ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Company registration number:
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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2022
The principal activity of the Group continued to be that of manufacturing electronic components and assemblies. The Company continued to be the Group's ultimate parent holding company.
The Group reported a net profit before tax for the year of £543,906 (2021 - £827,781). In common with many in the industry, there has been extreme pressure on component supply and pricing following supply disruption post Covid and the impact of US$ exchange rates. The disruption is expected to continue for some time, but customer and supplier relationships have ensured continued business development so that the directors are confident of continued benefits from the marketing and investment activities over recent years with both new customers and a wider spread of manufactured electronic components & assemblies for established customers. This has led to a sales growth of 34.1% (2021 - 4.3%). The risk of any individual customer dependence by the Group has become more contained. Component availability and stability of pricing, which includes $ exchange rates, and the lead time for that supply is considered to be the biggest risk to the Group as that impacts on the service to its customers on which the Group has built its reputation. Improved productivity will be required to finance continued increases in direct wage costs and the company therefore continually reviews its capital expenditure program. The conclusion of the last major review of equipment led to the purchase of over £400,000 (2021 - £68,000). This expenditure being primarily funded by asset finance to maintain working capital. Increased product ranges and current supply issues have expanded stock holding needs but the Group believes its method of working capital finance and good customer relations accommodate most of the pressure that may create. The directors believe the Group is well placed to continue to take advantage of new business. At the year end, the directors consider the Group remains in a strong financial position with shareholders' funds totaling £4,260,861 (2021 - £3,884,462) and maintaining a good working capital position.
In addition to the impact of the pandemic on customers and suppliers, the principal threats to the Group, in addition to material availability and the lead time for that supply, is as with most other companies, will always be the loss of major customers and the cost of supply impacted by wages, sourcing of components and stability of material prices which are affected by world supply and the value of the GBP. The Group's management has so far managed to mitigate the extremes of any of the pandemic influences and has continued to trade throughout and is confident that there are sufficient available resources to ensure a strong future.
The directors consider the Group's key financial performance indicators to be its operating profit and margins together with stock turn which then has an impact on working capital. These key performance indicators of the business have all been adequate and at a level to ensure customer development and retention and the long term success of the Group. The reduction in stock turn was consistent with increased stock needs for new products.
The main key performance indicators for the Group's principal trading subsidiary, Esprit Electronics Limited, are as follows:
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2022
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2022
The directors present their report and the financial statements for the year ended 31 May 2022.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group 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 for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in Directors' Reports may differ from legislation in other jurisdictions.
The profit for the year, after taxation, amounted to £451,399 (2021 - £633,214).
The directors' recommend the payment of a dividend of £75,000 (2020 - £75,000).
The directors who served during the year were:
The main trading company will continue to focus its efforts on core customers and service lines in order to maintain profit
levels, whilst actively seeking to develop relationships with new customers to increase profit levels.
The Company uses basic financial instruments such as cash and fixed term deposits.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2022
The Group has chosen in accordance with section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 to set out in the group's strategic report information required by schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 it must be stated in the Directors' Report that it has done so. This includes information that would have been included in the business review and the principal risks and uncertainties.
There have been no significant events affecting the Group since the year end.
Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ESPRIT BUSINESS SERVICES LIMITED
We have audited the financial statements of Esprit Business Services Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 May 2022, which comprise the Group Statement of Comprehensive Income, the Group and Company Statements of Financial Position, the Group Statement of Cash Flows, the Group and Company 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 Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the 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.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ESPRIT BUSINESS SERVICES LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group 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 Group Strategic Report or the Directors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ESPRIT BUSINESS SERVICES 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 Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙The Company is subject to laws and regulations that directly affect the financial statements including The Companies Act 2006, UK taxation legislation, financial reporting legislation and general regulations such as occupational health and safety and General Data Protection. There are no industry specific laws and regulations which would be deemed to have a significant impact on the financial statements. We assessed the extent of compliance with the appropriate laws and regulations as part of our procedures on the related financial statement items.
∙We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries through our review of documentation.
∙The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area.
∙We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud
might occur. Audit procedures performed by the engagement team included:
°Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
°Understanding how those charged with governance considered and addressed the potential for override of controls or
other inappropriate influence over the financial reporting process;
°Challenging assumptions and judgments made by management in its significant accounting estimates;
°Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
°Review of legal and professional expenditure and supporting documentation.
∙As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
°Posting of unusual journals and complex transactions;
°Misappropriation of funds through fraudulent supplier ledger activity; and
°Manipulation of amounts subject to significant judgement or estimate.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission, or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ESPRIT BUSINESS SERVICES LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
3000a Parkway
Hampshire
PO15 7FX
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2022
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 19 to 39 form part of these financial statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 19 to 39 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2022
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2021
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2022
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2021
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2022
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2022
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 MAY 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
These financial statements have been prepared in compliance with FRS102, 'The Financial Reporting Standard applicable in the UK and the Republic of Ireland'.
Esprit Business Services Limited is a private company limited by shares incorporated and domiciled in the United Kingdom. The address of its registered office, which is also the same as its principal place of business, is disclosed within the Company Information page.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. In accordance with the transitional exemption available in FRS 102, the group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102, being 01 June 2015.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
2.Accounting policies (continued)
An entity is treated as a joint venture where the Group is a party to a contractual agreement with one or more parties from outside the Group to undertake an economic activity that is subject to joint control.
An entity is treated as an associated undertaking where the Group exercises significant influence in that it has the power to participate in the operating and financial policy decisions. In the consolidated accounts, interests in associated undertakings are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to reflect the investors share of the profit or loss, other comprehensive income and equity of the associate. The Consolidated Statement of Comprehensive Income includes the Group's share of the operating results, interest, pre-tax results and attributable taxation of such undertakings applying accounting policies consistent with those of the Group. In the Consolidated Statement of Financial Position, the interests in associated undertakings are shown as the Group's share of the identifiable net assets, including any unamortised premium paid on acquisition. Any premium on acquisition is dealt with in accordance with the goodwill policy.
The directors consider the Group and Company's finances remain strong and having taken that into consideration the expected performance over the foreseeable future, the directors consider that the Group and Company will have sufficient resources to continue operational existence for a period of at least 12 months from the date that these accounts are authorised for approval.
For this reason, the Group and Company continue to adopt the going concern basis of accounting in preparing these annual financial statements.
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in the same period as the related expenditure.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
2.Accounting policies (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, On both a reducing balance and straight line basis.
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.
Work in progress is valued on the basis of direct costs plus attributable overheads based on normal level of activity. Provision is made for any foreseeable losses where appropriate. No element of profit is included in the valuation of work in progress.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the reporting date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
Factored debt in which recourse lies with the lender is recognised as a liability and is included in creditors falling due within one year. The related receivables continue to be reported separately in trade debtors until the balances are collected.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Fixed asset residual values: The directors have reviewed the asset lives and associated residual values of all fixed asset classes and have concluded that asset lives and residual values are appropriate. Slow moving stock provision: Slow moving stock is defined as stock that cannot be directly allocated to a customer order for a period of between 3 and 18 months. The directors believe this is a reasonable measure based on their experience of the business.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the parent Company for the year was £
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
15.Tangible fixed assets (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Page 32
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Page 33
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Bank borrowing is secured by charges over assets held by the Group's trading subsidiaries.
In addition to this security, there are two third party guarantees in place dated 25 May 2005 and 19 June 2009 limited to £100,000 and £165,000 respectively in relation of the available overdraft facility for two of the Group's trading subsidiaries. Hire purchase creditors are secured by a charge over the related asset.
Page 34
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Hire purchase creditors are secured by a charge over the related asset.
Page 35
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Profit and loss account
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £73,075 (2021 - £62,291) . Contributions totalling £120 (2021 - £10,945) were payable to the fund at the reporting date and are included in creditors.
Page 36
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Page 37
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
Page 38
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2022
The Company was under the control of Mr I McInnes throughout the current and previous year.
Page 39
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