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 2022
The directors present their Strategic report on the company for the year ended 31 December 2022.
The past few years has seen Harvey Water Softeners consolidate and build on its position as a premier provider of water softeners within the UK market. Despite the impact of the Covid pandemic, followed by uncertainty and inflationary pressures, the company has continued to grow strongly and has been able to retain gross margin levels through this period. This has allowed the company to maintain its commitment to investment in its core products, auxiliary services and employees. In turn the investment has led to increased market share and openings into new markets whilst retaining premium product quality and service provision. The directors believe that the medium and long term interests in the company are reliant on strong investment which is reflected in the increased administration costs incurred in the year. However, this provides Harvey’s with the necessary strong foundation to continue to expand geographically and through product range.
Overall sales revenue increased in comparison with the prior year at £41,885,342 (2021: £39,997,653), representing both organic growth and acquisitions. Gross margins were not significantly impacted by the increase in sales, remaining within the historical base range of 28.3% (2021: 28.1%) if excluding the increased bad debt provision totalling £1,768,600. This reflects the monitoring and control of costs during this period and efficiencies gained through cost rationalisation with further investment made. Operating loss has increased to £2,613,606 (2021: Operating profit £640,885). EBITDA (earnings before interest, taxation, depreciation, and amortisation) has decreased to a negative £453,371 (2021: positive £1,944,699).
The directors of the company consider that the key business risks and uncertainties affecting the company continues to relate to the economic environment, specifically inflation, overall employment numbers and consumer disposable income. In mitigation the company continues to invest in improving the energy efficiency, cost effectiveness and range of products being provided into the commercial and household water drinking market. Costs are routinely monitored with specific teams performing rolling reviews on energy consumption, utilisation and general overhead costs.
a) Financial risk The company's operations expose it to a variety of financial risks that include liquidity risk, foreign exchange risk and credit risk. The company has in place a risk management programme that seeks to limit any adverse effects on the financial performance of the company. Liquidity risk Liquidity risk is managed by monitoring and retaining sufficient cash and access to borrowings, to ensure the company has sufficient available funds for operations and planned expansion. Foreign exchange risk Foreign exchange risk arises from cash flows associated with contracting operations in overseas territories. The company does not use derivative financial instruments to manage foreign currency transactions and as such, no hedge accounting is applied. The directors will revisit the appropriateness of this policy should the company's operations change in size or nature.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Credit risk
Credit risk arising from transactions with third party customers. The company has policies which require appropriate credit checks on potential customers and regularly reviews the utilisation of individual customer credit limits. b) Operations The company's ability to successfully deliver what their customers require is material to its continued growth and development. The directors continue to enhance the customer experience by assessing and monitoring customer focused initiatives to ensure continual improvement. c) Russo Ukraine Conflict The company continues to monitor and review the ongoing Russo Ukraine Conflict. The company has reviewed the potential impact on both supply lines and customer base where these have been impacted both directly and indirectly by the conflict and has identified contingencies and alternative supplies if required. The company continues to monitor the impact of the conflict on energy prices and has implemented rolling reviews to ensure, where possible, price and supply stability. d) Health and safety Health and safety are of prime importance to the company and its business, and the company is committed to continual improvement of its performance. The company maintains a compliant integrated Health, Safety and Environmental management system, which through its operation, aims to ensure a safe and healthy environment for our employees, customers, suppliers, communities, and all those affected by our activities.
The directors consider the key performance indicators (KPIs) for the business to be:
i) Sales revenue – indicates sales growth ii) Gross margin – indicates sales profitability before administrative costs are deducted iii) EBITDA – indicates profitability iv) Headcount – indicates return on investment in people These KPIs provide information on growth and profitability and have been reported in the review of the business section above. The directors regularly review these KPIs along with more detailed information on the company’s performance and positions. Results of key performance indicators: Revenue: £41,885,342 (2021: £39,997,653) Gross Margin: £10,086,555 (2021: £11,245,280) EBITDA: (£453,371) (2021: £1,944,699) Headcount: 251 (2021: 245)
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
In 2022, the parent group, Culligan International, expanded the organisation’s environmental, social, and governance (ESG) program including two internal ESG roles. This transitioned the responsibility of carbon accounting from reliance on external consultants to an internal responsibility. The carbon inventory was prepared using the principals of Greenhouse Gas Protocol (GHG Protocol), the widely recognised standard of global monitoring and reporting of Greenhouse Gasses. In certain circumstances modelling has been used by date or utilised areas of shared premises. The company leverages Emitwise, a carbon accounting technology company, to help calculate and report its GHG emissions. Emitwise combines AI technology with a proprietary set of Emission Factor (EF) databases to deliver accurate, auditable, and actionable results. Emitwise benefits from a team of expert carbon accountants that review classifications to ensure the most accurate EF has been selected. Final results are quality assured and can be confidently relied on to make reduction decisions and for public reporting.
We have identified and reported based on the principal of legal entity to define the organisational boundary. We have reported all material emission sources required by the regulations for which we deem ourselves responsible and have maintained records of all source data and calculations. The company is committed to carbon reduction and is reviewing science-based target commitments. Specifically, Culligan has prepared a group wide, as well as company specific carbon mitigation plan. The company is reviewing the proposals and continues to seek all avenues of carbon reduction and energy efficiency. The table below includes total energy consumption (reported as kWh) and greenhouse gas emissions for the sources required by the regulations, along with our intensity ratio: 2022 Total Energy Consumption (kWh) 2,547,410.4 Purchased Electricity Emissions (tCO2e) 6.3 Vehicle Fuel Combustion Emissions (tCO2e) 769.03 Total Gross Reported Emissions (tCO2e) 775.3 Turnover (£’000) 41,885.34 Intensity Ratio: Turnover (tCO2e / £ million) 0.02 In 2022 the company exceeded the medium sized threshold and therefore is disclosing the carbon reporting for the first year. The results reflect the expanded bandwidth of the ESG program that allowed for the most thorough and rigorous carbon inventory to date. The company continued investment in company vehicle transition through replacement of diesel company vehicles with electric vehicles as leases expire. The 2022 weather patterns also allowed for a decrease in electricity use at the company’s facilities.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
a) Stakeholder Engagement
Investors The ultimate parent is BDT Capital Partners (BDT) following the acquisition of the Culligan Group from Advent International Corporation on 31 July 2021. The company is a subsidiary of the Culligan Group (‘Culligan’), within BDT’s diverse portfolio, which will only continue to remain attractive to investors if we demonstrate consistent and robust growth with profitable performance. Strategic alignment is discussed on a monthly basis with regional and global Culligan leadership, with a clear mandate and set of values cascaded from the group. Employees The company’s continued success is predicated by a committed, dynamic, and importantly safe workforce that are driven by success and adherence to our Culligan values. Whilst overall employee numbers fell in the year, this was due to the transfer of support and back office staff to a central service company for the group. Operational and sales employees continued to increase supporting the growth in sales and operations of the company. Workforce engagement is managed through several initiatives, including a structured personal performance review cycle, online learning and skills management, and feedback inputs from employee questionnaires and ENPS (employee net promotor score) tracking. Furthermore, health and safety are core to our working practices with recordable injury frequency rates, and near misses, highlighted within company KPI dashboards and seen as a priority agenda point in wider company communications. Customers The company is a premium brand in the sector in which it operates, with it needing to demonstrate this in the continued high quality of products and aftersales services it provides. Customer engagement, the value derived from the water solutions the company provides, and the ability to be receptive and adapt to changing customer needs and trends, are fundamental to the continued success of the business. NPS (net promotor score) is continuously tracked through automated requests for customer feedback, reviewed and actioned upon with a clear strategy and focus on the customer experience and how this can be continuously improved. We continue to invest in both technology and training (in both our office and field-based teams) to improve the customer journey, both in terms of quality and efficiency. Suppliers The company buys from a range of both international suppliers and local UK businesses - the compliance, quality, speed of supply, continuous innovation, and environmental credentials, of which are key to us being able to meet the needs of our customers and operate a lean working capital position. The company’s supply chain works closely with suppliers, specifically our larger product manufacturers, on supply planning, product development, and any other ongoing considerations (such as Brexit and COVID-19). This secures robust, timely supply and mutually beneficial alignment of product innovation.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
b) Principal Decision
During the year Harvey Water Softeners continued and expanded on the policy of the acquisition of water softener dealers. The policy has allowed the company to directly expand into new geographical regions. The direct acquisition and control has also allowed the company to streamline customer support and experience ensuring that all customers are provided with a consistent high level of service. In addition, through reducing the reliance on a secondary sales market the company has been able to prevent significant price rises for end customers even whilst input prices have increased sharply and offers a greater value to the end customer. The directors believe that increasing direct sales, standardising customer experience and streamlining the customer interactive experience provides the company with the necessary quality, market reach and level of service needed to ensure longer term growth and a strong customer base.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their report and the financial statements for the year ended 31 December 2022.
The directors who served during the year were:
The loss for the year, after taxation, amounted to £2,296,164 (2021 - profit £562,409).
During the year the directors did not recommend a payment of dividend (2021 - £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;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The 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.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Whilst the company continues to build and develop it’s product range and services, having launched a number of new products in the prior two years, 2023 is seen as a year of consolidation and growth through the current products and services offered to the market. The company is launching a number of initiatives to drive customer service and staff development, helping to support the continued growth of the company with consistently high quality service.
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.
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 directors consider carbon emissions and environmental policy to be strategic given the central consideration environmental impact is given to the performance of the company, products and services. Accordingly, the directors have elected to include the Streamlined Energy and Carbon Reporting within the Strategic Report of the company.
In accordance with Section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 and the Strategic Report preceding the Directors' Report includes information that would formerly have been included in the business review and the principal risk and uncertainties sections of the Directors' report.
There have been no significant events affecting the Company since the year end.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2022, 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.
∙Judgements and estimates in respect of stock, warranty and bad debt provisions to show a more favourable result.
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 2022
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 15 to 33 form part of these financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2022 and these financial statements may be obtained from Companies House under Culligan Shared Services (UK) Limited, company number: 11540567.
The Company is a parent company that is also a subsidiary included in the consolidated financial statements of a larger group by a parent undertaking established under the law of a state other than the United Kingdom and is therefore exempt from the requirement to prepare consolidated financial statements under section 401 of the Companies Act 2006.
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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. Grants of a revenue nature are recognised in the Statement of Income and Retained Earnings in the same period as the related expenditure.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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 2022
2.Accounting policies (continued)
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 2022
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. Aside from the estimation above, an error was identified in the warranty provision calculation which further information is on note 24. Stock provision 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 Bad debt provision The provision for bad debts on trade debtors unrecovered by the year end. Management undertakes an annual review of whether balances are recoverable, this includes a retrospective review.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Analysis of turnover by country of destination:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
13.Taxation (continued)
Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2021 on 24 February 2022. These include increases to the main rate of tax from 19% to 25%. Deferred taxes at the balance sheet date would have been measured using these enacted tax rates and reflected in the financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Profit and loss account
A prior year error has been identified in the warranty provision whereby the labour and parts had been calculated on estimated call outs from historical data. The warranty provision should have included parts only and therefore a prior year adjustment was necessary to correct the warranty provision recognised. This reduced the warranty provision by £1,617,545 for the year ending 31 December 2020 and £75,150 for the year ending 31 December 2021. The corporation tax impact was £321,612 meaning there was an overall increase to profit reserves as at 1 January 2022 of £1,371,083.
26.Other financial commitments
At the balance sheet date the company had entered into an agreement with a supplier and provided £520,000 (2021 - £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 2022
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.
The ultimate controlling party is BDT Capital Partners LLC by virtue of their control of Osmosis Holdings, LP.
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