PLAYDALE_PLAYGROUNDS_LIMI - Accounts

The directors present the strategic report and financial statements for the period ended 31 December 2017.

The principal activity of the company continued to be that of design, manufacture, and installation of playground equipment. The majority of the business is derived from the UK with a significant proportion derived from overseas by exporting to the company's extensive and growing network of distributors.

The directors monitor the performance of the company by reference to numerous key performance indicators (KPI's). The important financial KPI's are turnover, gross margin and net profit. The financial statements show the results for the period ended 31 December 2017 and the position at that date together with the prior period for the year ended 30 June 2017.

The profit and loss account for the six months ended 31 December 2017 is set out on page 8. The turnover was £5.3 million, gross margin improved to 31.3% and the retained profit for the six months amounted to £224,756. The directors are pleased to report a profit in the current period and an improvement in the financial position of the company. This was achieved despite the continued difficulties of trading within a highly competitive UK playground equipment market.

Significant important work was carried out to reduce overheads including a successful restructure of the business in the prior period. This, as well as the adoption of lean manufacturing processes, the development of an improved stainless-steel range and a steady focus on developing and strengthening both the sales and management teams has put the company in a strong position to meet customers' demands and needs both within the UK and Export markets going forward. Since the improvement in operational efficiency and restructure completed in April 2017 the company has generated profits and now has an overhead base consistent with the future size of the business.

As for many businesses in the UK involved in manufacturing, the environment in which we operate continues to be challenging. Strong competition remains and the spending patterns of our customers may change. With these risks and uncertainties in mind, we are aware that our plans for future development of the company may be subject to unforeseen future events outside our control especially in light of Brexit negotiations and the effect this may have on both trading within the UK and Export markets and the risk of fluctuating exchange rates. The Directors are confident that the strategic plans in place within the business will ensure the company is sufficiently prepared to deal with these uncertainties.

The company's operations expose it to a variety of financial risks that include the effects of changes in debt market prices, credit risk, liquidity risk and currency risk. The company has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the company by monitoring levels of debt finance and related finance costs.

The following areas are covered as part of the financial risk management:

Foreign currency risk

The company has some exposure to foreign currency risk as some of its purchases are made in Euros. However, this is mitigated partly by competitive prices offered on supplies from suppliers and partly through sales to EU customers in Euros which provide a natural hedge.

Credit risk

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

Supply chain risk

The directors are aware that the company could be sensitive to any potential failure of a key supplier or delays in supply. To mitigate against the potential disruption to the supply chain, the directors regularly rank suppliers in terms of business risk and adapt supplier selection and procurement practices for the suppliers of key components and supplies.

Pricing risk

The market in which the company operates is highly competitive and price sensitive. In response, the directors undertake a regular review of both the prices charged by suppliers to ensure the company continues to receive best value and of those prices charged to customers to ensure they are competitive.

On behalf of the board

The directors present their annual report and financial statements for the period ended 31 December 2017.

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

The results for the period are set out on page 8. The Directors do not recommend the payment of a dividend for the period ended 31 December 2017.

Going concern

The directors have reviewed the performance for the current period, trading results since the period end and forecasts for the future periods. The directors believe that the company is able to manage its business risks successfully despite the current economic uncertainty. Based on this information, the directors have no reason to believe that material uncertainties exist that may cast significant doubts over the ability of the company to continue as a going concern. On the basis of their assessment of the company's financial position, the directors have continued to adopt the going concern principle for the preparation of the financial statements. Further details are disclosed within the company's accounting policies at Note 1.2.

The industry in which we operate continues to be constrained by the restrictions on UK Government spending and the uncertain outcome of negotiations on the UK's future trading relationships with Europe. During the period the company has continued to undertake research and develop technically innovative products that are suitable for the global market. The company's continued experience in exporting to distributors both within and outside Europe reduces risk associated with potential future adverse impact of being reliant on the UK market.

MHA Moore and Smalley are deemed to be re-appointed under section 487 (2) of the Companies Act 2006.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial period. 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;

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

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

We have audited the financial statements of Playdale Playgrounds Limited (the 'company') for the period ended 31 December 2017 set out on pages 8 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 31 December 2017 and of its profit for the period then ended;

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

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

Basis for opinion

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

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report 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 there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the Strategic Report and the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

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.

As explained more fully in the Directors' Responsibilities Statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the 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.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

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

The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.

Playdale Playgrounds Limited is a private company limited by shares incorporated in England and Wales. The registered office is Haverthwaite, Ulverston, LA12 8AE.

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

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

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis.

The directors consider this to be an appropriate basis and consider that the company is well placed to manage its business risks successfully despite the current uncertain economic environment.

The company has returned to profitable trading following a period of losses and whilst the net assets have been reduced in recent years, following the restructuring in April 2017 profits have been sustained throughout the period from May 2017 to February 2018 and the balance sheet reductions are being recouped.

The company has prepared projected profit & loss, balance sheet and cash flow forecasts with appropriate sensitivities around operational performance. These show that the company will be able to continue to meet the needs of its working capital requirements through an overdraft facility. In addition, the directors do not foresee any reasons why the company will not continue to have the support of its bankers. On the basis of these projections the directors have a reasonable expectation that the company has adequate financial resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

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

The company recognises income when the goods are despatched to the customer and on installation at site.

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

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

No depreciation is provided on freehold land as it has an infinite useful life.

At each reporting period end date, the company reviews the carrying amounts of its tangible fixed assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Stocks and work in progress are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials, labour and overheads and the company operates a standard costing system for stock.

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

Cash and cash equivalents are basic financial assets and include cash in hand and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

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

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

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

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

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

The Playdale Playgrounds Limited EMI Share Option plan was established during the period. In view of the proximity of the grant date to the accounting reference date the directors have concluded there would be no material effect on the reported results for the period ended 31 December 2017 if a formal share option valuation exercise was to be undertaken and its results incorporated into the financial statements. The directors will consider the use of option pricing models in future years.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

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

Investments

Fixed asset investments are stated at cost less provision for diminution in value.

Long term contracts

Amounts recoverable on long term contracts, which are included in debtors, are stated at the net sales value of the work done after provision for contingencies and anticipated future losses on contracts, less amounts received as progress payments on account. Excess progress payments are included in the creditors as payments on account. Profit is recognised on long term contracts, if the final outcome can be assess with reasonable certainty, by including in the profit and loss account turnover and related costs as contract activity progresses.

Research and development expenditure

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

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

At the inception of each lease, management undertake an assessment of the terms of the lease including the payments to be made over the life of the lease, the fair value of the asset subject to the lease, the length of the lease and whether the terms of the lease transfer substantially all of the risks and rewards of ownership.

Based on this assessment, management will determine whether the lease should be classified as a finance or operating lease.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

As detailed in note 11 to the financial statements, freehold land is stated at fair value based on a valuation carried out by an independent firm of MRICS chartered surveyors, using their extensive experience of the location valued. When calculating the valuation they have made various assumptions and caveats as detailed in the valuation report.

Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, usage and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

Stocks are held at costs less any provision for impairment. The calculation of any provision for impairment requires judgement. Such provisions are calculated using management's best estimate of likely future estimated selling price less costs to complete.

The impairment of trade debtors is calculated by initially determining the year end debts on a customer by customer basis that are over three months old and still unpaid at the date of approval of the financial statements. The directors then estimate the impairment provision required to be made in the financial statements based upon the knowledge they have accumulated over the trading relationship with each individual customer and any other external information that comes to their attention.

The company provides for the estimated cost of product warranties. The company's warranty provision is established based upon best estimates, calculated by reference to previous years experience having regard for quality improvements made in the design of the product range.

The exceptional item relates to one-off redundancy and other associated costs arising out of a re-structure of the company's operations.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2017 - 3).

The highest paid director has exercised share options during the period (see note 24).

The highest paid director has been entitled to receive shares under a long term incentive scheme during the period.

The effective rate for corporation tax changed from 20% to 19% on 1 April 2017.

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

In addition to the amount credited to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

The company has estimated tax losses of £624,902 (2017: £898,963) available to carry forward against future trading profits.

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

If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:

The freehold land at Woodcroft Farm was valued on a market value basis by an independent firm of MRICS chartered surveyors on 5 January 2018 at £367,000.

The directors consider this valuation to be an acceptable indication of the fair value of the freehold land at 31 December 2017.

The associated deferred tax liability relating to the above revaluation and totalling £59,001, representing deferred taxation on the difference between fair value and the indexed base cost for tax purposes of freehold land has been provided for as detailed in note 21 to the financial statements.

The following liabilities disclosed under creditors falling due after more than one year are secured by the company:

Overdrafts            £992,741 (2017 - £936,938)    

Finance lease and hire purchase    £47,242 (2017 - £80,737)

The bank overdraft is secured by a legal charge over part of Woodcroft Farm together with a fixed and floating charge over all assets of the company.

The following liabilities disclosed under creditors falling due after more than one year are secured by the company:

Finance lease and hire purchase    £45,369 (2017 - £66,535)

The aggregate amount of creditors for which security has been given amounted to £1,085,352 (2017 - £1,084,211).

Finance lease payments represent rentals payable by the company for certain items of plant and machinery and motor vehicles. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

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

The net deferred tax liability set out above represents the potential corporation tax on capital gains that would fall due if the land was sold. There is no deferred tax movement regarding indexation on the revaluation gain as any change would be immaterial.

A deferred tax asset in respect of tax losses has been recognised above as they are expected to be offset by anticipated future profits in the future.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund. Contributions totalling £13,054 (2017 - £6,310) were payable to the fund at the period end and are included in creditors.

During the period, the company established the Playdale Playgrounds Limited EMI Share Option Plan for the grant of share options to eligible employees of the company as described below:

The options outstanding at 31 December 2017 had an exercise price of £1, and a remaining contractual life of up to 10 years from the date of grant.

In view of the proximity of the grant date to the accounting reference date the directors have concluded there would be no material effect on the reported results for the period ended 31 December 2017 if a formal share option valuation exercise was to be undertaken and its results incorporated into the financial statements. The directors will consider the use of option pricing models in future years.

On 14 November 2017, 5,000 Ordinary shares were re-designated as shown above. In addition 882 'B' Ordinary shares were allotted on the same date.

All shares rank pari passu. Members have the right to receive notice of, attend and vote at general meetings of the company. Members have the right to participate in all legally declared dividends and in the event of winding up are entitled to participate in any distributions. The shares are not redeemable.

The remuneration of key management personnel is as follows.

During the period the company entered into the following transactions with related parties:

A guarantee of £250,000 from a director supported by a charge over personal freehold property and a guarantee of £210,000 from two of the directors supported by a charge over personal freehold property has been given to Barclays Bank Plc.