ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their Strategic report on the company for the year ended 31 December 2021.
The principal activity of the company during the year continued to be that of the manufacture, retailing and wholesaling of water softeners and accessories.
During 2021 the company continued to develop and improve of the core product offering, water softeners, with the introduction of greener manufacturing process with the introduction of recycled plastics to the process and through the introduction of a new generation of water softeners, which have incorporated smart technologies for the first time. The company has continued to invest in filtering and softener process, expanding on products that improve effectiveness of the water softeners. This investment saw sales increase by £5,178,483 to £39,997,653 (2020: £34,819,170), however impacted gross profit margin for year which decreased by 9.99% to 27.93% (2020: 37.92%). The ongoing investment, which is also reflected in the significant increase in staff numbers, is considered to be in the long term interest of the company, making Harvey’s more competitive, resilient and diverse. Profit after tax similarly decreased by £3,045,532 to £562,409 (2020: £3,607,941). This was the result of both the decrease in gross profit margin due to ongoing investment but also to one off charges relating to the re-organisation of the business of £138,430 and the withdrawal of covid support grants to £9,314 (2020: £1,122,100). Following the acquisition of the group by BDT Capital in July 2021, the company has introduced new supporting IT technologies to improve the customers sales and post sales experience. Through 2022 the company has acquired a number of regional dealerships, bringing them under the Harvey Water Softener banner, a policy which enables the company to retain local knowledge and connections, whilst ensuring the highest levels of service across the country. The company’s net assets position improved in the year to £7,049,216 (2020: £6,486,805).
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The management of the business and the execution of the Company strategy are subject to several risks.
The principal risks and uncertainties faced by the company are:
∙Operational risk which is managed and mitigated through the maintenance of appropriate systems, processes, controls and training to staff, which maintains the quality of the production and installation of water softeners/ Operational risk is further mitigated by public liability insurance.
∙Product warranty risk which is intrinsic in any business that provides a product. We aim to maintain a high quality production and installation practice. As well as excellent customer support and after-care service in order to reduce the product warranty risk.
∙Credit risk is managed by ensuring the credit worthiness of clients and institutions where cash is deposited. Liquidity rusk is daily monitoring of cash requirements and the company’s access to the group cash pooling facility.
The overall macro-economic outlook remains challenging and has suppressed the performance of the company, however the business model and historic performance of the company demonstrates stable demand. Early indications are that potential customers are aware of the indirect cost savings offered by water softeners, especially in hard water areas, which continues to support demand despite inflationary and disposable income pressures.
The company continues to generate profits which it has been able to re-invest in the past 2 years, resulting in a strong balance sheet and significant sales growth. Both the company and the group, Culligan, has considerable financial resources and both are expected to continue to generate profits for the foreseeable future. Membership of the Culligan group allows the company, if necessary, to utilise the considerable operational and financial support of the group. Management believes the company is well placed to continue to meet the expectations and requirements of the group and ultimate beneficial owners. Therefore, the directors believe that it is appropriate to consider the company to be a going concern.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their report and the financial statements for the year ended 31 December 2021.
The director who served during the year was:
The profit for the year, after taxation, amounted to £562,409 (2020 - £3,607,941).
During the year the directors did not recommend a payment of dividend (2020 - £NIL).
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in Directors' Reports may differ from legislation in other jurisdictions.
To the extent allowable by commercial confidentiality, financial information is provided and disseminated to all staff members where such information is of interest or importance to them as employees.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
Recruitment and employment decisions will be made based on fair and objective criteria. We are committed to ensuring that all team members and applicants for employment are protected from unlawful discrimination during their employment. In line with the Equality Act 2010, the Company is committed to ensuring that equal opportunities exist for all team members. Training and career development programs are available to all employees and include development programs outside of their current job roles. No exceptions, or restrictions are taken based on disabilities or “Protected Characteristics”, as defined by the Equality Act (2010).
The company has chosen in accordance with Section 414C(11) of the Companies Act 2006 (Strategic Report and Directors‘ Report) Regulations 2013 to set out within the company's Strategic Report the Company's Strategic Report Information Required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review and details of the principal risks and uncertainties.
Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HARVEY WATER SOFTENERS LIMITED
We have audited the financial statements of Harvey Water Softeners Limited (the 'Company') for the year ended 31 December 2021, which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The 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 HARVEY WATER SOFTENERS LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HARVEY WATER SOFTENERS LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standards 102;
∙UK employment legislation;
∙General Data Protection Regulations; and
∙UK tax legislations.
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
∙We understood how the parent company and the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries through our review of board minutes.
∙The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
°Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
°Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
°Challenging assumptions and judgments made by management in its significant accounting estimates; and
°Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
°Timing of revenue recognition; and
°The use of management override to post unusual journals or complex transactions.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HARVEY WATER SOFTENERS LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
1st Floor
Midas House
62 Goldsworth Road
Surrey
GU21 6LQ
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2021
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 11 to 27 form part of these financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Harvey Water Softeners Limited is a private Company, limited by shares, incorporated and domiciled in England and Wales under the Companies Act 2006. The address of the registered office is given on the Company information page. The principal activity of the Company is disclosed in the directors' report.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Osmosis Holdings, LP as at 31 December 2021 and these financial statements may be obtained from Companies House.
The company has taken advantage of the exemption from preparing consolidated financial statements, contained in section 400 of the Companies Act 2006, on the basis that it is a subsidiary undertaking and its immediate parent undertaking is established under the law of an EEA state.
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Turnover from the sale of goods is recognised when the risks and rewards of ownership have significantly passed to the customer. This is usually after the "money back guarantee trial period" has concluded. Turnover from services is recognised as it is performed. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Goodwill
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
Intangible assets are amortised over a period of 5 years.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following basis:
Where the company has agreed rental contracts with customers, the water softeners being rented are recognised as tangible fixed assets in the Statement of Financial Position and depreciated per the accounting policy above.
The entity has voluntarily changed its accounting policy for the capitalisation of installation costs. Previously the entity had expensed these costs. The entity now capitalises these costs. Management judges that the policy provides reliable and more accurate capitalisation. The change in accounting policy has not been retrospectively applied, as this would not be material and would not impact the true and fair view of the financial statements. These are shown as Other fixed assets. Rental income received from these softeners is recognised in the Statement of Income and Retained Earnings on a monthly basis.
Provisions are made where an event has taken place that gives the company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimat can be made of the amount of the obligation.
Provisions are charged as an expense to the Statement of Income and Retained Earnings in the year that the company becomes aware of the obligation, and are measured at the best estimate at the Statement of Financial Position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
In July 2021 the company went live with a cost of goods sold accounting system, which now records the stock on a first in, first out 'FIFO' basis, rather than average cost 'AVCO' basis. This is not considered to have a material impact, as the AVCO value from the previous system has been entered and is being used first. The stock turnover days turning over within 3-5 months, also indicates that the stock prices will not have materially differed as they were being purchased and used frequently.
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company has no further payment obligations.
The contributions are recognised as an expense in the Statement of Income and Retained Earnings when they fall due. Amounts not paid are shown in accurals as a liability in the Statement of Financial Position. The assets of the plan are held seperately from the company in independently administered funds.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
A summary of key sources of estimation taken in the preparation of the financial statements is detailed below: Capitalised rental softeners The value at which capitalised rental softeners are carried in the balance sheet is based upon management's best estimate of the age of the softeners held and the depreciation that would have been charged. A summary of significant judgements taken in the preparation of the financial statements is detailed below: Warranty service provision The provision for warranties held at year end is based on management's best estimate of future liabilities arising on those warranty contracts still outstanding as at the year end. The liability is calculated based on a historical warranty service call profile which is inclusive of management's estimation in respect of: a. Production risk for each yearly batch. b. Labour and parts cost in respect of each service call. c. Expectation of the number of breakdowns. Management no longer consider the discount rate or the reliability of historical data in calculating the warranty provision due to better information now being available to them. This does not have a material impact on the warranty provision. Stock provision change of estimation for the year ended 31 December 2021 In July 2021 the company went live with a COGS accounting system, which now records the stock on a FIFO basis, rather than AVCO basis. With the new system and the data available, this led to a change in estimation on the way that the provision is calculated. Subsequent to moving to the new system, a purge of old lines with no movement made was made, clearing down the provision. A secondary market is considered to be available for most of the stock lines that the company holds, therefore the directors are satisfied that the 10% on stock over 1000 days would reasonably cover the potential impairment. The provision going forward is calculated on the following basis: 50% of stock where no movement has occurred in 2021 or previously 10% of stock where there has been movement but some items have been held for over 1,000 days Excess Inventory - Inventory quantities on hand that are in excess of one year usage. These stock items are provided for depending on the usage in the year as a percentage of prior year end quantities. Where stock usage in the year is: - 15% to 25%, a provision of 85% is made - 25% to 50%, a provision of 75% is made - Less than 50%, a provision of 50% is made.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Analysis of turnover by country of destination:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Two £1 ordinary shares were allotted in the year ended in respect of the share for share exchange as disclosed in the Fixed Asset Investment note 16.
Profit and loss account
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 £184,236 (2020 - £160,690). Contributions totalling £30,420 (2020 - £105,572) were payable to the fund at the reporting date and are included in creditors.
27.Other financial commitments
At the balance sheet date the company had entered into an agreement with a supplier and provided £520,000 (2020 - £520,000) worth of funds in advance for which a discount on future purchases will be received.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Company was a wholly owned subsidiary of HWS Holdings Limited throughout the period. The Company's financial statements are consolidated in the financial statements of Osmosis Holdings, LP.
During the year ended 31 December 2021, the ultimate controlling party has changed to BDT Capital Partners LLC by virtue of their control of Osmosis Holdings, LP.
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