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 DECEMBER 2020
The principal activity of the company during the year continued to be that of manufacturing, retailing and wholesaling of water softeners and accessories.
During 2020 the company was able to meet the challenging market and business conditions by building upon the improved internal and external efficiencies of 2019. The decision of the company to focus on maintaining margins and value despite the significant impact of Covid resulted in a decline in sales of £6,460,414 to £34,819,170 (£41,279,584) however this was offset by an improved gross margin position of 37.9% (2019: 34.3%) and continued improvement in support and administrative efficiencies resulting in a decrease in administrative expenses of £647,472 excluding income from government support during the pandemic. The company has continued to invest in efficiencies, product lines and improvements in key products building on the strong improvements in 2019. As the uncertainties created by Brexit and Covid subside the company is well positioned to grow whilst capitalising on the improved customer support and systems and product range. The company’s net asset position improved for the second year to £6,716,618 (2019: £2,878,864) while cash reserves increased to £1,241,509 (2019: £873,906).
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The management of the business and the execution of the Company strategy are subject to several risks.
The principal risks and uncertainties faced by the company are:
∙Operational risk which is managed and mitigated through the maintenance of appropriate systems, processes and controls and training to staff, to maintain the quality of the production and installation of water softeners. Operational risk is further mitigated by public liability insurance.
∙Product warranty risk which is intrinsic in any business that provides a product. We aim to maintain a high quality production and installation practice, as well as excellent customer support and after-care in order to reduce the product warranty risk.
∙Credit risk is managed by ensuring the credit worthiness of clients and institutions where cash is deposited. Liquidity risk is mitigated by daily monitoring of cash requirements to ensure sufficient cash reserves are in place to meet actual and forecast requirement of the group.
Whilst the company is not immune to the effects of a macro-level recession in the economy, the business model and historic performance have shown that demand for the product is sustainable. Despite this, the effects of Brexit on the business are yet unknown.
The company has considerable financial resources and is expected to continue to generate profits for the foreseeable future. Culligan ownership brings significant financial and operational resources to Harvey to secure its success and management believes the company is well placed to deliver the expectations of the new ultimate owners. Therefore, the directors believe that it is appropriate to consider the company to be a going concern.
Post balance sheet events The ultimate parent company was sold on 30 July 2021 with ultimate ownership transferring from Advent International Corporation to BDT Capital Partners LLC.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their report and the financial statements for the year ended 31 December 2020.
The director who served during the year was:
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 judgments 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 directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in Directors' Reports may differ from legislation in other jurisdictions.
The profit for the year, after taxation, amounted to £3,607,941 (2019 - £2,450,438).
During the year the directors did not recommend a payment of dividend (2019 - £NIL).
The company has chosen in accordance with Section 414C(11) of the Companies Act 2006 (Strategic Report and Directors‘ Report) Regulations 2013 to set out within the company's Strategic Report the Company's Strategic Report Information Required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review and details of the principal risks and uncertainties.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
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 HARVEY WATER SOFTENERS LIMITED
We have audited the financial statements of Harvey Water Softeners Limited (the 'Company') for the year ended 31 December 2020, which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position 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).
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.
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.
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 HARVEY WATER SOFTENERS 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HARVEY WATER SOFTENERS LIMITED (CONTINUED)
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.
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:
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standards 102;
∙UK employment legislation;
∙General Data Protection Regulations; and
∙UK tax legislations.
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
∙We understood how the parent company and the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries through our review of board minutes.
∙The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
°Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
°Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
°Challenging assumptions and judgments made by management in its significant accounting estimates; and
°Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
∙As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
°Timing of revenue recognition; and
°The use of management override to post unusual journals or complex transactions.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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 HARVEY WATER SOFTENERS LIMITED (CONTINUED)
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 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, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
1st Floor
Midas House
62 Goldsworth Road
Surrey
GU21 6LQ
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2020
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 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 28 form part of these financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Harvey Water Softeners Limited is a private company, limited by shares, incorporated and domiciled in England and Wales under the Companies Act 2006. The address of the registered office and principal trading address is given on the Company information page.
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 judgment in applying the Company's accounting policies (see note 3).
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 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of AI Aqua (Luxembourg) S.ar.l as at 31 December 2020 and these financial statements have been filed at Companies' House.
The company has taken advantage of the exemption from preparing consolidated financial statements, contained in section 400 of the Companies Act 2006, on the basis that it is a subsidiary undertaking and its immediate parent undertaking is established under the law of an EEA state.
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
Turnover from the sale of goods is recognised when the risks and rewards of ownership have significantly passed to the customer. This is usually after the "money back guarantee trial period" has concluded. Turnover from services is recognised as it is performed. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only. Grants of a revenue nature are recognised in the Statement of Income and Retained Earnings in the same period as the related expenditure.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
Goodwill
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
Intangible assets are amortised over a period of 5 years.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
Where the company has agreed rental contracts with customers, the water softeners being rented are recognised as tangible fixed assets in the Statement of Financial Position and depreciated per the accounting policy above.
Rental income received from these softeners is recognised in the Statement of Income and Retained Earnings on a monthly basis.
Assets held under finance leases and hire purchase contracts are recognised in the statement of financial position as assets and liabilities at the lower of the fair value of the assets and the present value of the minimum lease payments, which is determined at the inception of the lease term. Any initial direct costs of the lease are added to the amount recognised as an asset.
Lease payments are apportioned between the finance charges and reduction of the outstanding lease liability using the effective interest method. Finance charges are allocated to each period so as to produce a constant rate of interest on the remaining balance of the liability.
Provisions are made where an event has taken place that gives the company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimat can be made of the amount of the obligation.
Provisions are charged as an expense to the Statement of Income and Retained Earnings in the year that the company becomes aware of the obligation, and are measured at the best estimate at the Statement of Financial Position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company has no further payment obligations.
The contributions are recognised as an expense in the Statement of Income and Retained Earnings when they fall due. Amounts not paid are shown in accurals as a liability in the Statement of Financial Position. The assets of the plan are held seperately from the company in independently administered funds.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
A summary of key sources of estimation taken in the preparation of the financial statements is detailed below: Capitalised rental softeners The value at which capitalised rental softeners are carried in the balance sheet is based upon management's best estimate of the age of the softeners held and the depreciation that would have been charged. A summary of significant judgements taken in the preparation of the financial statements is detailed below: Warranty service provision The provision for warranties held at year end is based on management's best estimate of future liabilities arising on those warranty contracts still outstanding as at the year end. The liability is calculated based on a historical warranty service call profile which is inclusive of management's estimation in respect of: a. Production risk for each yearly batch. b. Labour and parts cost in respect of each service call. c. Expectation of the number of breakdowns. Stock provision Obsolete Inventory - Inventory that is no longer of use to sell or include in the production process, inventory that is at the end of its product life cycle, or inventory that has not had any sales or usage during the last 12 months. These stock items are provided for in full. Excess Inventory - Inventory quantities on hand that are in excess of one year usage. These stock items are provided for depending on the usage in the year as a percentage of prior year end quantities. Where stock usage in the year is: - 15% to 25%, a provision of 85% is made - 25% to 50%, a provision of 75% is made - Less than 50%, a provision of 50% is made.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Analysis of turnover by country of destination:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
13.Taxation (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Profit and loss account
The 2019 comparatives have been restated to reclassify an intercompany loan creditor from creditors due within one year to creditors due in greater than one year, as at 31 December 2019.
A further reclassification has been made to the 2019 comparatives to reclassify an amount accrued for costs to replace softeners, from accruals to provisions. These restatements have no impact on the profit and loss reserves brought forward.
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £160,690 (2019 - £143,381). Contributions totalling £105,572 (2019 - £74,638) were payable to the fund at the reporting date and are included in creditors.
28.Other financial commitments
At the balance sheet date the company had entered into an agreement with a supplier and provided £520,000 (2019 - £520,000) worth of funds in advance for which a discount on future purchases will be received.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The Company was a wholly owned subsidiary of HWS Holdings Limited throughout the period. The Company's financial statements are consolidated in the financial statements of AI Aqua (Luxembourg) S.ar.l.
During the year ended 31 December 2020, Advent International GPE VIII Limited Partnership were the ultimate controlling party by virtue of their control of AI Aqua (Luxembourg) S.ar.l. Since the year end, the ultimate controlling party has changed to BDT Capital Partners LLC by virtue of their control of AI Aqua (Luxembourg) S.ar.l.
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