FARGRO_LIMITED - Accounts

The directors are pleased to present their strategic report and financial statements for the year ending 30 September 2021.

In May 2021, the directors completed a private equity backed management buy-out of the business. This meant that Fargro and its subsidiary company, Cohort (Worthing) Limited, were acquired by Fargroup Limited. Group performance for the period May to September 2021 can be found in the Fargroup Limited statutory accounts.

The management buy-out was a significant event in Fargro’s 77-year history. Although demutualised in 2007, the shareholders represented a continuation of the farmers and growers who formed the original co‑operative. Many had retired from horticulture, so we were pleased to recognise their long-held investment in the business. We are also delighted that we continue to support, as customers, those shareholders’ businesses who remain active in the sector.

Our change in ownership brings greater tactical agility and strategic perspective in our future development.

COVID-19 continued to have a profound effect on the social and business landscape. Despite various and changing pandemic restrictions throughout the year, we continued to provide essential goods and services to the fresh produce sector. Restrictions to overseas vacations meant demand for horticultural products in the ornamentals and garden centre sector was high. Our continued investment in systems and processes enabled the company to operate fully in a COVID-safe environment.

Sales for the year increased by 27% to £30.7m. EBITDA increased 40% to £1.048m from £751k in the previous year. Gross profit (excluding carriage) grew 41% to £8.2m. These are the financial key performance indicators ("KPI's") that the directors have identified to be the most effective method of monitoring the company's performance.

(* excluding exceptional items related to the MBO)

The success of the company’s strategy of product diversification has again been demonstrated by our results. The directors believe that it is essential to continue the policy of investing in appropriate resources to respond to ever-changing customer requirements. These include the continued evolution of our ERP system, B2B and B2C e-commerce, additional sales channels, and reinforced supply chain relationships.

Financial Instruments

The company's principal financial instruments comprise bank balances, bank and asset financing, trade debtors and trade creditors. The main purpose of these instruments is to finance the business’s operations.

The company’s operations expose it to a variety of financial risks that include credit risk, liquidity risk, exchange rate risk and interest rate risk. These risks are limited by the company’s financial management policies and practices as described below:

Credit risk

The company operates a number of policies and procedures designed to mitigate credit risk. These include but are not limited to the maintenance of third party credit insurance for major customers and the use of regular credit reviews for new and existing customers via third party credit rating agencies. This enables management to determine, in their opinion, if a customer has the ability to meet its debts as they fall due. Consequently, the company will only conduct business with those customers deemed to be creditworthy.

Liquidity risk

The company maintains sufficient cash to meet its obligations as and when they become due whilst minimizing interest expense. Available cash headroom is monitored by management and regular discussions take place with the company's bankers as a way of managing this risk. Key factors such as stock and trade debtor levels are reported upon monthly to the board of directors and monitored regularly at their meetings.

Exchange rate risk

The company trades with several major suppliers and, to a lesser extent, customers in currencies other than sterling, mainly the Euro and US dollar. The fluctuating rate movement against the pound of these currencies in recent years has increased the company's exposure in this area. The company manages this risk by identifying and forecasting the potential exposure at an early stage and undertaking forward contracts for purchase of the relevant currencies to fix the major portion of this exposure as early as possible and enable management to determine product pricing accordingly. The company does not use derivative financial instruments for speculative purposes.

Interest rate risk

Bank borrowings have been utilised for specific capital investment projects or in support of short-term working capital requirements which are impacted by the seasonal nature of much of the business. The company manages its interest rate exposure by maintaining a prudent mix of financing and thereby achieves a certain level of protection against interest rate increases.

COVID-19 risk

The company has identified that the main risks associated from COVID-19 relate to supply chain continuity, workforce wellbeing and customer credit risk. The company has addressed these risks by:

• Using a portfolio of many suppliers with a broad geographic spread allowing substitute products where necessary

• Maintaining effective working conditions to facilitate ongoing operations, and

• Maintaining our policies and procedures regarding credit account opening, monitoring and maintenance. Most customers have seen a positive demand for end-product during the pandemic.

Brexit Risk

The company identified that the main risk associated with Brexit was the added complexity of import and export operations. The company is an experienced operator in this aspect and as such is used to the necessary administration impact this will bring. Export risk continues to be considered immaterial based on the volume of exports and the fact that we are not exporting product with short shelf life. Imports have been slower to process with delays at UK docks, but as imported product is not short shelf life this is not a material issue. If product is delayed the company generally has adequate stocks of alternative products with which to support customer demand.

Approved by and signed on behalf of the board

The directors have pleasure in presenting their report for the year ended 30 September 2021.

The principal activity of the company continues to be the supply of sundries, technical and value-added products, and energy to the horticultural industry.

The following directors have held office since 1 October 2020:

The results for the year are set out on page 10.

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

In accordance with the company's articles, a resolution proposing that Carpenter Box be re-appointed as auditor of the company will be put at a General Meeting.

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 financial instruments and the associated risks.

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 maintains directors' and officers' insurance cover for directors and officers of the company against certain personal liabilities which they may incur in the performance of their duties as directors and officers. The upper limit of the indemnity provided by this policy is £1,000,000.

The directors have undertaken a robust assessment of the company's future trading prospects and have concluded that the company and remains a going concern. See note 1.2 to the financial statements for further detail.

The directors are responsible for preparing the Strategic Report, 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 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 UK 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.

We have audited the financial statements of Fargro Limited (the 'company') for the year ended 30 September 2021 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity 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 30 September 2021 and of its loss for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 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.

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

• Obtaining an understanding of the legal and regulatory framework that the company operates in, focusing on those laws and regulations that had a direct effect on the financial statements and operations;

• Obtaining an understanding of the company's policies and procedures on fraud risks, including knowledge of any actual, suspected or alleged fraud; and

• Discussing among the engagement team how and where fraud might occur in the financial statements and any potential indicators of fraud through our knowledge and understanding of the company and our sector-specific experience.

As a result of these procedures, we considered the opportunities and incentives that may exist within the company for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: health and safety, employment law and compliance with the UK Companies Act.

In addition to the above, our procedures to respond to risks identified included the following:

• Making enquiries of management about any known or suspected instances of non-compliance with laws and regulations and fraud;

• Reviewing minutes of meetings of the board and senior management;

• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to stock provisions, depreciation and bad debt provisions; and

• Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.

Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to

recognise the non-compliance.

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 member 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 member those matters we are required to state to the member 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 member for our audit work, for this report, or for the opinions we have formed.

The income statement has been prepared on the basis that all operations are continuing operations.

Fargro Limited is a private company limited by shares incorporated in England and Wales. The registered office is Vinery Fields, Arundel Road (A27), Poling, Arundel, West Sussex, BN18 9PY.

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. Monetary amounts in these financial statements are rounded to the nearest £1.

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

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income.

The financial statements have been prepared on a going concern basis. The directors have considered relevant information, including the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. true

Performance continues to be strong despite the ongoing issues surrounding the COVID-19 pandemic. Historic investment in infrastructure is allowing the company to maintain operations in a safe and effective manner. The growth of interest in gardening was maintained through the 2nd year of pandemic. As reported last year, the HTA estimates that there are around 3 million more people caring for their gardens. The company continues to develop and evolve its offering to ensure a full and diversified portfolio of products to fulfil market requirements.

In response to the ongoing issues relating to the pandemic, the directors have performed a robust analysis of forecast future cash flows taking into account the potential impact on the business of possible future scenarios arising from the impact of COVID-19. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.

Based on these assessments and having regard to the resources available to the entity, the directors have concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.

Revenue represents amounts receivable for the sale of goods and the rendering of services in the course of ordinary activities, net of settlement discounts allowed, VAT and other sales taxes and is recognised when goods and services have been dispatched/supplied.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

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

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

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

Freehold land and buildings whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent impairment losses. The fair value of the freehold land and buildings is usually considered to be their market value. Revaluations will be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

Revaluation gains and losses are recognised in other comprehensive income and accumulated in the revaluation reserve, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains held in the revaluation reserve; such gains and losses are recognised in profit or loss.

The interest in the company's subsidiary is initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

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). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition.

Cost is calculated on an average cost basis.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories 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 within the profit and loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks 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 statement of financial position when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end 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.

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.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss 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 leases asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Tangible fixed assets are depreciated over their useful lives taking into account residual values where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

The group and company maintain a broad range of inventory in order to quickly and efficiently serve the needs of their customers. This includes a number of slower moving lines of inventory. The vast majority of these are non-perishable and management closely monitor the usage and turnover of these lines. Whilst a significant proportion of demand is seasonal with certain products selling predominantly at specific times of the year, management do monitor sales closely, initially seeking alternative sales options for slow moving inventory where demand is weak and then, if necessary, recognising an impairment charge.

The value of inventories held at the reporting date, net of the provisions recognised, is disclosed at note 14.

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

Exceptional expenditure relates to legal and professional fees in relation to the acquisition costs and expenses in relation to the restructuring of the group, including the compensation for loss of office in relation to 6 directors.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2020 - 4).

In the directors opinion the above constitutes key management personnel.

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

In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Land and buildings with a carrying amount of £8,254,000 were revalued at 28 January 2021 by Lambert Smith Hampton independent valuers not connected with the company on the basis of market value. There was no material difference between the valuation and carrying value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.

If revalued assets were stated on an historical cost basis rather than a fair value basis, the carrying value would be £7,705,615.

Details of the company's subsidiaries at 30 September 2021 are as follows:

Amounts owed from group companies have no terms and are therefore repayable on demand. Whilst the classification as amounts falling due within one year reflects the contractual nature of the loans, the company does not seek repayment of these loans until the group companies are financially able to do so. This may be more than 12 months from the reporting date, as part of the company's ongoing financial support of the group companies.

Bank loans are secured by a fixed and floating charge over the assets of the company, its parent and its subsidiary.

The bank holds a fixed charge over the freehold land and buildings as security for these borrowings. Included within bank loans are 4 loans which have bank interest rates ranging from 2.35% to 4.5% above base rate.

Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period (hire purchase agreements, and no restrictions are placed on the use of the assets. The average lease term is 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Finance leased are secured against the assets to which they relate.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The directors have considered the deferred tax liabilities noted above and concluded that it is not possible to state the estimated liabilities which will reverse in the next 12 months. This is due to the level of reversal being dependant on events which are not yet known.

In accordance with section 29 of FRS 102 the deferred tax is being recognised at the tax rates enacted and expected to apply at a future date of disposal. The rate now applied is 25% which is effective for periods commencing on or after 1 April 2023.

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.

Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.

The revaluation reserve shows the movement in fair value of the land and buildings, net of deferred tax.

The company entered into forward foreign exchange contracts to mitigate exchange rate risk for foreign currency payments. There were no outstanding contracts at the year end.

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:

Amounts contracted for but not provided in the financial statements:

During the year the group and company entered into transactions, in the ordinary course of business, with other related parties. Transactions entered into, and trading balances outstanding at 30 September 2021, are as follows:

Terms and conditions of transactions with related parties

Sales and purchases between related parties are made at normal market prices. Outstanding balances with entities are unsecured, interest free and cash settlement is expected within 60 days of invoice. The company has not provided or benefited from any guarantees for any related party receivables or payables. The company has not made any provision for doubtful debts relating to amounts owed by related parties in either the current or comparative year.

The ultimate controlling party is Fargroup Limited by virtue of its majority shareholding, which was acquired on 4 May 2021. Their registered office address is: Vinery Fields, Arundel Road, Poling, Arundel, West Sussex, BN18 9PY. The parent prepares consolidated financial statements, which are available from Companies House.