OLIVER_ASHWORTH_(HOLDINGS - Accounts

The directors present the strategic report for the year ended 31 December 2020.

Oliver Ashworth (Holdings) Limited is an investment holding company holding shares in Oliver Ashworth Limited.

Oliver Ashworth Limited has been trading since 1906. The current management team took control of the company in December 2017. Since then there has been a successful turn-around in the fortunes of the company. This has been achieved by the management team having a clear vision regarding the key cornerstones of the business – People, Products and Service. In short, having the best people who can sell the best products to give the best levels of service.

In the previous three years, the management team have been diligent in recruiting the best people in the industry. This has resulted in talented individuals joining the company to compliment the retained staff who have between them industry leading knowledge.

The management team have a very clear strategy around the product offering – tubes, valves, fittings, bracketry and drainage and there has been extensive ongoing rigour around working in partnership with the UK’s leading suppliers.

2020 with all its challenges saw the group produce a better than anticipated sales performance. When COVID took an effect on the turnover, costs were reduced quickly resulting in higher than budgeted EBITDA and net cash positions at the year end. Industrial sales remained strong with a significant project being serviced within the tunnelling sector.

There has been a continued effort by the management team to reduce ‘bad’ stock – that is stock which is not moving in the business. Initiatives such as swapping dead stock for fast moving stock have been a focus for the directors. The planned move of the old Radcliffe branch to a location in Bolton went ahead although COVID meant that the logistics had to be carried out in a very different way. The team essentially carried out the move under their own steam as the contractors who were lined up to facilitate the move were unavailable due to COVID. This showed a great level of commitment and a very high work ethic from the team. To be able to move all the stock and fixtures from a 90,000 sq ft unit to a 50,000 sq ft unit without serious interruption to trade and during a pandemic with virtually no external assistance was a remarkable achievement.

As an accredited IS014001:2015 (Environmental) and IS09001:2015 (Quality) company, work has been carried out by the management team to ensure the group remains compliant. A group transport manager has been employed, essential for ensuring that the company maintains the necessary standards required to comply with the Freight Operators Recognition Scheme and the Silver standard which has been achieved. The company’s fleet of commercial vehicles all have Euro6 engines ensuring a significant reduction in NOx emissions.

During the new financial year, the management team will be focused on the following:

• Ensuring that staff and customers are kept safe and that government guidelines are followed regarding COVID

• Continue the recovery and growth of the group, Sales to grow by minimum 15% YOY, EBITDA £2m and net profit £1m

• Find suitable premises for a new branch in the Midlands

• Monitor fixed and variable costs carefully. Manage cash flow. Be very diligent around the company’s debtors. As customers start to recover in terms of turnover there could be risk to the company.

• Work with the supply chain to keep communication levels high. Monitor the situation carefully in terms of Brexit impact / COVID impact / Price inflation and material shortages.

• The Directors are proud of their team and the ‘people’ within the group are the critical part of being able to deliver the best service. The Directors will strive to continue to make the company a great place to work where colleagues feel valued and respected. The Directors will continue to bring talent into the company.

The outlook for 2021 will bring challenges to the group. COVID, Brexit, Inflation and Material Shortages make trading conditions volatile. The Directors are confident of being able to navigate through these challenges to be able to deliver the budgeted results in the year ahead.

The Directors would like to personally thank all of the group’s suppliers for their support during 2020.

The commitment which the staff of Ashworth have shown during what has been at times a very challenging work environment has been remarkable and shows the level of commitment and quality of people who work within the group.

The Directors would like to thank their dedicated colleagues and their families for their commitment to the company during 2020.

Clearly COVID remains a significant potential ongoing risk to the group. At the time of writing it has become apparent that one of the affects of COVID is shortages (in some cases severe) of materials. This has been exacerbated by Brexit and the delays which have been caused at ports and confusion over legislation and paperwork.

There is constant diligence around the commodity prices as there is a risk to the group if rapid action is not taken in times of sharp inflation or deflation, margins can quickly be eroded if price increases are not passed on to the customer for example. Again, at the time of writing there has been rampant inflation, truly unprecedented in recent years. During 2020 it was beginning to happen and the management team had to ensure very regular communication with their supply chain and also their customers.

Another area of potential risk for the company relates to bad debts. Although the group has credit insurance cover through Euler Hermes and the finance team manage the company’s debtors with absolute diligence, the uncertain times as a result of COVID cause bad debt to be a principal risk. During the financial year the level of bad debt remained remarkable low, testimony to the close management of the debtor book.

Commodity and currency price risk – Still a significant proportion of the group’s product range is steel, and copper based and therefore the Directors constantly manage commodity price and (where product is sourced from outside the UK) currency risk. The business operates tight price controls to ensure margins are protected and sales prices are smoothed as commodity prices fluctuate.

Financial/credit risk – Another area of potential risk for the group relates to bad debts. Although the company has credit insurance cover through Euler Hermes and the finance team manage the company’s debtors with absolute diligence, the uncertain times as a result of COVID cause bad debt to be a principal risk.

During the financial year the level of bad debt remained remarkable low, testimony to the close management of the debtor book.

Market risk – So far, the impact of BREXIT on the construction industry remains unclear.

The outbreak of the pandemic caused sales to drop to around 55% of the original budget in April. The management team had to act quickly and decisively to ensure staff and customer safety and keep the business running. The result was that branches remained fully open and fully operational. Deliveries were made to many essential projects. The company had to utilise the Furlough scheme and made 20 redundancies, whilst this was regrettable, it was essential and showed that the management team acted quickly to ensure the survival of the business.

Business recovered in May and June with the majority of staff returning from Furlough by July. Extensive changes were made to the way in which staff worked to ensure safety and although there were COVID outbreaks in the majority of locations, quick action and a good understanding of the Governments COVID policies meant that staff remained safe and the business continued to operate.

As can be seen by the top line financial performance of the company, there was growth year on year in-spite of COVID.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2020.

The principal activity of the company is that of a holding company to a group that acts as a distributor to the building services and process industry markets.

The results for the year are set out on page 9.

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

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

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 group and company, and of the profit or loss of the group 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 group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 auditor of the company 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 auditor of the company is aware of that information.

We have audited the financial statements of Oliver Ashworth (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2020 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group 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 group's and the parent company's affairs as at 31 December 2020 and of the group's 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 group's and parent 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 group and the parent 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

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

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 parent 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.

Based on our understanding of the group, we identified that the principal risks of non-compliance with laws and regulations related to the non-compliance with UK tax legislation not being adhered to, non-compliance with employment regulations in the UK, breaches of health and safety legislation, non-compliance with import and export restrictions, and other legislation specific to the industries in which the group operates, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements, such as the Companies Act 2006.

We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting of journal entries to improve revenue performance or to manipulate metrics relating to bank covenants, and management bias in key accounting estimates.

Audit procedures performed by the audit engagement team included:

• Review of correspondence with the regulators and government authorities;

• Review of correspondence with legal advisors;

• Enquiries of management at local level;

• Enquiries of the company’s legal team;

• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations which result in an impact to revenue or to metrics relevant to banking covenants;

• Challenging assumptions and judgements made by management in determining significant accounting estimates, in particular in relation to stock costing and provisioning.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £0 (2019 - £0 profit).

Oliver Ashworth (Holdings) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Mill Hill Street, Bolton, BL2 2AB.

The group consists of Oliver Ashworth (Holdings) Limited and all of its subsidiaries.

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 £.

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

The 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 for parent company information presented within the consolidated financial statements:

• Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;

• 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;

• Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

The consolidated group financial statements consist of the financial statements of the parent company Oliver Ashworth (Holdings) Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

All financial statements are made up to 31 December 2020. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Oliver Ashworth Limited has been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of Oliver Ashworth Limited for the 12 month period.

The risks related to the Covid-19 pandemic have been assessed by the Board. To date, the group has experienced a reduction in revenues but due to the actions that the board are taking this is not having a detrimental impact on its financial performance. The group has sufficient financial resources, including the support of its bankers. As a consequence, the directors believe that the group is well placed to manage its business risks successfully despite the current uncertain economic outlook related to the Covid-19 pandemic.

The directors are taking all available steps to efficiently manage cash flow, to reduce costs and to plan appropriate commercial actions to take during this period of instability across the UK economy. This includes exploring all available support being made available from the UK Government.

After reviewing the group’s forecasts and projections, the directors have a reasonable expectation that the group has adequate resources to continue operational existence for the foreseeable future. The directors therefore believe that it remains appropriate to prepare the financial statements on a going concern basis.

Turnover is recognised to the extent that it is probable that the economic benefits will flow to the group and the turnover can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:

Sale of goods

Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

• the group has transferred the significant risks and rewards of ownership to the buyer;

• the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the group will receive the consideration due under the transaction; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Negative goodwill

Negative goodwill represents the difference between the amounts paid on the cost of the business combination and the acquirer's interest in the fair value of the groups share of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition. Negative goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Negative good will is amortised on a straight line basis in the consolidated statement of comprehensive income over its useful economic life of 3 years.

Tangible fixed assets 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:

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 recognised in the profit and loss account.

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. 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 group 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.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Stocks 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 stocks to their present location and condition.

Stocks held for distribution at no or nominal consideration are measured at the lower of the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

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 group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and 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 debtors 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 group 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 group after deducting all of its liabilities.

Basic financial liabilities, including creditors, 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 creditors 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 creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the group 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 group.

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 fixed 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 balance sheet 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.

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 leased 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.

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 group’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.

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 11 for the carrying amount of property, plant and equipment and the depreciation accounting policy note above for the useful economic lives for each class of asset.

The group establishes a reliable estimate of the useful life of goodwill and intangible assets arising on business combinations. This estimate is based on a variety of factors such as the expected use of the acquired business, the expected useful life of the cash generating units to which the goodwill is attributed, any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of similar businesses.

The group measures inventories at the lower of cost and estimated selling price. Management is aware of the requirement to provide for obsolete and slow moving stock and utilise aged stock reports to identify any obsolete and slow moving stock that should be provided against.

Included within exceptional costs above are contractual settlement costs of £9,487 (2019 - £1,715,524 ). Prior year costs related to restructuring.

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

Their aggregate remuneration comprised:

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

Details of the company's subsidiaries at 31 December 2020 are as follows:

Other borrowings are repayable at a notice period of three months. They bear interest at a commercial rate and are secured over certain fixed assets, trade debtors and stock of the group.

Other borrowings carry interest at 6%.

Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

Contributions totalling £30,048 (2019 - £31,658) were payable to the fund at the reporting date and are included in creditors.

The profit and loss reserves include all realised current and prior period retained profits and losses.

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

At the reporting end date the total future minimum sublease payments expected to be received under non-cancellable subleases was £416,667 (2019 - £541,667).

The company has a diverse ownership and therefore the directors consider that there is no ultimate controlling party.

The company has a diverse ownership and therefore the directors consider there is no ultimate controlling party.