Michael Pavis Limited - Limited company accounts 20.1

REGISTERED NUMBER: 02561389 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

FOR

MICHAEL PAVIS LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Income Statement

8

Other Comprehensive Income

9

Statement of Financial Position

10

Statement of Changes in Equity

11

Statement of Cash Flows

12

Notes to the Statement of Cash Flows

13

Notes to the Financial Statements

14

DIRECTORS:

Mrs J Pavis

Mr J Pavis

SECRETARY:

Mrs J Pavis

REGISTERED OFFICE:

29 Arboretum Street

Nottingham

Nottinghamshire

NG1 4JA

BUSINESS ADDRESS:

Millennium Way East

Phoenix Centre

Nottingham

Nottinghamshire

NG8 6AR

REGISTERED NUMBER:

02561389 (England and Wales)

AUDITORS:

Lemans

Statutory Auditor

29 Arboretum Street

Nottingham

Nottinghamshire

NG1 4JA

Market conditions within the building sector remain challenging. Subsequently sales levels have decreased over the year by 10.6% to £33,005,096 (2018 - £36,903,095)

The purchasing aspect of the business continues to be key and the company maintains a significant level of liquidity to enable the management to act quickly to market changes. Whilst this has helped the company to remain competitive gross margin increased to 22.8% for 2019 (2018 - 20.2%).

Future trading

The outbreak of the COVID-19 pandemic in 2020 has affected all business sectors throughout the UK, with many businesses being forced to close at the end of March 2020 as part of a nationwide lock down imposed by the government. In accordance with this, the company closed its doors and furloughed the majority of its staff for a period of approximately 9 weeks. During this time, it continued to offer a limited level of service via a pre order and collect scheme, providing plumbing supplies for emergency repairs, and to assist key workers and businesses. As a result, turnover for April and May was significantly reduced. However, since reopening in June, sales have bounced back strongly buoyed by the resurgence of the building sector.

Whilst the impact that BREXIT and the COVID-19 pandemic will have on the building sector in the coming months remains uncertain, the directors remain confident about future trading and profitability.

Objectives and policies

The company finances its operations with retained profits. The management's objectives are to retain significant liquid funds to enable it to meet its day-to-day obligations and react quickly to changes in market conditions.

Price risk/credit risk/creditor risk/cash flow risk

Company funds are invested in Sterling bank deposit accounts which are held with reputable United Kingdom banks where there is no price risk exposure.

Price and credit risks are controlled through the initial buying decisions and the constant monitoring of stock levels and sales data. The company has taken out credit insurance over its trade debts to reduce its exposure and has strong credit control procedures in place.

The directors continue to monitor prices and demand and are confident that the commitment to providing a high level of customer service will continue to allow the company to compete favourably in this sector.

SECTION 172(1) STATEMENT

Accountability and transparency with stakeholders are key to the future success of the company. We consider our key stakeholders to be customers, team members, key suppliers and shareholders.

In making decisions regarding the running of the business we always seek to promote the long-term success of the company for the benefit of its members as a whole, and in doing so have regard to:

(a) the likely consequences of any decision in the long term:

The long-term strategy of the company to hold significant liquid funds, enabling it to react quickly and effectively to changes in business activities and environment has helped the company to deal with the affects of the COVID-19 pandemic and adjust its working practices as required. This has enabled the company to provide support and assistance, where needed, to customers via alteration to their credit terms and continue to operate and trade profitably throughout the current year.

(b) the interests of the company employees:

The Directors recognise that the company employees play a substantial role in the ongoing and continued success of the business. In recognition of this the company pays competitive salaries and operates a staff bonus scheme to reward employees commensurate with their respective contribution.

'(c) the need to foster the company's business relationships with suppliers and customers and other:

The company continues to foster good working relationships with suppliers and customers. The operating strategy of the company enables it to pay all suppliers on time and in accordance with agreed payment terms and offering support to its customers as and when needed which has been emphasised more recently in 2020 during the COVID-19 pandemic.

(d) the impact of the company's operations on the community and environment:

In 2011 the company made a significant investment in solar panels, which were fitted to the company's two main warehouses, providing enough electricity for the whole company, with any excess being sold back to the grid.

All members of staff have been recruited locally and live in close proximity to the company's premises.

When needed and where possible the company utilises the services of local business to support its operations.

(e) the desirability of the company maintaining a reputation for high standards of business conduct:

The company continues to provide a high level of service to all its customers and holds a comprehensive range of products to meet demand.

(f) the need to act fairly between members of the company:

Michael Pavis Limited is owned and controlled by members of the Pavis family and long serving company employees. The directors consider that they all act fairly and with the best interests of the members.

ON BEHALF OF THE BOARD:

Mr J Pavis - Director

19 November 2020

The directors present their report with the financial statements of the company for the year ended 31 December 2019.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of merchants to the plumbing and heating trade.

DIVIDENDS

A dividend of £20,000 on the 8% Cum. Red. Pref. Shares was paid on 12th June 2019 in respect of the dividend due for the year ended 31 December 2019.

A dividend of £43,538 on the 9% Cum. Red. Pref. Shares was paid on 26th November 2019 in respect of the dividend due for the year ended 31 December 2019.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2019 to the date of this report.

Mrs J Pavis

Mr J Pavis

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 or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Lemans, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr J Pavis - Director

19 November 2020

Opinion

We have audited the financial statements of Michael Pavis Limited (the 'company') for the year ended 31 December 2019 which comprise the Income Statement, Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Notes to the Statement of Cash Flows, 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 2019 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 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 four, 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.

Adrian Harby FCCA (Senior Statutory Auditor)

for and on behalf of Lemans

Statutory Auditor

29 Arboretum Street

Nottingham

NG1 4JA

19 November 2020

TURNOVER

3

33,005,096

36,903,095

Cost of sales

25,478,917

29,449,951

GROSS PROFIT

7,526,179

7,453,144

Administrative expenses

7,656,848

7,421,971

(130,669

)

31,173

Other operating income

168,445

161,990

OPERATING PROFIT

5

37,776

193,163

Interest receivable and similar income

6

164,294

158,234

PROFIT BEFORE TAXATION

202,070

351,397

Tax on profit

7

56,918

74,741

PROFIT FOR THE FINANCIAL YEAR

145,152

276,656

PROFIT FOR THE YEAR

145,152

276,656

OTHER COMPREHENSIVE LOSS

Own share purchase

(148,750

)

(416,250

)

Income tax relating to other comprehensive loss

-

-

OTHER COMPREHENSIVE LOSS FOR THE YEAR, NET OF INCOME TAX

(148,750

)

(416,250

)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR

(3,598

)

(139,594

)

FIXED ASSETS

Tangible assets

9

2,887,795

3,064,062

Investments

10

1,100

1,100

2,888,895

3,065,162

CURRENT ASSETS

Stocks

11

4,497,865

5,078,396

Debtors

12

5,310,086

6,586,812

Cash at bank and in hand

16,409,392

13,475,423

26,217,343

25,140,631

CREDITORS

Amounts falling due within one year

13

7,851,678

6,882,847

NET CURRENT ASSETS

18,365,665

18,257,784

TOTAL ASSETS LESS CURRENT LIABILITIES

21,254,560

21,322,946

CAPITAL AND RESERVES

Called up share capital

15

775,000

776,250

Capital redemption reserve

16

8,750

7,500

Retained earnings

16

20,470,810

20,539,196

SHAREHOLDERS' FUNDS

21,254,560

21,322,946

The financial statements were approved by the Board of Directors and authorised for issue on 19 November 2020 and were signed on its behalf by:

Mr J Pavis - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 January 2018

780,000

20,746,078

3,750

21,529,828

Changes in equity

Issue of share capital

(3,750

)

-

-

(3,750

)

Dividends

-

(63,538

)

-

(63,538

)

Total comprehensive loss

-

(143,344

)

3,750

(139,594

)

Balance at 31 December 2018

776,250

20,539,196

7,500

21,322,946

Changes in equity

Issue of share capital

(1,250

)

-

-

(1,250

)

Dividends

-

(63,538

)

-

(63,538

)

Total comprehensive loss

-

(4,848

)

1,250

(3,598

)

Balance at 31 December 2019

775,000

20,470,810

8,750

21,254,560

Cash flows from operating activities

Cash generated from operations

1

3,162,748

(2,020,912

)

Tax paid

(108,667

)

(85,840

)

Net cash from operating activities

3,054,081

(2,106,752

)

Cash flows from investing activities

Purchase of tangible fixed assets

(137,369

)

(129,510

)

Sale of tangible fixed assets

66,501

74,050

Interest received

164,294

158,234

Net cash from investing activities

93,426

102,774

Cash flows from financing activities

Share redemption

(1,250

)

(3,750

)

Purchase of own shares

(148,750

)

(416,250

)

Equity dividends paid

(63,538

)

(63,538

)

Net cash from financing activities

(213,538

)

(483,538

)

Increase/(decrease) in cash and cash equivalents

2,933,969

(2,487,516

)

Cash and cash equivalents at beginning of year

2

13,475,423

15,962,939

Cash and cash equivalents at end of year

2

16,409,392

13,475,423

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

31.12.19

31.12.18

£

£

Profit before taxation

202,070

351,397

Depreciation charges

254,698

273,979

Profit on disposal of fixed assets

(7,563

)

(12,694

)

Finance income

(164,294

)

(158,234

)

284,911

454,448

Decrease/(increase) in stocks

580,531

(478,328

)

Decrease/(increase) in trade and other debtors

1,276,726

(635,697

)

Increase/(decrease) in trade and other creditors

1,020,580

(1,361,335

)

Cash generated from operations

3,162,748

(2,020,912

)

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:

Year ended 31 December 2019

31.12.19

1.1.19

£

£

Cash and cash equivalents

16,409,392

13,475,423

Year ended 31 December 2018

31.12.18

1.1.18

£

£

Cash and cash equivalents

13,475,423

15,962,939

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1.1.19

Cash flow

At 31.12.19

£

£

£

Net cash

Cash at bank and in hand

13,475,423

2,933,969

16,409,392

13,475,423

2,933,969

16,409,392

Total

13,475,423

2,933,969

16,409,392

1.	STATUTORY INFORMATION

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

Turnover and other income

Turnover relates to the sale of goods and is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Sale of goods

Turnover from the sale of goods is recognised at the point of sale.

Interest receivable

Interest income is recognised on an accruals basis.

Tangible fixed assets

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

Freehold property

-

2% on cost

Fixtures and fittings

-

33% on reducing balance, 20% on reducing balance and 10% on cost

Motor vehicles

-

25% on reducing balance

Freehold land is not depreciated.

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Stock are valued on a FIFO basis at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, 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 statement of financial position date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position 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.

Pension costs

The company operates defined contribution pension schemes. Contributions payable for the year are charged in the profit and loss account.

Operating leases

Rentals payable under operating leases are charged against income on a straight line basis over the lease term.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

4.	EMPLOYEES AND DIRECTORS

31.12.19

31.12.18

£

£

Wages and salaries

5,736,198

5,630,539

Social security costs

733,709

718,977

Other pension costs

103,736

99,749

6,573,643

6,449,265

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

31.12.19

31.12.18

Administration & Distribution

58

56

31.12.19

31.12.18

£

£

Directors' remuneration

3,211,449

3,482,514

Directors' pension contributions to money purchase schemes

-

1,932

Compensation to director for loss of office

-

30,000

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

2

2

Information regarding the highest paid director is as follows:

31.12.19

31.12.18

£

£

Emoluments etc

3,135,900

3,381,600

5.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

31.12.19

31.12.18

£

£

Depreciation - owned assets

254,698

273,979

Profit on disposal of fixed assets

(7,563

)

(12,694

)

Auditors' remuneration

16,000

16,000

Auditors remuneration for

taxation and other non audit

services

22,000

22,000

Hire of plant and machinery

12,135

12,782

Hire of motor vehicles

35,197

24,692

6.

INTEREST RECEIVABLE AND SIMILAR INCOME

31.12.19

31.12.18

£

£

Deposit account interest

164,294

158,234

7.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

31.12.19

31.12.18

£

£

Current tax:

UK corporation tax

56,918

108,667

Deferred tax

-

(33,926

)

Tax on profit

56,918

74,741

UK corporation tax has been charged at 19% .

Reconciliation of total tax charge 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:

31.12.19

31.12.18

£

£

Profit before tax

202,070

351,397

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

38,393

66,765

Effects of:

Expenses not deductible for tax purposes

2,254

2,438

Depreciation in excess of capital allowances

12,031

36,612

Deferred tax

-

(33,926

)

Pension premiums opening accrual

(2,765

)

(3,932

)

Pension premiums closing prepayment

7,005

6,784

Total tax charge

56,918

74,741

Tax effects relating to effects of other comprehensive income

31.12.19

Gross

Tax

Net

£

£

£

Own share purchase

(148,750

)

-

(148,750

)

31.12.18

Gross

Tax

Net

£

£

£

Own share purchase

(416,250

)

-

(416,250

)

8.

DIVIDENDS

31.12.19

31.12.18

£

£

8%Cum.Red.Pref.Shares shares of £1 each

Final

20,000

20,000

9%Cum.Red.Pref.Shares shares of £1 each

Final

43,538

43,538

63,538

63,538

9.	TANGIBLE FIXED ASSETS

Fixtures

Freehold

and

Motor

property

fittings

vehicles

Totals

£

£

£

£

COST

At 1 January 2019

3,296,095

1,432,876

793,069

5,522,040

Additions

-

15,448

121,921

137,369

Disposals

-

-

(152,523

)

(152,523

)

At 31 December 2019

3,296,095

1,448,324

762,467

5,506,886

DEPRECIATION

At 1 January 2019

838,431

1,249,818

369,729

2,457,978

Charge for year

45,576

93,069

116,053

254,698

Eliminated on disposal

-

-

(93,585

)

(93,585

)

At 31 December 2019

884,007

1,342,887

392,197

2,619,091

NET BOOK VALUE

At 31 December 2019

2,412,088

105,437

370,270

2,887,795

At 31 December 2018

2,457,664

183,058

423,340

3,064,062

Included in the cost of freehold property are depreciable assets amounting to £2,278,482 (2018 - £2,278,482) and land amounting to £1,017,613 (2018 - £1,017,613).