ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
COMPANY INFORMATION
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DERMAL LABORATORIES LIMITED
CONTENTS
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DERMAL LABORATORIES LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2021
The principal activities of the company continue to be pharmaceutical research, development, manufacture, marketing and distribution.
The past year has seen gyrations of sentiment, and associated restrictions and behaviour, in relation to the Covid pandemic. Staff have adjusted their work patterns, as necessary, to maintain high levels of activity across the company. They, and their managers, have coped with extraordinary resilience and inventiveness to ensure the business carried on as near to normally as possible. As a result, and despite massive disruption to the relationship between patients and their GPs, prescription sales volumes have remained steady. If anything, maintaining supply has proved to be a more daunting challenge than stimulating sales, but we have managed to avoid any significant out-of-stock issues through careful planning and by fulfilling an increasing proportion of orders using in-house manufacture.
Ways of working have changed dramatically to comply with the Covid-19 pandemic restrictions, and a fulsome tribute is due to all staff and managers who have made the necessary adjustments, to both their working and home life, to keep the show on the road. Supply chain problems, arising from a post-pandemic economic resurgence, coupled with some Brexit-related issues, continue to pose a serious challenge to production planning. Adapting our medical device business to fulfil the demanding requirements of MDR (Medical Device Regulation), in succession to the previous MDD (Medical Device Directive), has absorbed very significant resources, in order to meet prescribed deadlines, and the process continues into the new year.
Prescription sales have remained broadly on a par with last year. Gross profit margins continue under pressure, especially with recent upsurges in raw material costs and supply chain difficulties, but are only slightly down, whilst operating profit is consistent with last year.
Staff numbers decreased by 0.62%.
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DERMAL LABORATORIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2021
The board of directors of Dermal Laboratories Limited, both individually and together, consider that they have acted in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and in doing so have regard (amongst other matters) to:
- the likely consequences of any decision in the long term; - the interest of the company's employees; - the need to foster the company's business relationships with customers, suppliers and others; - the impact of the company's operations on the community and environment; and - the desirability of the company maintaining the reputation for high standards of business conduct. The long-term stability of the Company is a key consideration in any strategic decision making, as exemplified by the decision taken, several years ago, to increase the control and security of product supply through vertical integration, reflected in the substantial investment and expansion of in-house manufacturing facilities. The added capacity and flexibility have helped enormously in substituting for the surprise collapse of external contract supply. High priority has been attached to the interest of group employees, especially when adjusting ways of working in response to the pandemic, such as through the provision of personal protection equipment where needed, protective office screens, strict protocols to limit and govern attendance at work sites, and systems and equipment support to enable a very substantial transfer of office-based activities to staff homes. The Company is consulting carefully with staff, through its management structure, so as to organise the process of returning to work in an orderly, safe and consensual fashion. In parallel, careful consideration is also being given, where appropriate, to the possibility of an element of home-based working continuing for some staff, for an experimental period of evaluation. The success of the Company’s relationships with staff, customers and suppliers is well evidenced by the longevity of a high proportion of such relationships, very commonly measured in decades rather than years. The Company’s commitment to the local communities and environments in which it operates is reflected in the reputation it enjoys as a considerate, careful business fully committed to providing a positive impact, benefiting the surrounding economic and social life. And the reputation of the business is second to none amongst key opinion leaders, such as health care professionals, in relation to the quality and usefulness of its products as well as the high ethical standards it maintains in all its dealings.
This report was approved by the board on 9 December 2021 and signed on its behalf.
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DERMAL LABORATORIES LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 MAY 2021
The director presents his report and the financial statements for the year ended 31 May 2021.
The profit for the year, after taxation, amounted to £2,894,941 (2020 - £3,231,844).
The director does not recommend the payment of a dividend (2020 : £nil)
The director who served during the year was:
The company continues an extensive programme of New Product Development to extend the Company's portfolio and renew the momentum for growth in both domestic and overseas markets.
Treasury operations and financial instruments
The company's principal financial instruments include bank accounts, the main purpose of which is to raise finance for the company's operations. In addition, the company has various other financial assets and liabilities such as trade debtors and trade creditors arising directly from operations Liquidity risk The company manages its cash requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business. Foreign currency risk The company's principal foreign currency exposure arise from trading with overseas companies. The company does not hedge against this risk as the director considers that the volume of transactions does not warrant this. Credit risk Investments of cash surpluses and borrowings are made through banks and companies which must fulfil credit rating criteria approved by the board. All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are reviewed on a regular basis and provision is made for doubtful debts when necessary.
The Company continues to invest heavily in research and development to provide our next generation of brand leading medicines and medical devices.
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DERMAL LABORATORIES LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2021
The Board acknowledges that the long term success of the company is dependent on the way it works with several important stakeholders. Key stakeholders are considered in their decision making and in doing so ensure that the directors' duty is discharged under section 172 of the Companies Act.
Engagement with employees The Company places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting their current and future interests. Pertinent information is provided via the business’s intranet facility, with regular updates on news such as staff appointments, new product launches, marketing activities, additions or improvements to offices, laboratories, factory or warehouses. In the absence of routine face-to-face meetings, during the Covid-19 pandemic, new forms of engagement have involved the widespread adoption of virtual meetings through Zoom, Teams etc. Corporate social functions, including customary Christmas meals, have had to be put on hold until personal, social contact becomes permissible again. Engagement with suppliers, customers and others The Board acknowledges that the long-term success of the group is dependent on the way it works with several important stakeholders. Key stakeholders are considered in their decision making and in doing so ensure that the directors' duty is discharged under section 172 of the Companies Act. ‘Customers’ comprise different groups of stakeholders. Patients using our products may be considered customers, whether they obtain them on prescription or purchase them in store or online. Healthcare professionals (doctors, nurses and pharmacists) may also be regarded as customers, as we promote the benefits of our products to these groups, whether for prescription or recommendation. And retail trade customers, such as supermarkets, pharmacies, or online retailers, all figure as customers. Irrespective of category, the business maintains the highest standards of engagement, whether through continuously updated websites on each product, tailored to the needs of the anticipated viewer, close personal liaison (online during the pandemic) with trade buyers and prescribers, the creation and provision of educational material in relation to a wide variety of diseases etc. Additionally, a professionally managed team provide prompt interaction and information to follow up any enquiries or complaints arising from any member of any of these groups who is seeking information or a response from the business. Continuous engagement is maintained, as a matter of course, with the appropriate regulatory authorities who supervise the provision of medicines and medical devices, to ensure that we are in full compliance, at all times, with whatever the latest regulations require. Suppliers’ broadly comprise those businesses which supply ours with componentry (raw materials and packaging) which go into the manufacture of our products, and with services, such as professional advice (accountants, lawyers, advertising agents, patent attorneys, systems support engineers etc). The vast majority of such relationships are of very long standing, reflecting a high degree of trust, understanding and mutual satisfaction. Interaction with all suppliers is handled by suitably qualified staff. The Board is fully committed to ensuring that the operation of the business is mindful of, and responsive to, environmental considerations. These concerns translate to the formulation (or where deemed appropriate) re-formulation of products, choice of packaging materials, avoidance of wastage, avoiding local pollution, adoption of improved working practices, maintaining and nurturing flora and fauna on its properties, preserving natural habitats etc.
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DERMAL LABORATORIES LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2021
Other than the ongoing changes arising from the the collapse of the company's main contract manufacturer and the impact of Brexit as mentioned in the Strategic Report, there have been no significant events affecting the Company since the year end.
The auditors, Haslers, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on
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DERMAL LABORATORIES LIMITED
DIRECTOR'S RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MAY 2021
The director is responsible for preparing the Strategic Report, the Director's Report and the financial statements in accordance with applicable law and regulations.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙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 director is 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 him to ensure that the financial statements comply with the Companies Act 2006. He is 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.
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DERMAL LABORATORIES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DERMAL LABORATORIES LIMITED
We have audited the financial statements of Dermal Laboratories Limited (the 'Company') for the year ended 31 May 2021, which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 director's 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 director with respect to going concern are described in the relevant sections of this report.
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DERMAL LABORATORIES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DERMAL LABORATORIES LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The director is 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Director's Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Director's 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 Director's Report.
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DERMAL LABORATORIES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DERMAL LABORATORIES 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:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the entity and determined that the most significant are those that: • had a direct effect on the determination of material amounts and disclosures in the financial statements. These included the UK Companies Act and tax legislation etc; and • do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty. These include those rules governing the pharmaceutical industry. We obtained an understanding of how the company are complying with those legal and regulatory frameworks by making inquiries to the management and the company’s head of regulatory department. We corroborated our inquiries through our review of documentation generated and assessing the extent of compliance with the relevant laws and regulations. We discussed among the audit engagement team regarding the opportunities and incentives, including management override of controls, that may exist within the organisation for fraud and how and where fraud might occur in the financial statements. As a result of performing the above, we identified the greatest potential for fraud in the following areas, and our specific procedures performed to address it are described below: The principal risks related to inappropriate journal entries to impact the profit for the year and management bias in accounting estimates. Procedures performed to address these were as follows: • 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 judgements made by management in its significant accounting estimates: and • Identifying and testing journal entries, in particular any unusual journal entries posted around the year-end and journal entries posted by infrequent system users. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. 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 actions to commit misstatements.
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DERMAL LABORATORIES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DERMAL LABORATORIES LIMITED (CONTINUED)
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.
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
Old Station Road
Essex
IG10 4PL
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DERMAL LABORATORIES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
REGISTERED NUMBER: 01594795
BALANCE SHEET
AS AT 31 MAY 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 14 to 27 form part of these financial statements.
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DERMAL LABORATORIES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2021
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2020
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
Dermal Laboratories Limited is a private company, limited by shares and incorporated in England and Wales, United Kingdom, with a registration number 01594795. The address of the registered office is Haslers, Old Station Road, Loughton, Essex, IG10 4PL and the principal place of business is Tatmore Place, Gosmore, Hitchin, Hertfordshire, SG4 7QR. The nature of the company's operations and principal activities are the distribution of pharmaceutical products.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Diomed Developments Limited as at 31 May 2021 and these financial statements may be obtained from Companies House.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
2.Accounting policies (continued)
Where 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.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
2.Accounting policies (continued)
At each reporting date the company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
2.Accounting policies (continued)
Land is not depreciated. Depreciation on other assets 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:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
2.Accounting policies (continued)
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, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. The director does not believe that there have been judgements (apart from those involving estimates) made in the process of applying the above accounting policies that have had a significant effect on amounts recognised in the financial statements.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
Analysis of turnover by country of destination:
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
12.Taxation (continued)
During March 2021 the UK chancellor announced an expected change to UK’s main corporation tax rates from 19% to 25%. After the year-end this was enacted into the Finance Act in June 2021. The main rate will increase to 25% from 1 April 2023 and will impact the corporation tax provision of the Company from that date.
The deferred tax balance will need to be adjusted in recognition of this change in the year-ended 31 May 2022.
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
Profit and loss account
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DERMAL LABORATORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2021
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 £1,280,587 (2020 - 1,020,167). Contributions totalling £nil (2020 - £nil) were payable to the fund at the balance sheet date.
The ultimate parent undertaking is Diomed Developments Limited, a company incorporated in England and Wales.
Diomed Developments Limited prepares consolidated group financial statements and copies can be obtained from its registered office. The ultimate controlling party is M J Yarrow, by virtue of his majority shareholding in the parent company.
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