisors LLP

Statutory Auditor

The Point

Granite Way

Mountsorrel

Loughborough

Leicestershire

LE12 7TZ

The directors present their strategic report for the year ended 30 June 2019.

REVIEW OF BUSINESS

We aim to present a balanced and comprehensive review of the development and performance of our business during the

year and its position at the year end.

Our review is consistent with the size and non-complex nature of our business and is written in the context of the risks

and uncertainties we face.

The Company is a wholly-owned subsidiary of Harlow Bros Holdings Ltd. The principal activities of the company for

the year under review are that of a timber and building material distributor and manufacturer. We provide products to a

wide range of customers within the house building and construction sector.

Results and performance

The results of company for the year, as set out on pages 10 to 23.

In June 2019 we decided to close down the building materials segment which the disclosure of can be seen on pages 10

to 11. Following a strategic review of the company's operations by the directors it was decided to close this segment of

the business to enable greater focus on their more successful key competencies being the manufacture of the Truss and

Engineered timber products. This is in line with the other Harlow Group companies.

The directors are hopeful that the company's core businesses activities will continue to show improvements. Our

customers appear to be enjoying robust sales despite the continued uncertainty surrounding Brexit.

Turnover has decreased due to the level of competition in the building materials market together with the shift in focus

of our product offering as stated previously. We continue to take action to improve the efficiency and focus of our

operations and we are hopeful that this and the refocus of our products will show positive results by July 2020. As with

any exercise like this, there is a time lag until results are realised within the year end financials; however, we have begun

to see small signs of improvements from the increase in gross margin over the year. The company has made a

considerable effort to control its costs post year end and has continued to invest in all areas of the business to ensure that

we remain competitive whilst offering a quality product and first class customer service.

Staff numbers have remained consistent with prior year. We are always looking to continually improve their knowledge

and identify any training needs to better aid the development and efficiency of the workforce to help with the delivering

of the revised company strategy. This includes investment in trainees and apprentices, which are important to ensure that

we have new talent coming through the business, and continued investment in internal systems to manage the change in

skills within the workforce.

Overall, we are disappointed with the current years trading results with the reduction in the value of shareholders' funds

of the company and we have taken more robust action to turn these results around in the past 12 months. Whilst this is a

short to medium term project, we are committed to seeing it through to a successful outcome.

PRINCIPAL RISKS AND UNCERTAINTIES

The process of risk management is applied through a combination of policies, procedures and internal controls. All

policies are subject to Board approval and ongoing review by management. Compliance with regulation, legal and

ethical standards is a high priority for the company to ensure they are compliant and able to continue trading

successfully.

The finance team is responsible for ensuring that effective internal controls exist to manage the financial risks and that

these controls operate effectively for the benefit of the business.

We the directors endeavour to identify the risks that the company faces on a day to day basis. This is to ensure we have

the financial strength and operational capacity to support the growth of the business. The current risk factors below are

those that are considered by the board to be material to the company. However, we also recognise that we operate in a

fast paced commercial environment which is constantly evolving, where new risks may appear or immaterial risks may

become more important, and the directors will develop appropriate strategies as these risks appear.

Competitive market pressure is an ongoing risk for the company. To mitigate this risk the company strives to understand

its customers' requirements, markets and competitors, to ensure we continue to provide quality products and seek

expansion by organic growth. Given the potential economic volatility seen in our core business markets, we are

continuously monitoring trends and looking for ways in which to be more efficient and improve our working capital

requirements. The production of regular financial information helps the board to identify and assess current trends.

Key parts of our business, such as timber raw material purchasing, are affected by fluctuations in price and supply of

materials, although purchasing policies and practices in place seek to mitigate, where practicable, such risks. We procure

materials from long standing and reliable supply partners which ensures we can meet production requirements. We

benefit from being part of the Harlow group of companies and are able to take advantage of combined strategic

purchasing opportunities allowing us to respond proactively to changes in market conditions.

Other than the general uncertainty that surrounds the decision to leave the European Union, Brexit has not yet had a

significant impact on the business or operations so far. The company's relationship with its supply partners in Europe is

of great importance to us and we have the flexibility to procure timber from a wide range of reliable supply sources to

help mitigate changes in market conditions.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The activities of the company expose it to a number of financial risks during the normal course of the company's

business. The company aims to limit undue exposure to business and financial risks and ensure sufficient working capital

exists to fund operations and to mitigate any potential negative effects on the company's assets and profitability. The

directors consider such risks and uncertainties to the business at this point in time are:

Customer mix

There is a risk that the company becomes too dependent on a particular customer and product range and efforts are made

to ensure that our exposure in this respect is minimised by continually striving to expand the range of products and

services on offer to enhance the customer experience and build relationships with key customers.

Credit risk

There is a risk that one party to a financial instrument will cause a financial loss for the other party by failing to

discharge an obligation. Company policies are aimed at minimising such losses and require that deferred terms are only

granted to customers who demonstrate an appropriate payment history and satisfy credit worthiness procedures. Details

of the company's debtors are shown in the notes to the financial statements.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED

Competitor risk

The company operates in a highly competitive market balancing both customer requirements and market pressures. The

directors review and monitor these factors to ensure the company's competitiveness is upheld to enable the company to

maintain its long term relationships with key customers and reputation for quality. We aim to improve, strengthen and

maintain the brand to ensure we maintain the right levels of investment and innovation in our customer offerings.

Liquidity risk and going concern

The company is exposed to liquidity risk as sufficient funds are required to support trading and financing activities. The

company regularly monitors its liquidity position and reports to the parent company board to ensure that sufficient funds

are available to meet both current and future requirements. This assessment of working capital requirements is reviewed

by the parent company for their financial support where additional funds are required.

With the above business risks and uncertainties in mind, we are aware that any plans for the future development of the

business may be subject to unforeseen future events outside of our control.

The company's business activities, together with the factors likely to affect its future development and position, are set

out in the business review at the beginning of the Strategic Report on page 3.

The company is working hard to generate positive cash flows on its own account in the foreseeable future and is working

closely with the parent company board on ensuring that the turnaround strategy is a success.

The directors, having assessed the responses of the directors of the company's parent Harlow Bros Holdings Limited to

their enquiries, have no reason to believe that a material uncertainty exists that may cast significant doubt about the

ability of the Harlow group to continue as a going concern or its ability to continue with the current banking

arrangements & the continuation of its financial support through the transition of the business in line with the groups

overall strategy of the operations of the company. The company participates in the group's centralised treasury

arrangements and so shares banking arrangements with its parent and fellow subsidiaries.On this basis we continue to

adopt the going concern basis of accounting in preparing the annual financial statements.

Health and Safety

We are conscious of our corporate responsibilities to all our stakeholders and to society as a whole. Health and safety,

environmental matters, staff training and equal opportunities are key areas relevant to the company's business activities.

We are keen to remain proactive in assessing and minimising the risks in all areas of the business and educating the

workforce to provide as safe a working environment as possible for our staff.

The Group employs a full-time Health and Safety Officer who reports to the board regularly on working practices and

improvements that can be made to increase safety for the staff. Employees are encouraged to take personal responsibility

for making sure their actions and behaviour maintain safety for all staff members during the working day.

KEY PERFORMANCE INDICATORS

We consider that our key financial performance indicators are those that communicate the financial performance and

strength of the company, these being turnover, gross margin, operating profit and earnings before interest tax

depreciation and amortisation (EBITDA). The company also closely monitors other internal KPI's.

We continually aim to develop our business with selective expansion and contraction in markets in order to work

towards increasing overall gross margin. Gross margin provides an indication of the quality of turnover growth and is

also a measure of value added by the company, reflecting the quality of the goods and services offered. Due to this

strategy turnover for the year decreased approximately 16% with gross profit margins increasing again this time by 0.6%

to 11.7% (2018: 11.1%).

Overall, the company's EBITDA has declined to a £665,365 loss (2018: £233,433 loss). This trend follows through to a

loss before tax increasing to £959,979 (2018: £488,970). Our strategy to recover and improve the financial performance

of the business going forward has been commented on above in the review of business in more detail.

FINANCIAL INSTRUMENTS

A summary of the company financial instruments and related disclosures affecting the financial statements are set out in

the notes to the accounts. The financial risk management objectives and policies of the entity and its exposure to related

risks are covered above

FUTURE DEVELOPMENTS

The directors are closely the monitoring performance against the strategic review plans of the company. The directors

anticipate the business environment will remain competitive, but they believe that the company will be in a stronger

position to meet these challenges, with a new management team in place at operational level to ensure the plan is

delivered over the medium term with the parent company support when required.

ON BEHALF OF THE BOARD:

R V D Harlow - Director

20 March 2020

The directors present their report with the financial statements of the company for the year ended 30 June 2019.

CHANGE OF NAME

The company passed a special resolution on 13 December 2019 changing its name from Bolt Building Supplies Limited to Harlow Timber Systems (Eastern) Limited.

DIVIDENDS

No dividends will be distributed for the year ended 30 June 2019.

DIRECTORS

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

J R Harlow

P V J Harlow

R V D Harlow

D Poli

Other changes in directors holding office are as follows:

S G Burgess - resigned 13 July 2018

D Broyd - appointed 13 July 2018

DISCLOSURE IN THE STRATEGIC REPORT

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 Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and

Reports) Regulations 2008 to be contained in the directors' report. It has done so in respect of future developments and

financial instruments.

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;

-	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.

AUDITORS

The auditors, Charnwood Accountants & Business Advisors LLP, have expressed their willingness to continue in office

as auditors and will be proposed for re-appointment at the forthcoming Annual General Meeting in accordance with

Section 485 & 487 of the Companies Act 2006.

ON BEHALF OF THE BOARD:

R V D Harlow - Director

20 March 2020

Opinion

We have audited the financial statements of Harlow Timber Systems (Eastern) Limited (the 'company') for the year

ended 30 June 2019 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 30 June 2019 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 Report of the Auditors

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 six, 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 a Report of the Auditors 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 Report of the Auditors.

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 a Report of the Auditors 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.

Christopher David Hutton FCCA (Senior Statutory Auditor)

for and on behalf of Charnwood Accountants & Business Advisors LLP

Statutory Auditor

The Point

Granite Way

Mountsorrel

Loughborough

Leicestershire

LE12 7TZ

20 March 2020

TURNOVER

7,254,436

5,386,256

12,640,692

Cost of sales

(6,320,758

)

(4,834,740

)

(11,155,498

)

GROSS PROFIT

933,678

551,516

1,485,194

Distribution costs

(88,438

)

(67,326

)

(155,764

)

Administrative expenses

(1,479,843

)

(809,614

)

(2,289,457

)

(634,603

)

(325,424

)

(960,027

)

Other operating income

12

-

12

OPERATING LOSS

4

(634,591

)

(325,424

)

(960,015

)

Interest receivable and similar income

-

36

36

Amounts written off investments

-

-

-

LOSS BEFORE TAXATION

(634,591

)

(325,388

)

(959,979

)

Tax on loss

5

(61,824

)

61,824

-

LOSS FOR THE FINANCIAL YEAR

(696,415

)

(263,564

)

(959,979

)

OTHER COMPREHENSIVE INCOME

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(959,979

)

TURNOVER

4,668,028

10,369,223

15,037,251

Cost of sales

(4,058,070

)

(9,306,714

)

(13,364,784

)

GROSS PROFIT

609,958

1,062,509

1,672,467

Distribution costs

(151,454

)

(52,801

)

(204,255

)

Administrative expenses

(1,128,608

)

(829,811

)

(1,958,419

)

(670,104

)

179,897

(490,207

)

Other operating income

663

-

663

OPERATING (LOSS)/PROFIT

4

(669,441

)

179,897

(489,544

)

Interest receivable and similar income

574

-

574

Amounts written off investments

-

-

-

(LOSS)/PROFIT BEFORE TAXATION

(668,867

)

179,897

(488,970

)

Tax on (loss)/profit

5

50,417

(34,180

)

16,237

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(618,450

)

145,717

(472,733

)

OTHER COMPREHENSIVE INCOME

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(472,733

)

FIXED ASSETS

Tangible assets

7

1,349,937

1,451,573

CURRENT ASSETS

Stocks

8

571,998

924,976

Debtors

9

2,113,710

2,787,050

Cash at bank and in hand

662,139

478,926

3,347,847

4,190,952

CREDITORS

Amounts falling due within one year

10

2,765,425

2,950,182

NET CURRENT ASSETS

582,422

1,240,770

TOTAL ASSETS LESS CURRENT LIABILITIES

1,932,359

2,692,343

CREDITORS

Amounts falling due after more than one year

11

(1,880,000

)

(1,680,000

)

PROVISIONS FOR LIABILITIES

14

(14,931

)

(14,936

)

NET ASSETS

37,428

997,407

CAPITAL AND RESERVES

Called up share capital

15

600,000

600,000

Retained earnings

16

(562,572

)

397,407

SHAREHOLDERS' FUNDS

37,428

997,407

The financial statements were approved by the Board of Directors on 20 March 2020 and were signed on its behalf by:

R V D Harlow - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 July 2017

600,000

870,140

1,470,140

Changes in equity

Total comprehensive income

-

(472,733

)

(472,733

)

Balance at 30 June 2018

600,000

397,407

997,407

Changes in equity

Total comprehensive income

-

(959,979

)

(959,979

)

Balance at 30 June 2019

600,000

(562,572

)

37,428

1.	STATUTORY INFORMATION

Harlow Timber Systems (Eastern) 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.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The

Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006 and

under the provision of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations

2008. The financial statements have been prepared under the historical cost convention.

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires

management to exercise its judgement in the process of applying the company accounting policies. The areas

involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant

to the financial statements, are disclosed in note 2 below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

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 33 Related Party Disclosures paragraph 33.7.

Significant judgements and estimates

In the application of the company's accounting policies, which are described in the accounting policies below,

management is required to make judgements, estimates and assumptions about the carrying values of assets and

liabilities that are not readily apparent from other sources. The estimates and underlying 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 if the revision affects only that period, or in the

period of the revision and future periods if the revision affects both current and future periods.

Judgements

In preparing these financial statements, the directors have made the following key judgements that have a

significant effect on the amounts recognised in the financial statements as described below.

- Determine whether there are indicators of impairment of the company's tangible and intangible assets along

with residual values and asset lives. The residual value is the net realisable value of an asset at the end of its

useful economic life. The company has taken an assessment of the residual values that are appropriate for the

business and reviews this assessment annually. Note 7 provides details of the value of fixed assets capitalised.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,

that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities

within the next financial year, are described below. The Company based its assumptions and estimates on

parameters available when the financial statements were prepared. Existing circumstances and assumptions about

future developments, however, may change due to market changes or circumstances arising that are beyond the

control of the Company. Such changes are reflected in the assumptions when they occur.

a) Establishing useful economic lives for depreciation purposes of property, plant and equipment

Long-lived assets, consisting primarily of property, plant and equipment, comprise a significant portion of the

total assets. The annual depreciation charge depends primarily on the estimated useful economic lives of each

type of asset and estimates of residual values. The directors regularly review these asset useful economic lives

and change them as necessary to reflect current thinking on remaining lives in light of prospective economic

utilisation and physical condition of the assets concerned. Changes in asset useful lives can have a significant

impact on depreciation and amortisation charges for the period. Detail of the useful economic lives is included in

the accounting policies.

b) Providing for bad and doubtful debts

The company makes an estimate of the recoverable value of trade and other debtors. The company uses estimates

based on historical experience in determining the level of debts, which the company believes, will not be

collected. These estimates include such factors as the current credit rating of the debtor, the ageing profile of

debtors and historical experience. Any significant reduction in the level of customers that default on payments or

other significant improvements that resulted in a reduction in the level of bad debt provision would have a

positive impact on the operating results. The level of provision required is reviewed on an on-going basis.

Turnover

Turnover represents the amounts (excluding value added tax) derived from the provision of goods and services

to customers during the year.

Revenue is recognised when the significant risks and rewards of the goods or services provided have transferred

to the buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits

associated with the transaction will flow to the company.

Revenue is measured at the fair value of the consideration receivable from the sale of goods and services to third

parties after deducting discounts, allowances for customer loyalty and other promotional activities. Revenue

includes duties which the company pays as principal, but excludes amounts collected on behalf of other parties,

such as value added tax or other sales taxes.

Revenue of the company comprises the following key streams:

Sale of goods

Revenue on the sale of goods delivered is recognised when goods have been dispatched to the customer.

Tangible fixed assets

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

Short leasehold

-

2% on cost

Furniture and equipment

-

20% on cost and 10% on cost

Plant and machinery

-

15% on cost

Motor vehicles

-

25% on cost

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost

includes the original purchase price, costs directly attributable to bringing the asset to its working condition for

its intended use.

Stocks

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to

complete and sell, and after making due allowance for obsolete and slow moving items.

The cost of stock is calculated on the weighted average cost principle on a first in first out basis and includes

expenditure incurred in acquiring stock, production or conversion costs, and other costs incurred in bringing

them to their existing location and condition. Stocks are recognised as an expense in the period in which the

related revenue is recognised.

Cost for raw materials and consumables are at the purchase cost to the company. Cost for Work in progress and

finished goods includes all direct expenditure.The cost of work in progress and finished goods includes

production overheads and the attributable proportion of indirect overheads based on the normal level of activity.

At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced

to its selling price, in the ordinary course of business, less costs to complete and sell. The impairment provision

is determined primarily by future demand forecasts. The write down is measured as the difference between the

calculated cost of the stock and market based upon assumptions about future demand and charged to the

provision for stock, which is a component of cost of sales.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive

Income, except to the extent that it relates to items recognised in other comprehensive income or directly in

equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at

the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the

lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to profit or loss in the period to which they relate.

Going concern

The accounts have been prepared on the going concern basis due to the confirmation of continuing financial

support from the parent company.

3.	EMPLOYEES AND DIRECTORS

30.6.19

30.6.18

£

£

Wages and salaries

2,515,758

2,070,355

Social security costs

10,727

-

Other pension costs

52,790

32,387

2,579,275

2,102,742

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

30.6.19

30.6.18

Directors

1

1

Management/Admin

23

20

Production

46

47

70

68

30.6.19

30.6.18

£

£

Directors' remuneration

99,064

85,000

Directors' pension contributions to money purchase schemes

4,437

-

4.	OPERATING LOSS

The operating loss is stated after charging:

30.6.19

30.6.18

£

£

Hire of plant and machinery

7,303

7,313

Depreciation - owned assets

294,614

255,537

Loss on disposal of fixed assets

4,069

-

Auditors' remuneration

11,125

10,813

5.

TAXATION

Analysis of the tax credit

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

30.6.19

30.6.18

£

£

Deferred tax

-

(16,237

)

Tax on loss

-

(16,237

)

Reconciliation of total tax credit included in profit and loss

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

explained below:

30.6.19

30.6.18

£

£

Loss before tax

(959,979

)

(488,970

)

Loss multiplied by the standard rate of corporation tax in the UK of 19% (2018 - 19%)

(182,396

)

(92,904

)

Effects of:

Expenses not deductible for tax purposes

1,987

1,682

Depreciation in excess of capital allowances

28,565

20,175

Deferred tax movement

-

(16,237

)

Group relief of losses

151,844

71,047

Total tax credit

-

(16,237

)