ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 JULY 2020
The directors present their annual report and the audited financial statements for the year ended 31 July 2020.
The Company has continued to operate at an acceptable level and expects to do so in the coming year. The retained profit for the year of £6,849,068 (2019 - £7,989,383) has been transferred to reserves. Dividends of £11,883,266 (2019 - £13,009,820) were received from subsidiaries.
During the fiscal year 2020 there was an operating loss of £440 compared to a loss of £408 in the prior fiscal year. Brady European Holdings Limited has £200m of investments in subsidiaries being £168m in BI (UK), £14m in W H Brady NV, £15m in Brady France, £2m in Spain, £1m in Denmark and the remainder in Russia and Romania.
The Company is financed by amounts due to group companies. The Company's activities expose it to a limited number of financial risks including cash flow risk and liquidity risk. These risks are explained in the Directors Report under 'Financial risk management'. The use of financial derivatives is governed by the Company’s policies approved by the board of directors, which provide written principles on the use of financial derivatives to manage these risks. The company does not use derivative financial instruments for speculative purposes.
COVID-19 The impact of the COVID-19 pandemic on the global economic environment has resulted in reduced demand across the majority of our end markets. In the near-term, the COVID-19 pandemic is expected to continue to have adverse effects on our sales, overall profitability, and cash provided by operating activities. As of the date of this filing, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. Brady is deemed an essential business under the majority of local government orders. Our products support first responders, healthcare workers, food processing companies, and many other critical industries. Certain of our businesses were shut down temporarily and many employees worked remotely during the second half of 2020, which had a negative impact on our financial results, operations, and employee productivity. However, the majority of our facilities were operating globally while implementing enhanced safety protocols designed to protect the well-being of our employees. Due to the speed with which the COVID-19 pandemic has developed and the resulting uncertainty, including the depth and duration of any disruptions to customers and suppliers, its future effect on our business, results of operations, and financial condition cannot be predicted. Despite this uncertainty, we believe that our financial resources, liquidity levels and no outstanding debt, along with various contingency plans to reduce costs are sufficient to manage the impact of the COVID-19 pandemic, which may result in reduced sales, reduced net income, and reduced cash provided by operating activities Brexit All risks associated with Brexit have been assessed, the impact to the business is seen as minimal with mitigating actions already taken in terms of potential disruption to supply chain and duties that may be imposed.
The Company is a Holding entity directly and in-directly for many of the Brady Group European entities and businesses. As the Brady Group explores ways to grow both organically and via acquisitions future income of the Company will be affected thereby. As such the Company may seek to acquire new shareholdings or reconsider its funding need. At this time Management has however no clear indications of any said acquisitions or extra-ordinary transactions to that end.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2020
The Board, both individually and together, consider that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172 (1) (a-f) of the Companies Act 2006) in the decisions taken during the Period.
Specific details regarding how this has been achieved for the Company's subsidiaries can be found in the financial statements of its subsidiary, Brady Corporation Limited.
The Company derives its income from intra-group dividends. The directors are satisfied that the company can continue as a going concern due to the profitability of the investments it holds. The company is financed by amounts due to Group companies. The company has very little administrative expenses of its own. The intercompany interest expense due each year is rolling up into long term intercompany capital balance, therefore no cash payments are required in the short term. The company also benefits from being part of a cash pooling structure which gives access to funds held at the group level.
The directors have considered the impact of COVID-19 on the trading subsidiaries as part of the going concern assessment, however given the minimal expenses that this company incurs, its accumulated reserves, its participation in the group's cash-pooling arrangement and the support letter received, they are satisfied that the company can continue as a going concern for at least 12 months from sign off of these financial statements.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 JULY 2020
The directors present their report and the financial statements for the year ended 31 July 2020.
The profit for the year, after taxation, amounted to £6,849,069 (2019 - £7,989,383).
A dividend of £11,883,266 was paid in the year (2019 - £13,009,820)
The directors who served during the year were:
The directors are responsible for preparing the Strategic report, the Directors' report 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 for the Company's financial statements 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 to 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.
The Company's activities expose it to a limited number of financial risks including cash flow risk and liquidity risk. The use of financial derivatives is governed by the Company’s policies approved by the board of directors, which provide written principles on the use of financial derivatives to manage these risks. The company does not use derivative financial instruments for speculative purposes.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2020
To maintain liquidity and ensure that sufficient funds are available for ongoing operations and future developments, the company uses a mixture of long-term and short-term debt finance from other Group companies.
There are no employees of the company other than the directors who are remunerated by other group companies.
As a holding company, the Company does not directly incur greenhouse gas emissions and energy consumption is considered to be minimal. Details of UK emissions and other environmental matters are included within the financial statements of the Company's subsidiary, Brady Corporation Limited.
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
Menzies LLP were appointed as auditors during the year. Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRADY EUROPEAN HOLDINGS LIMITED
We have audited the financial statements of Brady European Holdings Limited (the 'Company') for the year ended 31 July 2020, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of changes in equity and the related notes, 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:
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 United Kingdom, including the Financial Reporting Council'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.
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.
The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our Auditors' report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRADY EUROPEAN HOLDINGS LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
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 Directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the Directors' responsibilities statement on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRADY EUROPEAN HOLDINGS LIMITED (CONTINUED)
This report is made solely to the Company's members in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Ashcombe House
5 The Crescent
Surrey
KT22 8DY
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2020
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STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 11 to 19 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
Brady European Holdings Limited is a private company limited by shares and incorporated in England and Wales. Its registered head office is located at 14 Wildmere Industrial Estate, Banbury, Oxfordshire, OX16 3JU.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Brady Corporation as at 31 July 2020 and these financial statements may be obtained from its registered office; 6555 W. Good Hope Road, PO Box 571, Milwaukee, WI 53201-0571, USA.
The company is a parent company that is also a subsidiary included in the consolidated financial statements of its immediate parent undertaking established under the law of a non-EEA state and is therefore exempt from the requirement to prepare consolidated financial statements under section 401 of the Companies Act 2006.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
2.Accounting policies (continued)
The Company derives its income from intra-group dividends. The directors are satisfied that the Company can continue as a going concern due to the profitability of the investments it holds. The Company is financed by amounts due to Group companies. The company has very little administrative expenses of its own. The intercompany interest expense due each year is rolling up onto long term intercompany capital balance, therefore no cash payments are required in the short term. The Company also benefits from being part of a cash pooling structure which gives access to funds held at the group level.
The directors have considered the impact of COVID-19 on the trading subsidiaries as part of the going concern assessment, however given the minimal expenses that this company incurs, its accumulated reserves, its participation in the group's cash-pooling arrangement and the support letter received, they are satisfied that the company can continue as a going concern for at least 12 months from sign off of these financial statements.
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of comprehensive income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
Interest income is recognised in the Statement of Comprehensive Income using the effective interest method.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Investments in subsidiaries are measured at cost less accumulated impairment.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
2.Accounting policies (continued)
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
There are no critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Key source of estimation uncertainty – recoverability of non-current assets The key judgement is around the valuation and impairment of investments. An impairment exercise is performed on annual basis to review the carrying value of investments and intangible assets. The recoverable amount of investments and intangible assets have been calculated with reference to its value in use. The key assumptions of this calculation are growth rate, discount rate, and forecast cashflows of the trading entities. The cash flow projections were determined using data from the investee company's latest internal forecasts and projections for a further five years. These estimates are extrapolated beyond five years based on the estimated long-term growth rate of 1.8%. The present value of future cash flow is calculated using a discount rate which is derived from the Group’s weighted average cost of capital, as adjusted for the specific risks relating to each platform and geographical region. The WACC used in the discounted cashflow is 11.8%. The carrying value of the investments balance is £200,336,103 (31 July 2019 - £200,336,103).
The audit fee of £2,750 (2019 - £9,500) is borne by Brady Corporation Limited. The non-audit fee of
£1,000 (2019 - £1,000) is also borne by Brady Corporation Limited.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
10.Taxation (continued)
There is also an unrecognised deferred tax asset of £3.4m (2019 - £3.0m) in relation to carried forward tax losses. It is considered unlikely that these losses will be utilised in the foreseeable future. Therefore, the asset has not been recognised on the Statement of Financial Position.
Changes to the UK Corporation tax rates were substantively enacted on 7 September 2016 to reduce the main rate of Corporation tax to 17% from 1 April 2020. A further change was substantively enacted on 17 March 2020 to maintain the rate at 19%.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
Subsidiary undertakings (continued)
Share premium account
Includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium. Capital contribution reserve Funds injected by the parent company. Profit and loss account Includes all current and prior periods retained profits and losses.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2020
The directors regard Brady Corporation incorporated under the laws of the state of Wisconsin, USA as being the ultimate parent controlling undertaking, copies of whose group financial statements are available from its registered office, 6555 W. Good Hope Road, PO Box 571, Milwaukee, WI 53201-0571, USA. The immediate parent undertaking is Brady International Co incorporated under the laws of the state of Wisconsin, USA. The financial statements of Brady Corporation are the largest and only consolidation the Company’s results are reported in to.
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