GRAF_UK_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2021.

Principal activities

The principal activity of the company is the distribution of sustainable water management solutions, products and systems. There has been no significant change in those activities during the year.

Turnover for the year under review was £15,739,000 (2020: £11,645,000). Profit before taxation was £717,000 for the year under review (2020: £519,000). Further details are set out in the statement of income and retained earnings on page 8 and in the related notes. The directors are satisfied with the level of turnover and pleased with the gross margin and increased net profit for the year. The directors are satisfied with the financial position at the year end.

The principal key performance indicators used by management to monitor performance are as follows:

• Changes in sales volumes and sales prices;

• Gross margin; and

• Operating costs and profit indicators

The directors consider that the following are principal risk factors that could materially and adversely affect the company’s future operating profits or financial position:

• Uncertainty in general economic conditions (including as a result of coronavirus)

• Uncertainties relating to the long-term effect of Brexit;

and

• Uncertainties in the world economy stemming from the high prices of raw materials combined with geopolitical tensions in the Middle East and Ukraine.

The directors are confident that steps taken by them, in conjunction with the parent company, will enable them to sustain continued growth. Further details of the directors’ views on the potential impact on the company of the above risks are provided in note 22 of the financial statements. 

The directors expect turnover to continue to increase in 2022.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2021.

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

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 Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments.

The directors are responsible for preparing the annual 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 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.

We have audited the financial statements of Graf UK Limited (the 'company') for the year ended 31 December 2021 which comprise the statement of income and retained earnings, the balance sheet, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 2021 and of its profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

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 and the directors' report.

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 remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the company’s remuneration policies, key drivers for directors’ remuneration and staff bonuses;

• results of our enquiries of management about their own identification and assessment of the risks of irregularities;

• any matters we identified having obtained and reviewed the company’s documentation of their policies and procedures relating to:

• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and

• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

• the matters discussed among the audit engagement team, regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, tax legislation and pension legislation.

As a result of performing the above, we identified management override of controls as a key consideration related to the potential risk of fraud.

Our procedures to respond to risks identified included the following:

• reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

• enquiring of management regarding actual and potential litigation and claims;

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

• reading minutes of meetings of those charged with governance, and asking management whether there had been any correspondence with HMRC; and

• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business reasons behind any significant transactions that are unusual or outside the normal course of the company’s business.

We also communicated potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Graf UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is Regen House, Beaumont Road, Banbury, Oxfordshire, OX16 1RH.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company is reliant upon the financial support of the parent company and a related company, details of which are provided in the related party transactions note. This financial support has continued and, based upon discussions with the ultimate controlling party, the directors consider that it will continue for at least 12 months from the date of approval of the financial statements and have therefore adopted a going concern basis for the preparation of these financial statements.true

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Tangible fixed assets are measured at cost, net of depreciation.

Depreciation is recognised so as to write off the cost of assets less their estimated residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is calculated using the average cost method. At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Basic financial assets, which include debtors and cash and bank balances, are measured at transaction price including transaction costs.

Basic financial liabilities, including creditors and loans from fellow group companies are recognised at transaction price.

The tax expense represents the sum of the tax currently payable or receivable and deferred tax.

Current tax represents the amount of tax payable or receivable in respect of the taxable profit (or loss) for the current or past reporting periods. It is measured at the amount expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

Government grants are recognised as income at the amount received or receivable when there is reasonable assurance that the grant conditions will be met and the grant will be received. Grants under the Coronavirus Job Retention Scheme are recognised over the periods in which the related costs are incurred.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The accounting policies set out the basis of estimates and judgements made during preparations of the financial statements. In the opinion of the directors, there are no material judgements or estimates which affect the financial statements.

An analysis of the company's turnover is as follows:

Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £1,157 (2020 - £3,590).

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

Remuneration relates to the two directors whereas there is only 1 director (2020 – 1) for whom retirement benefits are accruing.

Investment income includes the following:

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

There is no corporation tax charge due to the availability of losses brought forward.

The company has estimated corporation tax losses of approximately £110,000 (2020 - £820,000) available for carry forward against future trading profits, all of which (2020 - £500,000) relates to accelerated capital allowances.

The cost of freehold land which is not depreciated, included within freehold land and buildings above, amounts to £980,053 (2020 - £980,053).

Further details of other creditors and other borrowings are provided in the related party transactions note.

Further details of the loans from group undertakings are provided in the related party transactions note.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

None of the deferred tax liability set out above is expected to reverse within 12 months of the balance sheet date.

Subsequent to announcements made in the March 2021 Budget, the main rate of corporation tax is expected to increase to 25% from 1 April 2023. This was enacted on 10 June 2021, and so the deferred tax liability has been calculated at this higher rate.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Other creditors includes an amount of £3,869,619 (2020 - £3,532,394) due to Otto Graf GmbH, a company registered in Germany and which the parent company, GRAF Holding GmbH, has an interest. The amount is secured on the freehold land and buildings owned by the company.

Other borrowings represents £2,163,180 (2020 - £2,120,760) due to the parent company GRAF Holding GmbH in respect of a loan. This loan is repayable on demand, accrues interest at 2% and is secured on the freehold land and buildings, and other assets, owned by the company.

The immediate and ultimate parent company is GRAF Holding GmbH, a company registered in Germany.

BREXIT

Uncertainties relating to the long-term effect of Brexit together with the unsolved Irish border issue is still one of the most significant events in the UK giving uncertainty to the economy. Therefore, the company largely ceased intra-community deliveries in 2020 which had been taken over by other companies of the Graf group sitting in the EU. Since then the company is successfully focusing its efforts on the further development of the domestic market in Britain ensuring an expanding and profitable business. Hence, the directors are confident that further steps can be taken by them, in conjunction with the parent company, which will enable them to manage the effects of Brexit and sustain growth within their British business.

COVID 19

The directors are confident in the company’s prospect for the 2022 financial year. This confidence, however, is based on the assumption that further setbacks (e.g. by different variant spreading around) for global economic development will be avoided. Further setbacks would pose special risks, the effects of which are difficult to predict, for the global economy and the plastics processing industry, which also affect the company. The biggest risks for the world economy continue to stem from the high prices of raw materials combined with geopolitical tensions in the Middle East and the Ukraine. Like every company, Graf UK still has to deal with challenges in the supply chain, logistics, limited employee availability and partially changed call-off quantities from customers. We are therefore in constant liaison with our customers, suppliers and business partners in a bid to avoid disruptions as far as possible.

However, the current coronavirus crisis still is offering opportunities for the company to prove itself as a stable and reliable business partner and to strengthen its position in the market through this.