CAR_SPARES_(DISTRIBUTION) - Accounts

The directors present the strategic report for the year ended 31 December 2022.

The group’s turnover in 2022 totalled £23,494,084 which was an 12.7% increase compared to 2021 (£20,848,482).

The directors believe that they can continue to grow the business and expect to see a rise in sales through the expansion of the business through their new branches and as they remain competitive on price within their existing branches.

Despite encountering challenges in 2022 due to the cost-of-living crisis and the increase in inflation and energy costs, the directors are pleased with the year’s results.

The directors are delighted with the results for the year despite facing continued uncertainty in 2022 with regard to the high increase in inflation rates, the cost-of-living crisis, and disruption in the global supply chain.

The directors believe that they can continue to grow the business and expect to see a further rise in sales through the expansion of the business through the new branches and as they remain competitive on price within their existing branches.

The directors continue to consider and act upon the risks and uncertainties relevant to the business

Inflation and Recession

In 2023 we are still impacted by the high inflation rates due to the COVID-19 Pandemic and the Russian invasion of Ukraine. The latest figures – of inflation from the Bank of England have fallen to 8% in June 2023 and are expected to fall 5% by the end of 2023. This is due to energy prices falling and interest rates increasing. Further, there are some uncertainties behind this as the UK could potentially be at risk of a recession by the end of 2023, further affect the upcoming year. This could lead into a decline in economic growth and a reduction in consumers spending.

The increase in inflation has had an impact on retail businesses, and is contributing to a cost-of-living crisis and affecting how consumers spend their money. We have seen an increase in the National Minimum wage by 9.7% for +23 years of age, in comparison to 2022 - 6.6%. This is to ensure fairer compensation for workers and a positive step to improve income levels.

Due to the nature of the business, we believe that consumers will keep buying motor products and accessories to facilitate their journeys. We will have the capability to examine data and track trends to gain insight into the means to stay updated with the current market and keep close control of our spending.

Energy costs

Energy cost remains high, to help us with this increased cost we are exploring ways to enhance sustainability in the business by incorporating renewable energy sources.

Fuel prices increased considerably towards the end of last year due to global oil prices. However, as the cost of motor fuel fluctuating can impact the day-to-day expenses of the business, we are monitoring the most efficient routes for our deliveries allowing us to optimize our efficiency and reduce fuel consumption.

Disruption to the global supply chain

We have also seen a disruption across the global supply chain leading to shortages of goods and difficulty in receiving these items. To reduce the risk of disruption to receiving goods, we continually review where we are able to source goods to ensure we are able to meet consumer demands.

The group results and financial position at the year-end, are shown on pages 8 to 30 of the financial statements. The directors consider that the key performance indicators for the group are as follows:

• Ability to maintain and improve gross profit margin

  • Optimising our storage means we are able to buy goods in bulk and enable the gross profit margin to increase.

  • With the increase in the number of branches we have we are able to increase turnover.

• Staff efficiency per branch

  • Ensuring optimum staff efficiency through effective training and monitoring. Having now established a reporting structure that can monitor our employee productivity rate using company-specific metrics.

  • Reviewing and tracking vacancies per branch, understanding our time to hire, and completing a cost analysis of each department before any additional vacancies are agreed.

• Employee retention and engagement.

  • With recruitment remaining a key objective for the business towards the end of 2023, particularly with the addition of new branches, it's key for us to understand how to retain and motivate all members of staff through effective management, career progression, and ensuring that our compensation packages and staff incentives are competitive.

By order of the Board

The directors present their annual report and financial statements for the year ended 31 December 2022.

The principal activity of the company and group continued to be that of retailing and wholesaling of motor accessories.

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

The results for the year are set out on page 8.

Ordinary dividends were paid amounting to £67,500. The directors do not recommend payment of a further dividend.

The auditor, Cheesmans, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

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.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

We have audited the financial statements of Car Spares (Distribution) Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company 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 31 December 2022 and of the group's profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the 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 year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and 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.

Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and regulations related to the Employment Law, Health & Safety Law and UK tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journals to increase revenue or reduce expenditure and management bias in accounting estimates. Audit procedures performed by the engagement team included:

• Discussions with management in respect of known or suspected instances of non-compliance with laws and regulation and fraud, and review of board minutes and internal reports;

• Evaluation of the operating effectiveness of management’s key controls around the forecasting of costs and margin estimation;

• Challenging the assumptions and judgements made by management in their significant accounting estimates, in particular those that involve the assessment of future events, which are inherently uncertain – the key estimates determined in this respect are those relating to the value of accrued income and accrued costs and those relating to provisions; and

• Reviewing journal entries, unusual account combinations, such as those with unusual or unexpected journal postings to the profit and loss as well as journals which contain unusual words.

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 is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,974,986 (2021 - £2,279,421 profit).

Car Spares (Distribution) Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 90 Summer Lane, Newtown, Birmingham, B19 3ND.

The group consists of Car Spares (Distribution) Holdings Limited and all of its subsidiaries.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

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

The consolidated financial statements incorporate those of Car Spares (Distribution) Holdings Limited and all of its subsidiaries (i.e. entities that the Group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes. All financial statements are made up to 31 December 2022.

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.

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.

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

All financial statements are made up to 31 December 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. Thus the directors continue to adopt the going concern basis of accounting 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.

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the sale of goods 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.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Tangible fixed assets are stated at cost or valuation less depreciation. Depreciation is provided at rates calculated to write off the cost or valuation less estimated residual value of each asset over its expected useful life, with the exception of assets that have been acquired from group companies that will retain their original useful economic life, as follows:

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.

Interests in other investments are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in a revaluation reserve.

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.

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.

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

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

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 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.

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.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Trust

The Group has created a trust whose beneficiaries will include employees of the Group and their dependents. Assets held under this trust will be controlled by trustees who will be acting independently and entirely at their own discretion.

Where assets are held in the trust and these are considered by the Group to be in respect of services already provided by employees to the Group, the Group will account for these as assets of the Group until the earlier of it no longer having de facto control of these assets and it not obtaining future economic benefit from these assets. The value transferred will be charged in the Group's profit and loss account for the year to which it relates.

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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The recoverability of the trade debtors is considered by the directors and where this is considered an issue, due to the ageing of the debt, relevant provisions are accordingly made and are regularly assessed as new information becomes available.

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.

Each year, the directors make an appropriate provision based on the data available to reduce the carrying value of the stock based on the age of the stock, the number of units of each stock held and their projected sales numbers.

When assessing the recoverability of debtors, the directors consider the likelihood of future economic inflows to determine if the carrying value is appropriate or if a provision is required.

When assessing the value of fixed asset investments, the directors consider the current market for the investments and rely on the professional expertise of specialist insurers. The valuation is reviewed annually taking into account any new information that becomes available.

An analysis of the group's turnover is as follows:

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

Their aggregate remuneration comprised:

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

Details of the company's subsidiaries at 31 December 2022 are as follows:

Registered office addresses (all UK unless otherwise indicated):

Of the amounts shown above in amounts owed by related parties, £400,000 is covered by a loan agreement with the related party in Note 24, for a period of ten years from June 2019. Interest is charged on the principal sum at a rate of 3% above the Bank of England base rate.

Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

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

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.

All the shares rank pari passu in all respects, except for dividends.

There is an unlimited multilateral guarantee between the companies of the Car Spares (Distribution) Holdings Limited group and HSBC Bank PLC whereby amounts due to and from HSBC Bank PLC can be offset, both in terms of capital and interest calculation. At 31 December 2022 there were no amounts that could be called under this arrangement.

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:

During the year the group entered into the following transactions with related parties:

The following amounts were outstanding at the reporting end date:

Included in other related parties, is a loan receivable from TEEM Holdings Limited, a company controlled by the Directors, totalling £400,000 (2021: £400,000). The loan is for a period of 10 years from June 2019, is unsecured and interest is charged on the principal sum at a rate of 3% above the Bank of England base rate. During the year the decision was taken to waive all interest from the commencement of the loan until such time that the company can obtain a tenant for its investment property at which time the charging of interest will recommence.

Dividends totalling £0 (2021 - £4,000) were paid in the year in respect of shares held by the company's directors.

Loans have been granted to / (from) the group to its directors as follows:

The company is ultimately controlled by its Directors by virtue of their interest in the share capital.