Harlow Timber Systems (Eastern) Limited - Limited company accounts 23.2

REGISTERED NUMBER: 01293560 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 30 June 2023

for

Harlow Timber Systems (Eastern) Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

7

Report of the Independent Auditors

9

Statement of Comprehensive Income

13

Balance Sheet

14

Statement of Changes in Equity

15

Notes to the Financial Statements

16

DIRECTORS:

J R Harlow

S Dinsdale

A R Atlee

M S Hemsley

N M Sabey

Mrs G Plummer

REGISTERED OFFICE:

c/o Harlow Bros Limited

Hathern Road

Long Whatton

Loughborough

Leicestershire

LE12 5DE

REGISTERED NUMBER:

01293560 (England and Wales)

SENIOR STATUTORY AUDITOR:

Christopher David Hutton FCCA

AUDITORS:

Charnwood Accountants & Business Advisors LLP

Statutory Auditor

The Point

Granite Way

Mountsorrel

Loughborough

Leicestershire

LE12 7TZ

The directors present their strategic report for the year ended 30 June 2023.

REVIEW OF BUSINESS

We aim to present a balanced and comprehensive review of the development and performance of our business during the year and its position at the year end.

Our review is consistent with the size and non-complex nature of our business and is written in the context of the risks and uncertainties we face.

The company is a wholly-owned subsidiary of Harlow Timber Group Ltd and operates in the timber industry. The principal activities of the company for the year under review are that of a engineered timber distributor and manufacturer. We provide products to a wide range of customers within the construction sector and look to create value at the various stages of the selling process.

The business activities are undertaken at our manufacturing unit located in Halstead. We pride ourselves on having an ethos for excellent customer service provided through our knowledgeable staff and our ability to offer a wide product range at competitive prices.

Results and performance

We are pleased to report a strong year of trading results for the company, as set out on pages 13 to 28, which show a further increase in turnover as the company continues to increase its market share in the house building sector. Our customers traded well during this year and into Q1 but the immediate future is less certain given recent political and economic conditions; increased interest rates being a major factor.

The results reflect the company's strong underlying trading activities whilst we drive to improve the efficiency and focus of our operations. Strong overhead control continues to be a key focus of management. We have continued to invest in all areas of the business, such as the vehicle fleet, production space, solar panels and plant & machinery to ensure that we can continue to meet demand whilst offering quality products and customer service.

We continue to meet the criteria to remain certified by Programme for the Endorsement of Forest Certification (PEFC) products. This is to ensure we supply traceable and sustainable quality products in line with EU regulations for which we assess all suppliers continually.

Staff numbers have increased this year in line with increased production to meet the growing demand from customers. We are always looking to continually improve their knowledge and identify their training needs. This includes investment in trainees, which are important to ensure that we have new talent coming through the business, and continued investment in internal systems to manage the growing workforce needs.

Overall we are very pleased with the current years trading results and we can report a growth in the value of shareholders' funds. The result is a strengthening balance sheet which will enable us to implement our growth and investments plans for the future, whilst maintaining a good level of working capital. We are confident that this will continue steadily for the foreseeable future, as we continually aim to develop and grow the business across our core product areas.

PRINCIPAL RISKS AND UNCERTAINTIES

The process of risk management is applied through a combination of policies, procedures and internal controls. All policies are subject to Board approval and ongoing review by management. Compliance with regulation, legal and ethical standards is a high priority for the company to ensure they are compliant and able to continue trading successfully.

The finance team is responsible for ensuring that effective internal controls exist to manage the financial risks and that these controls operate effectively for the benefit of the business.

We the directors endeavour to identify the risks that the company faces on a day to day basis. This is to ensure we have the financial strength and operational capacity to support the growth of the business. The current risk factors below are those that are considered by the board to be material to the company. However, we also recognise that we operate in a fast paced commercial environment which is constantly evolving, where new risks may appear or immaterial risks may become more important, and the directors will develop appropriate strategies as these risks appear.

Competitive market pressure is an ongoing risk for the company. To mitigate this risk the company strives to understand its customers' requirements, markets and competitors, to ensure we continue to provide quality products and seek expansion by organic growth. Given the potential economic volatility seen in our core business markets, we are continuously monitoring trends and looking for ways in which to be more efficient and improve our working capital requirements. The production of regular financial information helps the board to identify and assess current trends.

Key parts of our business, such as timber raw material purchasing, are affected by fluctuations in price and supply of materials, although purchasing policies and practices are in place seek to mitigate, where practicable, such risks. We procure materials from long standing and reliable supply partners which ensures we can meet production requirements. We benefit from being part of the Harlow group of companies and are able to take advantage of combined strategic purchasing opportunities allowing us to respond proactively to changes in market conditions.

The company's relationship with its supply partners in Europe is of great importance to us and we have the flexibility to procure timber from a wide range of reliable supply sources to help mitigate changes in market conditions.

The company purchases goods from international markets and is therefore exposed to foreign currency movements on such purchases.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The activities of the company expose it to a number of financial risks during the normal course of the company's business. The company aims to limit undue exposure to business and financial risks and ensure sufficient working capital exists to fund operations and to mitigate any potential negative effects on the company's assets and profitability. The directors consider such risks and uncertainties to the business at this point in time are:

Currency risk

As the company trades in the UK, but purchases from various overseas markets, margins can fluctuate in line with changes in currency spot rates against the value of sterling for our purchases.

Customer mix

There is a risk that the company becomes too dependent on a particular customer and product range and efforts are made to ensure that our exposure in this respect is minimised by continually striving to expand the range of products and services on offer to enhance the customer experience and build relationships with key customers.

Credit risk

There is a risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Company policies are aimed at minimising such losses, and require that deferred terms are only granted to customers who demonstrate an appropriate payment history and satisfy credit worthiness procedures. Details of the company's debtors are shown in the notes to the financial statements.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED

Competitor risk

The company operates in a highly competitive market balancing both customer requirements and market pressures. The directors review and monitor these factors to ensure the company's competitiveness is upheld to enable the company to maintain its long term relationships with key customers and reputation for quality. We aim to improve, strengthen and maintain the brand to ensure we maintain the right levels of investment and innovation in our customer offerings.

Liquidity risk and going concern

The company is exposed to liquidity risk as sufficient funds are required to support trading and financing activities. The company regularly monitors its liquidity position to ensure that sufficient funds are available to meet both current and future requirements.

The company's cash position removes some elements of the financial risks any business faces. With the above business risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen future events outside of our control.

Health and Safety

We are conscious of our corporate responsibilities to all our stakeholders and to society as a whole. Health and safety, environmental matters, staff training and equal opportunities are key areas relevant to the company's business activities.

We are keen to remain proactive in assessing and minimising the risks in all areas of the business and educating the workforce to provide as safe a working environment as possible for our staff.

The handling of timber products, both manually and mechanically, and the stacking and storage of these products at height, can be dangerous activities. We utilise the services provided by the Group Health and Safety Officer who reports to the board regularly on working practices and improvements that can be made to increase safety for the staff. Employees are encouraged to take personal responsibility for making sure their actions and behaviour maintain safety for all staff members during the working day.

Environmental

The directors recognise that the company has a responsibility to the environment, customers, suppliers and staff to operate its commercial activities using well-managed forests and to reduce any negative environmental or social impact of its trading as far as is reasonably practical for the company.

We therefore make it a priority to ensure our timber is legally harvested and comes from well managed forests. The company recognises that the independent certification of forests and of the supply chain is the best means of providing assurances of this. Where possible we purchase material certified by the Programme for the Endorsement of Forest Certification schemes (PEFC). The company has third party audits of their chain of custody for timber supplied as certified by PEFC and other schemes. This is to ensure that claims made about certification can be proven and our certifications for these can be located on our website for customers and other stakeholders to view.

ENGAGEMENT WITH EMPLOYEES

Details of the number of employees and related costs can be found in Note 4 to the financial statements.

The company became an Employee Owned business in March 2022, with the previous shareholders selling 90% of their shares to Harlow Timber Group Employee Ownership Trust.

The trust exists solely for the benefit of employees of the Group. We have made an encouraging start to working towards an employee ownership ethos, but recognise this will continue to evolve over time. This is the first full year of employee ownership and all Group employees have already benefited from a second tax free payment based on the strong result.

The company's ability to achieve its commercial objectives and to serve the needs of its customers in a profitable and friendly manner depends on the contribution of its employees. Employees are encouraged to develop their contribution to the business whatever department in the business they work in.

The launch of the Companies Values, Vision and Mission has detailed a clear goal for the business and is helping to shape the targets of each department. Having a set of defined values gives our employees an overview of what our priorities are and how they can contribute to their business. These have been incorporated into probation and performance reviews to enable employees to consider how they can impact the culture of Harlow's.

Harlow's is working hard to improve our employee benefit offering, this in time will improve employee engagement, our ability to recruit and retain employees. Over the past year we have implemented a new length of service scheme which has seen over 200 employees across the group receive recognition for their service with Harlow's. We have also introduced a new Employee Assistance Programme which gives employees access to a range of services including counselling, mental health support and guidance on health and wellbeing. Alongside this we have introduced a benefits platform that gives our employees a range of discounts with high street and online retailers.

Harlow's has an ongoing commitment to developing our employees as well as bringing new people into the industry. It is our policy to train and develop employees to ensure that they are best equipped to undertake their daily tasks for which they are employed, and to provide the opportunity for career development without discrimination. Training and development is provided and is available to all levels and categories of staff. Over the past year we have rolled out our e-learning platform across the group. Allowing access to over 100 courses relating to health and safety, sales skills, personal wellbeing and management techniques. These are used alongside in person training courses and apprenticeships to develop the skills of all employees. This year Harlow's has signed a pledge with the Builders Merchant Federation to have 5% of employees on an apprenticeship. We constantly encourage development of current and new employees regardless of their ability, age, department, or seniority.

KEY PERFORMANCE INDICATORS

We consider that our key financial performance indicators are those that communicate the financial performance and strength of the company, these being turnover, gross margin, operating profit and earnings before interest tax depreciation and amortisation (EBITDA). The company also closely monitors other internal KPI's.

We continually aim to develop and grow our business in order to increase our market share, whilst striving to maintain the gross margin on our products. As the prime measure of our economic output, revenue growth is key to measuring shareholder return and the success of our expansion strategies. Turnover for the year increased by approximately 56%, as a result of the recovery from Covid 19 shutdown periods reflected in last years accounts and the upscaling of building developments gathers pace, together with the significant increase in the price of timber.

Overall, operating profit is £2,466,896 (2022: £1,130,262) and profit before tax has increased to £2,479,982 (2022: £1,130,250). Profit after taxation is £2,108,296 (2022: £926,742). A dividend has been declared, as disclosed in the directors report.

FINANCIAL INSTRUMENTS

A summary of the company financial instruments and related disclosures affecting the financial statements are set out in the notes to the accounts. The financial risk management objectives and policies of the entity and its exposure to related risks are covered above

FUTURE DEVELOPMENTS

The Group moved to Employee Ownership under the new group holding title of Harlow Timber Group Limited on 31 March 2022. Harlow Timber Group Trustees Limited was duly formed and a representative board, elected alongside the creation of employee committees. We made an encouraging start to working towards an employee ownership ethos but recognise this will continue to evolve over time. This will involve senior management helping employees at all levels to understand the many implications of this structure and how they can directly influence the success of the business through their own day to day activities and responsibilities.

The directors anticipate the business environment will become increasingly more challenging, starting in Q2 and into 2024, but believe that the company is in a good financial position to meet these challenges. However, there are a number of economic, political and international factors influencing trading conditions within our markets and this will need careful management until a more stable trading environment is achieved.

ON BEHALF OF THE BOARD:

N M Sabey - Director

19 February 2024

The directors present their report with the financial statements of the company for the year ended 30 June 2023.

DIVIDENDS

The total distribution of dividends for the year ended 30 June 2023 will be £ 408,000 .

DIRECTORS

The directors shown below have held office during the whole of the period from 1 July 2022 to the date of this report.

J R Harlow

S Dinsdale

A R Atlee

M S Hemsley

N M Sabey

Other changes in directors holding office are as follows:

Mrs G Plummer was appointed as a director after 30 June 2023 but prior to the date of this report.

DISCLOSURE IN THE STRATEGIC REPORT

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 to be contained in the directors' report. It has done so in respect of future developments and financial instruments.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors 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 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 and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and 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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Charnwood Accountants & Business Advisors LLP, have expressed their willingness to continue in office as auditors and will be proposed for re-appointment at the forthcoming Annual General Meeting in accordance with Section 485 & 487 of the Companies Act 2006.

ON BEHALF OF THE BOARD:

N M Sabey - Director

19 February 2024

Opinion

We have audited the financial statements of Harlow Timber Systems (Eastern) Limited (the 'company') for the year ended 30 June 2023 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Notes to the Financial Statements, 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).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 30 June 2023 and of its 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 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 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 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 directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

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.

In connection with our audit of the financial statements, 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 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 the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

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 Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page seven, 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 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 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 company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the Financial Statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the Financial Statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.

In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the Financial Statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity's operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs(UK). The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. As such material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment and or collusion.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

We obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the Company operate in and how the Company are complying with the legal and regulatory frameworks. Focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, pension legislation and UK tax legislation.

We inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud;

We discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the Financial Statements may be susceptible to fraud, having obtained an understanding of the effectiveness of the control environment.

The engagement partner assessed that the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations.

We assessed the susceptibility of the company's financial statements to material misstatement, including how fraud might occur, by evaluating management's incentives and opportunities for manipulation of the financial statements. This included the evaluation of the risk of management override of controls. In assessing the potential risks of material misstatement, we obtained an understanding of the company's operations, including the nature of its income and expenditure together with its objectives and strategies to understand the classes of transactions, account balances, expected financial statement disclosures and business risks that may result in risks of material misstatement. Also on the company's control environment, including the policies and procedures implemented by the company to ensure compliance with the requirements of the financial reporting framework.

We determined that the principal risk in relation to areas of increased management judgement, which could be impacted by management bias, was through the use of journal entries that increase revenues, profits or the carrying value of property plant and equipment in order to inflate results of the company.

Our audit procedures involved:

The evaluation of the design effectiveness of controls that the company has in place to prevent and detect fraud;

To undertake journal entry testing, with a focus on higher risk journal, such as, posted by senior management, journals with unusual attributes, journals without any descriptions and closing journals posted during the preparation of the financial statements, which are material and not reoccurring or common postings which fall outside of the auditor's expectations. Together with assessing whether the judgments made in making accounting estimates are indicative of a potential bias.

In response to the risk of irregularities and non-compliance with laws and regulations our procedures included, but which were not limited to;

Enquiring of management as to actual and potential litigation and claims against the company;

Completing a review of relevant legal and professional costs within the accounting records for any evidence of previously un-detected or un-reported instances of non-compliance.

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 Report of the Auditors.

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 a Report of the Auditors 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.

Christopher David Hutton FCCA (Senior Statutory Auditor)

for and on behalf of Charnwood Accountants & Business Advisors LLP

Statutory Auditor

The Point

Granite Way

Mountsorrel

Loughborough

Leicestershire

LE12 7TZ

19 February 2024

TURNOVER

3

15,607,548

13,178,643

Cost of sales

11,610,294

10,239,703

GROSS PROFIT

3,997,254

2,938,940

Distribution costs

395,900

380,741

Administrative expenses

1,190,237

1,427,937

1,586,137

1,808,678

2,411,117

1,130,262

Other operating income

55,779

-

OPERATING PROFIT

5

2,466,896

1,130,262

Interest receivable and similar income

23,352

-

2,490,248

1,130,262

Interest payable and similar expenses

6

10,266

12

PROFIT BEFORE TAXATION

2,479,982

1,130,250

Tax on profit

7

371,686

203,508

PROFIT FOR THE FINANCIAL YEAR

2,108,296

926,742

OTHER COMPREHENSIVE INCOME

Equity settled share options

34,419

-

Income tax relating to other comprehensive
income

-

OTHER COMPREHENSIVE INCOME
FOR THE YEAR, NET OF INCOME TAX

34,419

-

TOTAL COMPREHENSIVE INCOME
FOR THE YEAR

2,142,715

926,742

FIXED ASSETS

Tangible assets

10

1,315,188

990,286

CURRENT ASSETS

Stocks

11

1,139,756

1,863,309

Debtors

12

2,975,711

2,217,985

Cash at bank and in hand

930,138

686,214

5,045,605

4,767,508

CREDITORS

Amounts falling due within one year

13

1,813,960

2,513,105

NET CURRENT ASSETS

3,231,645

2,254,403

TOTAL ASSETS LESS CURRENT
LIABILITIES

4,546,833

3,244,689

CREDITORS

Amounts falling due after more than one
year

14

(2,066,980

)

(2,600,000

)

PROVISIONS FOR LIABILITIES

18

(100,449

)

-

NET ASSETS

2,379,404

644,689

CAPITAL AND RESERVES

Called up share capital

19

600,000

Retained earnings

20

1,779,404

44,689

SHAREHOLDERS' FUNDS

2,379,404

644,689

The financial statements were approved by the Board of Directors and authorised for issue on 19 February 2024 and were signed on its behalf by:

N M Sabey - Director

Called up

share

Retained

Total

capital

earnings

equity

£

Balance at 1 July 2021

600,000

(882,053

)

(282,053

)

Changes in equity

Total comprehensive income

-

926,742

Balance at 30 June 2022

600,000

44,689

644,689

Changes in equity

Dividends

-

(408,000

)

(408,000

)

Total comprehensive income

-

2,142,715

Balance at 30 June 2023

600,000

1,779,404

2,379,404

1.	STATUTORY INFORMATION

Harlow Timber Systems (Eastern) Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

The principal place of business is 22 Fifth Avenue, Bluebridge Industrial Estate, Halstead, Essex, CO9 2SZ

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2 below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

Going concern

Having completed their assessment, the directors have concluded that there are no material uncertainties that cast significant doubt about the ability of the company to continue as a going concern.

The company meets its day-to-day working capital requirements through its bank facilities. The company’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the company should be able to operate within the level of its current facilities and that these will continue to be made available to the company.

The company's business activities, together with the factors likely to affect its future development and financial position have been documented in the strategic report. The company currently has sufficient financial resources together with strong relationships spread over a number of customers to enable future growth to continue.

After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its financial statements.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of paragraph 3.17(d);

•

the requirement of paragraph 33.7.

The company is a wholly owned subsidiary of Harlow Timber Group Limited, and subsequently a qualifying entity under FRS102 and has such applied the qualifying exemptions given above under FRS102 in respect of those disclosures.

The company has taken advantage of the exemption, under paragraph 1.12(b) of FRS 102, from preparing a statement of cash flows, on the basis that it is a qualifying entity and its ultimate parent company, Harlow Timber Group Limited, includes the company’s cash flows in its consolidated financial statements.

The consolidated financial statements of Harlow Timber Group Limited, within which the company is included, can be obtained from the Companies House.

Significant judgements and estimates

In the application of the company's accounting policies, which are described in the accounting policies below, management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements

In preparing these financial statements, the directors have made the following key judgements that have a significant effect on the amounts recognised in the financial statements as described below.

- Determine whether there are indicators of impairment of the company's tangible and intangible assets along with residual values and asset lives. The residual value is the net realisable value of an asset at the end of its useful economic life. The company has taken an assessment of the residual values that are appropriate for the business and reviews this assessment annually. Note 8 provides details of the value of fixed assets capitalised.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

a) Establishing useful economic lives for depreciation purposes of property, plant and equipment

Long-lived assets, consisting primarily of property, plant and equipment, comprise a significant portion of the

total assets. The annual depreciation charge depends primarily on the estimated useful economic lives of each type of asset and estimates of residual values. The directors regularly review these asset useful economic lives and change them as necessary to reflect current thinking on remaining lives in light of prospective economic utilisation and physical condition of the assets concerned. Changes in asset useful lives can have a significant impact on depreciation and amortisation charges for the period. Detail of the useful economic lives is included in the accounting policies.

b) Providing for bad and doubtful debts

The company makes an estimate of the recoverable value of trade and other debtors. The company uses estimates based on historical experience in determining the level of debts, which the company believes, will not be collected. These estimates include such factors as the current credit rating of the debtor, the ageing profile of debtors and historical experience. Any significant reduction in the level of customers that default on payments or other significant improvements that resulted in a reduction in the level of bad debt provision would have a positive impact on the operating results. The level of provision required is reviewed on an on-going basis.

Revenue recognition

Turnover represents the amounts (excluding value added tax) derived from the provision of goods and services to customers during the year.

Revenue is recognised when the significant risks and rewards of the goods or services provided have transferred to the buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the company.

Revenue is measured at the fair value of the consideration receivable from the sale of goods and services to third parties after deducting discounts and other promotional activities. Revenue may include duties which the company pays as principal, but excludes amounts collected on behalf of other parties, such as value added tax or other sales taxes.

Revenue of the company comprises the following key streams:

Sale of goods

Sales of goods are recognised on sale to the customer, which is considered the point of delivery. Delivery occurs when the goods have been shipped to the location specified by the customer, the risks of obsolescence or loss have been transferred to the customer, the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the company has objective evidence that all criteria for acceptance have been satisfied.

Retail sales are usually by cash, credit or payment card. Provision is made for credit notes based on the expected level of returns which is based on the historical experience taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.

Short leasehold

-

4% on cost

Furniture and equipment

-

20% on cost and 10% on cost

Plant and machinery

-

15% on cost

Motor vehicles

-

25% on cost

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use.

The assets' residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period. The effect of any change is accounted for prospectively.

Stocks

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to

complete and sell, and after making due allowance for obsolete and slow moving items.

The cost of stock is calculated on the weighted average cost principle on a first in first out basis and includes expenditure incurred in acquiring stock, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. Stocks are recognised as an expense in the period in which the related revenue is recognised.

Cost for raw materials and consumables are at the purchase cost to the company. Cost for Work in progress and finished goods includes all direct expenditure. The cost of work in progress and finished goods includes

production overheads and the attributable proportion of indirect overheads based on the normal level of activity.

At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price, in the ordinary course of business, less costs to complete and sell. The impairment provision is determined primarily by future demand forecasts. The write down is measured as the difference between the calculated cost of the stock and market based upon assumptions about future demand and charged to the provision for stock, which is a component of cost of sales.

Financial instruments

The company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable and loans to/from related parties.

Debt instruments, like loans and other accounts receivable and payable, are initially measured at present value of the future payments and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received.

However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an outright short-term loan not at market rate, the financial asset or liability is measured, initially and subsequently, at the present value of the future payment discounted at a market rate of interest for a similar debt instrument.

Trade and other debtors

Trade and other debtors are initially recognised at the transaction price and thereafter stated at amortised cost using the effective interest method, less impairment losses for bad and doubtful debts except where the effect of discounting would be immaterial. In such cases, the debtors are stated at cost less impairment losses for bad and doubtful debts.

A provision for impairment of trade debtors is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of debtors. The amount of the provision is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows, and is recognised in the profit & loss in operating expenses.

Trade and other creditors

Trade and other creditors are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in other creditors in the balance sheet. The assets of the plan are held separately from the company in independently administered funds.

Share-based payment

Where the company participates in a share-based payment arrangement established by a group company, the company takes advantage of the alternative treatment allowed under Section 26 of FRS 102. The company recognises the share-based payment expense based on an allocation of its share of the group’s total expense, calculated in proportion to the number of participating employees. The corresponding credit is recognised in retained earnings as a component of equity.

Equity-settled share-based payment transactions are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions where applicable. Fair value is measured by use of an appropriate pricing model which is considered by management to be the most appropriate method of valuation. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability and exercise restrictions. Settlements and cancellations are treated as an acceleration of vesting and the unvested amount is recognised immediately in the income statement.

Going concern

Having completed their assessment, the directors have concluded that there are no material uncertainties that cast significant doubt about the ability of the company to continue as a going concern.

The company meets its day-to-day working capital requirements through its banking facilities. The company's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the company should be able to continue operate within the level of its current facilities.

The company's business activities, together with the factors likely to affect its future development and financial position have been documented in the strategic report. The company currently has sufficient financial resources together with strong relationships spread over a number of customers to enable future growth to continue.

After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its financial statements.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

Turnover represents the amounts derived from the provision of goods and services which fall within the company’s ordinary activities, stated net of value added tax.

The company's principal activities are as stated in the strategic report and the company operates within the geographical region of the United Kingdom.

4.	EMPLOYEES AND DIRECTORS

30.6.23

30.6.22

£

Wages and salaries

2,430,937

1,915,843

Social security costs

222,782

176,327

Other pension costs

49,316

40,986

2,703,035

2,133,156

The average number of employees during the year was as follows:

30.6.23

30.6.22

Directors

1

Management/Admin

21

15

Production

59

49

81

65

30.6.23

30.6.22

£

Directors' remuneration

105,769

82,854

Directors' long term incentive schemes

34,419

-

Directors' pension contributions to money purchase schemes

5,205

4,365

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

1

5.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

30.6.23

30.6.22

£

Hire of plant and machinery

20,404

4,064

Depreciation - owned assets

212,019

178,073

Profit on disposal of fixed assets

(33,141

)

-

Auditors' remuneration

16,701

11,375

Stock recognised as an expense

9,871,415

9,736,150

In accordance with SI 2008/489 the company has not disclosed the fees payable to the company’s auditors for ‘Other services’ as this information is included in the consolidated financial statements of Harlow Timber Group Limited.

6.

INTEREST PAYABLE AND SIMILAR EXPENSES

30.6.23

30.6.22

£

Other interest

-

12

Hire purchase

10,266

-

10,266

12

7.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

30.6.23

30.6.22

£

Current tax:

UK corporation tax

271,237

209,730

Prior year adjustment

-

(6,222

)

Total current tax

271,237

203,508

Deferred tax

100,449

-

Tax on profit

371,686

203,508

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

30.6.23

30.6.22

£

Profit before tax

2,479,982

1,130,250

Profit multiplied by the standard rate of corporation tax in the UK of
20.500% (2022 - 19%)

508,396

214,748

Effects of:

Expenses not deductible for tax purposes

7,568

971

Income not taxable for tax purposes

(133,223

)

-

Capital allowances in excess of depreciation

-

(5,989

)

Adjustments to tax charge in respect of previous periods

-

(6,222

)

Re-measurement of deferred tax – change in UK tax rate

(11,055

)

-

Total tax charge

371,686

203,508

Tax effects relating to effects of other comprehensive income

30.6.23

Gross

Tax

Net

£

Equity settled share options

34,419

-

34,419

In the Spring Budget 2021 the UK government announced that they will be increasing the corporation tax rate from 19% to 25% from 1 April 2023. This rate change was substantively enacted on 24 May 2021 which is before the balance sheet date and therefore deferred taxes are recognised at this rate at the balance sheet date. In the Autumn Statement in November 2022, the government confirmed the increase in corporation tax rate to 25% from April 2023.

The effective tax rate differs from the UK corporation tax rate principally due to the deductibility of allowances on capital expenditure and other permanent differences arising in the period as detailed in the tax charge reconciliation.

8.

DIVIDENDS

30.6.23

30.6.22

£

Ordinary shares of £1 each

Interim

408,000

-

9.	SHARE-BASED PAYMENTS

Certain employees of the company along with other group employees have been granted options over the shares in Harlow Timber Group Limited. The options are granted with a fixed exercise price, are exercisable ten years after the date of grant and are forfeited if an employee leaves employment with the company. Employees are required to remain in employment with the group during the vesting period.

The company recognises an equity-settled share-based payment expense based on a reasonable allocation of the total charge for the group. This allocation is the total charge for the group pro-rated for the number of expected participating employees of the company.

A reconciliation of share option movements over the year to 30 June 2023 is shown below:

2023

2022

Number of
share options

Exercise price

Number of share
options

Exercise
price

Outstanding at beginning of period

0

£0

0

£0

Granted during the period

193,548

£0.155

0

£0

Forfeited during the period

0

£0

0

£0

Exercised during the period

0

£0

0

£0

Expired during the period

0

£0

0

£0

Outstanding at the end of the period

193,548

£0.155

0

£0

Exercisable at the end of the period

0

£0.155

0

£0

The total charge for the year of £34,419 (2022: £0) was recognised by the company for equity settled share-based payment transactions.

10.	TANGIBLE FIXED ASSETS

Furniture

Short

and

Plant and

Motor

leasehold

equipment

machinery

vehicles

Totals

£

COST

At 1 July 2022

789,419

737,977

1,185,195

529,967

3,242,558

Additions

-

249,375

117,522

179,283

546,180

Disposals

-

(11,106

)

(148,850

)

(159,956

)

At 30 June 2023

789,419

987,352

1,291,611

560,400

3,628,782

DEPRECIATION

At 1 July 2022

208,215

644,179

1,031,364

368,514

2,252,272

Charge for year

32,178

38,533

69,795

71,513

212,019

Eliminated on disposal

-

(11,106

)

(139,591

)

(150,697

)

At 30 June 2023

240,393

682,712

1,090,053

300,436

2,313,594

NET BOOK VALUE

At 30 June 2023

549,026

304,640

201,558

259,964

1,315,188

At 30 June 2022

581,204

93,798

153,831

161,453

990,286

The net carrying amount of assets held under hire purchase included in fixtures and equipment is £169,356 and for motor vehicles is £53,063.

11.

STOCKS

30.6.23

30.6.22

£

Raw materials

1,128,776

1,850,009

Work-in-progress

10,980

13,300

1,139,756

1,863,309

12.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

30.6.23

30.6.22

£

Trade debtors

2,805,934

1,948,260

Amounts owed by group undertakings

-

116,000

Other debtors

6,430

-

Prepayments

163,347

153,725

2,975,711

2,217,985

Trade debtors are stated after provisions for impairment of £3,639.

Amounts owed by group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand.

13.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

30.6.23

30.6.22

£

Hire purchase contracts (see note 15)

66,254

-

Trade creditors

818,925

1,447,138

Amounts owed to group undertakings

110,144

350,095

Tax

141,237

169,730

Social security and other taxes

66,001

58,510

VAT

391,051

292,356

Other creditors

63,533

91,353

Accruals and deferred income

156,815

103,923

1,813,960

2,513,105

14.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE
YEAR

30.6.23

30.6.22

£

Hire purchase contracts (see note 15)

116,980

-

Amounts owed to group undertakings

1,950,000

2,600,000

2,066,980

2,600,000

Amounts owed to group undertakings are unsecured, interest free, have no fixed date of repayment.

15.	LEASING AGREEMENTS

Minimum lease payments under hire purchase fall due as follows:

30.6.23

30.6.22

£

Net obligations repayable:

Within one year

66,254

-

Between one and five years

116,980

-

183,234

-

16.	SECURED DEBTS

The following secured debts are included within creditors:

30.6.23

30.6.22

£

Hire purchase contracts

183,234

-

Amounts included within obligations under hire purchase contracts are secured over the assets to which they relate.

17.	FINANCIAL INSTRUMENTS

2023

2022

£

Financial assets measured at amortised cost

3,742,502

2,750,474

Financial liabilities measured at amortised cost

3,673,702

4,592,509

Financial assets measured at amortised cost comprise cash at bank and in hand, trade debtors and other debtors.

Financial liabilities measured at amortised cost comprise trade creditors, hire purchase, other creditors and accruals.

18.	PROVISIONS FOR LIABILITIES

30.6.23

30.6.22

£

Deferred tax

Accelerated capital allowances

103,541

-

Other timing differences

(3,092

)

-

100,449

-

Deferred

tax

£

Charge to Statement of Comprehensive Income during year

100,449

Balance at 30 June 2023

100,449

Deferred tax is provided at the future effective tax rate of 25% (2022 - 25%) based on the rates substantively enacted at the balance sheet date, the expected timing of the reversals and the profitability of the company.

This primarily relates to the reversal of timing differences on acquired tangible assets and capital allowances

through depreciation and amortisation.

19.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

30.6.23

30.6.22

value:

£

350,000

5% Preference Shares

£1

250,000

Ordinary

£1

350,000

600,000

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. All ordinary shares rank equally with regard to the company's residual assets.

The holders of preference shares carry a non-cumulative right to dividends. The shareholders have no rights in the event of a winding up beyond arrears of dividend and repayment of capital. They have no right to vote except on the winding up of the company, or on a proposed modification of the rights attached to their shares.

20.

RESERVES

Retained

earnings

£

At 1 July 2022

44,689

Profit for the year

2,108,296

Dividends

(408,000

)

Capital contribution arising

from equity settled share

based payments

34,419

At 30 June 2023

1,779,404

21.	PENSION COMMITMENTS

The company operates defined contribution pension schemes for the directors and employees. The company makes contributions to its pension scheme for employees, including directors when required. The assets of the scheme are held separately from those of the company in an independently administered fund. At the balance sheet date, unpaid contributions of £12,369 were due to the fund. These are included in other creditors. The pension charge represents contributions due from the company which are charged to the profit & loss account in the period that they arise.

22.	OTHER FINANCIAL COMMITMENTS

At the year end the company had total commitments under non-cancellable operating leases over the remaining life of those leases of £146,522.

23.	RELATED PARTY DISCLOSURES

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

24.	ULTIMATE CONTROLLING PARTY

The company is controlled by Harlow Timber Group Limited, which owns all of the issued share capital in the company. No other group statements include the results of the company. The parent undertaking and the smallest and largest group to consolidate these financial statements is Harlow Timber Group Limited. Copies of the consolidated financial statements can be obtained from the the company registered office as shown on the company information page to these financial statements.

The ultimate controlling party is Harlow Timber Group Employee Ownership Trust which holds 90% of the ordinary shares in Harlow Timber Group Limited in trust for the benefit of the employees. The trustee of the trust is Harlow Timber Group Trustees Limited. A company incorporated in England and Wales limited by Guarantee.