LPD_GROUP_HOLDINGS_LTD_(C - Accounts

The directors present the strategic report for the period ended 30 September 2022.

The directors are pleased with the performance of the group during the year.

The directors have considered the impact of the coronavirus pandemic on the business. The trading results were enhanced in the first part of the trading year due to COVID19 buying patterns along with the upward trend of the business in the first half of the year. As expected, that trend started to soften due to inflationary and cost of living increases, which impacted the second half of the year. Post year-end sales are in line with the pre-pandemic projected growth plans, yet gross profit margins have been affected by freight and other inflationary pressures but are slowly returning to pre-pandemic levels.

The key business risks and uncertainties affecting the group are considered to relate to competition and market forces within the doors and furniture market. However, this year we have seen an increase in shipping rates and uncertainty over availability due to exiting the worldwide pandemic lockdown. This led to a reduction in sea freight availability and significant rates increase which have only returned to normal from December 2022.

The group continues to actively review the market conditions to ascertain any impact on future sales. Foreign currency exchange rates are monitored on a regular basis to enable the business to make informed decisions on currency requirements. The business has a credit insurance policy to limit the risks of bad debts, but it is exposed to the usual credit and cashflow risk associated with selling on credit and manages this through credit control procedures. An invoice financing facility is in place with HSBC. Aside from an exposure to foreign currency fluctuations, the nature of the company’s financial instruments means that they are not subject to a price or liquidity risk.

Development and performance

The directors are satisfied with the position of the group at the year end.

Trading within the doors and furniture sector requires the group to continually develop its offering and ensure it remains at the forefront of research, design and trends in the product offering. The group continues to invest in marketing and technology with the aim of further growth.

The cash position remains satisfactory despite stock levels increasing due to supply chain disruptions. Post year end stock levels are now reducing back towards expected trading levels and are continually monitored to balance reasonable stock turn with the ability to better service customer needs.

In accordance with section 172 of the Companies Act 2006 each of our directors acts in a way that he or she considers, in good faith, would most likely promote the success of the group for the benefit of its members. The Directors are aware of how important building and maintaining successful relationship with stakeholders are to the business; be it employees, customers, suppliers and the wider community. In making decisions, the Directors take account not only of the short-term requirements of the business, but also of the longer-term impact on these stakeholders.

Employees - the group views pay and benefits as just one element of the needs of staff and is highly aware of the need to look after the security and welfare of its staff. Training and development are considered where support is required, or career paths identify promotional opportunities.

Customers - Engagement with our customers is essential, this is achieved though feedback, social media activity and promotional information. Providing our customers with the products and services they require at right time is imperative to building and maintaining our relationship.

Suppliers - Maintaining good relationship with suppliers over the longer term contributes to the success of the business and the promotion of brand loyalty.

Wider Community - Allowing local businesses the opportunity to be represented on site also benefits our customers, suppliers and the wider community.

Policy on the payment of creditors

The group agrees terms and conditions which include payment details with its suppliers. Payment is made in accordance with those terms and conditions, provided the supplier had complied with them.

High standards of business conduct

Recognising the important role that our trading partners and customers play, and developing trusted, long-term relationships is an integral part of our business. We are proud to have many customers that have been with us from the start.

Our environmental policy

The group takes its responsibilities very seriously, striving to make a positive contribution to minimise the impact of its activities on the environment. We are fully committed to upholding the principles of Chain of Custody and sustainable sources, aligning ourselves with manufacturers who source their materials from sustainable sources and auditable processes. The group is committed to the following:

• To meet or exceed all the environmental legislation that relates to the group's activities.

• Wherever and whenever economically practicable, endeavour to use environmentally and sustainable materials.

• Where feasible, strive towards the continual reduction of all waste streams, to air, water and land.

• Wherever commercially viable, recycle and reuse any materials that would otherwise go to landfill.

• To regularly monitor energy usage in order to reduce overall consumption.

• To communicate the policy internally and place it in the public domain.

• To establish and regularly review all environmental and sustainable objectives in respect of this policy.

Being a major force in the timber related industry we are fully committed to upholding the principles of FSC, Forest Stewardship Council and PEFC, Programme for the Endorsement of Forest Certification, and aligning ourselves with manufacturers who meet these criteria. We are proud to say that the majority of our products meet this criterion. Where items are not currently sourced within FSC or PEFC we ensure due diligence is completed on our supply chain and compliance with regulatory requirements.

The group has a zero-tolerance approach to any form of modern slavery. We are committed to acting ethically and with integrity and transparency in all business dealings and implementing effective systems and controls to safeguard against any form of modern slavery taking place within the business or our supply chain. A more comprehensive statement can be found on our website.

Operating Profit was £1.82m (2021 - £5.98m).

The group's key performance indicators during the year were as follows:

                        2022        2021

Turnover                        £69.7m        £66.6m

Gross Profit margin                24.8%        28.1%

Profit before tax                    £1.06m        £5.74m

The group has three banking facilities with HSBC, a term loan facility, a trade finance facility and a debt factoring facility. The term loan facility contains three covenants which are tested quarterly through to the end of the agreement in May 2026. These covenant tests are Cash flow cover, Leverage and Interest cover. On 30 June 2022, the group was in breach of both the cash flow cover and leverage covenant test ratios on its term loan facility. However, HSBC agreed to continue to work with the group, waiving the June 2022 test as well as the future dated September and December 2022 tests, and agreed to reset future covenant test ratios with effect from March 2023 along with an agreed new set of facility terms.

The group's banking facilities with HSBC were finally amended subsequent to the year-end during May 2023 and the next covenant tests are due to be reviewed on 30 June 2023.

The Directors have produced forecasts for the period up to September 2024, taking account of reasonably plausible changes in trading performance and market conditions. These reasonably plausible changes include the possible impact of Covid-19 and the impact of the current UK cost of living crisis. The forecasts demonstrate that the group is forecast to generate profits and cash in the current financial year and beyond and that the group has sufficient cash reserves and headroom in the financial covenants to enable the group to meet its obligations as they fall due for a period of at least 15 months from the date when these financial statements have been signed.

The Directors therefore have a reasonable expectation that the group has adequate resources to continue to operate for the foreseeable future and for these reasons they continue to adopt the going concern basis in preparing the financial statements.

On behalf of the board

The directors present their annual report and financial statements for the period ended 30 September 2022. The company was incorporated on 20 December 2021 and began trading on 20 December 2021.

The company assumed control of LPD (Holdings) Limited on 1 June 2022 via a share for share exchange. Merger accounting was applied in respect of that transaction and as such, the group accounts present the full results for both the current and comparative years as if LPD Group Holdings Ltd had always existed and had control of the group, which is inline with the principles of merger accounting.

The principal activity of the holding companies is that of investment in commercial property. The principal activity of the trading company continues to be the import and distribution of quality doors and furniture.

The results for the period are set out on page 11.

Ordinary dividends were paid amounting to £140,000. The directors do not recommend payment of a further dividend.

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

Azets Audit Services Limited were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006.

This report is in compliance with The Companies (Directors Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (“the 2018 Regulations”) implementing the government’s policy on Streamlined Energy and Carbon Reporting (SECR) that came into force on 1st April 2019.

The regulation sets out the obligation to report our UK energy use and associated greenhouse gas emissions relating to gas, electricity and transport fuel as well as an intensity ratio and information relating to energy efficiency action within our business.

Previous Year’s Figures

The group has met the threshold for this regulation, so the year ended 30th September 2022 has used the baseline for the previous year’s disclosure.

The group has been at the forefront of manufacturing, importing, and distributing internal and external door for 40 years. Operating a fleet of delivery vehicles from our base in Leeds the boundary of our disclosures has been set as those emissions within our financial control. These include the heating and running of our offices and warehouses, the operation of our fleet of lorries and cars.

Data Collection and Methodology

The following data was collated and assessed for completeness, accuracy and prepared on actuals and estimates for this base line report from.

• Monthly LPG purchases

• Monthly Electricity bills

• Monthly fuel purchases

Fuel measurements have been taken from our fleet management system and relevant emission rates applied. Company Car measurements have been taken from using a mean ratio to derive full coverage for mileage and emissions. Electricity figures were obtained from monthly readings and relevant rates applied. Propane figures were obtained from monthly measured figures and relevant rates applied. Relevant multipliers were then applied, using values from UK Government and Carbon Trust information.

Intensity Ratios

The primary intensity ratio of total CO2e per £100,000 turnover has been used for the base line year. This figure is £7,441 Kg CO2e.

Energy and carbon report for the year ended 30 September 2020

2020 is deemed to be the base year. Fuel purchases (£) were converted to litres of diesel using Gov.UK statistical data sets 2020 average price for fuel and multiplied by 2.55784 to produce kg Co2e figures. Electricity (kWh) and propane (litres) were multiplied by 0.19338 and 1.54354 respectfully to derive the total emissions for LPD. The multipliers have been taken from the UK Government GHG Conversion Factors for Company Reporting 2020.

Intensity ratios

The primary intensity ratio of total Co2e per £100,000 turnover has been used for the base line year. This figure is £7,422kg Co2e.

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.

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 ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the group and 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.

We have audited the financial statements of LPD Group Holdings Ltd (the 'parent company') and its subsidiaries (the 'group') for the period ended 30 September 2022 which comprise the group profit and loss account, 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 Financial Reporting Standard 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 30 September 2022 and of the group's profit for the period 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 group and parent 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 period 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 their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. We have nothing to report in respect of the following matters in relation to which 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 parent 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.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.

• Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting period.

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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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 loss for the year was £756,451 (2021 - £0 profit).

LPD Group Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Midland Road, Leeds, West Yorkshire, LS10 2RJ.

The group consists of LPD Group Holdings Ltd and all of its subsidiaries.

The reporting period runs from the date of incorporation on 20 December 2021 to 30 September 2022, a period of 9 months. The year end has been shortened to bring the company in line with other group company reporting dates.

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, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being the parent of a group that prepares publicly available consolidated financial statements, 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 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

The company has taken advantage of the disclosure exemptions of Section 33.1A of FRS 102 which permit it to not present details of its transactions with members of the group where relevant group companies are all wholly owned.

The group has applied the principles of merger accounting in consolidating the results, as control was acquired by LPD Group Holdings Ltd via a share-for-share exchange and at this point in time, ultimate control of the group had not changed. Note that the share-for-share exchange was transacted separately to the subsequent share transactions. Merger accounting requires that the results of the group are presented as if the group has always been in its present form and does not require a re-evaluation of fair values as at the point of acquisition. Accordingly, a merger reserve exists which represents the difference between the net assets of the group as at that date and the retained profits recognised by the group as at that date.

The consolidated group financial statements consist of the financial statements of the parent company LPD Group Holdings Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates. Due to the nature of the business combination, carried out on 1 June 2022, and there being no overall change in ultimate ownership, merger accounting has been used to consolidate the subsidiaries.

All financial statements are made up to 30 September 2022. 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.

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future notwithstanding net liabilities of £5,322,989. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

These financial statements have been prepared on a going concern basis. The group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in this Strategic Report.

The group has three banking facilities with HSBC, a term loan facility, a trade finance facility and a debt factoring facility. The term loan facility contains three covenants which are tested quarterly through to the end of the agreement in May 2026. These covenant tests are Cash flow cover, Leverage and Interest cover. On 30 June 2022, the group was in breach of both the cash flow cover and leverage covenant test ratios on its term loan facility. However, HSBC agreed to continue to work with the group, waiving the June 2022 test as well as the future dated September and December 2022 tests, and agreed to reset future covenant test ratios with effect from March 2023 along with an agreed new set of facility terms.

The group's banking facilities with HSBC were finally amended subsequent to the year-end during May 2023 and the next covenant tests are due to be reviewed on 30 June 2023.

The Directors have produced forecasts for the period up to September 2024, taking account of reasonably plausible changes in trading performance and market conditions. These reasonably plausible changes include the possible impact of Covid-19 and the impact of the current UK cost of living crisis. The forecasts demonstrate that the group is forecast to generate profits and cash in the current financial year and beyond and that the group has sufficient cash reserves and headroom in the financial covenants to enable the group to meet its obligations as they fall due for a period of at least 15 months from the date when these financial statements have been signed.

The Directors therefore have a reasonable expectation that the group has adequate resources to continue to operate for the foreseeable future and for these reasons they continue to adopt the going concern basis in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from the sale of doors and furniture is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date if the fair value can be measured reliably.

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

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.

Fixed asset investments represent capitalised costs for the purchase of racehorses. The cost of racehorses is released to profit and loss on a straight line basis over 4 years, being the estimated period each horse remains in training.

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.

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

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

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

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.

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’ and Section 12 ‘Other Financial Instruments Issues’ 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.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

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.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

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

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

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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.

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 depreciation and amortisation policies have been set according to management's experience of the useful lives of a typical asset in each category, something which is reviewed annually. It is not considered practical to use a per unit basis to allocate depreciation without undue cost and therefore amounts are charged annually. The depreciation and amortisation charged during the year was £1,274,132 (2021 - £1,095,168) which the directors feel is a fair reflection of the benefits derived from the consumption of the tangible fixed assets in use during the period.

Inventories are valued at the lower cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends.

Outstanding trade debtor balances are reviewed on a line by line basis by management to identify possible amounts where a provision is required. Management closely manage the collection of trade debtors and therefore are able to identify balances where there is uncertainty about its recoverability, and determine what provision is required (if any).

As required by FRS 102, properties which qualify as investment properties are revalued to fair value at each period end. The directors have made use of external specialists to obtain advice on market valuations, as well as using their own knowledge and conducting their own research into current market conditions. On balance the directors do not consider this to give rise to a material risk as at the year end.

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

Their aggregate remuneration comprised:

The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.

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

The depreciation charge for the year in respect of assets held under finance leases or hire purchase contracts was £668,636 (2021 - £685,829). £8,239 (2021 - £8,239) relates to fixtures, fittings and equipment and £660,397 (2021 - £677,590) relates to motor vehicles.

A bank loan is secured by fixed charges over the property.

The group has since refinanced the loan, with confirmation from the bank that the loan will be refinanced upon the initial maturity from June 2022 to 2027.

Other borrowings represent debt factoring and trade finance facilities which are secured by fixed and floating charges over the assets of the subsidiary company.

The group has interest bearing loan notes in issue that are repayable in full in 2026. Interest is accrued daily at 5% plus the base rate of HSBC UK Bank Plc. These loan notes are secured by fixed and floating charges over the assets of the group.

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 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Finance lease liabilities are secured against the assets to which they relate.

Bank loans and overdrafts and other bank borrowings are secured as detailed in note 19.

Obligations under finance leases are secured as detailed in note 20.

Bank loans and overdrafts and other bank borrowings are secured as detailed in note 19.

Obligations under finance leases are secured as detailed in note 20.

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

The deferred tax liability set out above is expected to reverse within 5 years and relates to accelerated capital allowances that are expected to mature within the same period.

The UK corporation tax rate was 19% throughout the year.

In the March 2021 Budget, a change to the future UK corporation tax rate was announced, indicating that the rate will increase to 25% from April 2023. Deferred tax balances at the reporting date are therefore measured at 25% (2021 - 25%).

The above share capital comprises 14,059,740 'A' Ordinary and 2,119,478 'B' Ordinary shares of £1 each. All classes of shares rank pari-passu with equal voting, dividend and capital rights.

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.

Group and company

The group is party to a group guarantee over any bank loans and overdrafts which may from time to time arise. At the year end, bank loans and overdrafts of relevant group companies totalled £1,648,591 (2021 - £1,905,774) net of cash balances.

As at the date of approval of the financial statements, no default has occurred which would trigger the above liability, nor is one anticipated. As such, the directors consider that the fair value of this obligation is £nil, and as such there is no recognition of the liability on the balance sheet.

At the balance sheet date the group was committed to buy $9,270,758 (2021 - $10,300,000 and €1,000,000) under forward foreign exchange contracts.

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:

The remuneration of key management personnel is as follows.

The following amounts were outstanding at the reporting end date:

The amounts due to related parties is in relation to a loan note issued to directors. Within this balance £4m of loan notes in issue is interest free and repayment in full on 30 September 2022. These loan notes are secured by fixed and floating charges over the assets of the group.

Dividends totalling £140,000 (2021 - £0) were paid in the period in respect of shares held by the company's directors.

Included within the other receivables is an amount owed by the executors of the late Mr J D Gordon of £478,716 as at 30 September 2022.

Details of the company's subsidiaries at 30 September 2022 are as follows: