Company Registration No. 130335 (England and Wales)
Scandinavian Tobacco Group United Kingdom Limited
Annual report and financial statements
for the year ended 31 December 2021
Scandinavian Tobacco Group United Kingdom Limited
Company information
Directors
Jurjan Klep
Alastair Williams
Morten Guldager
Company number
130335
Registered office
1st Floor, West Wing
Davidson House
Forbury Square
Reading
Berkshire
RG1 3EU
Independent auditor
Saffery Champness LLP
71 Queen Victoria Street
London
EC4V 4BE
Bankers
Danske Bank
74 King William Street
London
EC4N 7DT
Scandinavian Tobacco Group United Kingdom Limited
Contents
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 8
Statement of comprehensive income
9
Statement of financial position
10 - 11
Statement of changes in equity
12
Notes to the financial statements
13 - 24
Scandinavian Tobacco Group United Kingdom Limited
Strategic report
For the year ended 31 December 2021
Page 1
The directors present the strategic report for the year ended 31 December 2021.
Fair review of the business
Principal activities
The Principal activity of the Company is that of importer and distributor of the STG cigar and pipe tobacco portfolio, including brand leaders; Signature, Henri Wintermans and Clan, for sale in the UK.
The company’s strategy has been to focus tightly on our key mainstream ‘Full Margin’ brands such as; Signature and Half Corona, and to develop our share of ‘Value for Money’ (VFM) miniature cigars via our Moments brand. The company also continues to increase its focus on major key accounts such as mainstream retailers (e.g. Tesco/Sainsbury), where consumers are increasingly sourcing their favourite tobacco brands from.
Scandinavian Tobacco Group United Kingdom Limited (STG UK) has also focussed on diversifying its product base through market share growth in traditional pipe tobacco (down 0.1 share points to 23.3%).
The UK market for miniature cigars (STG UK mainstay) continues to be at a lower price point. This is primarily being driven by the growth of VFM brands such as Royal Dutch and our own Moments brand; this trend put pressure on margins in 2021. Throughout 2021 support was reduced and increased margins were realised.
In September 2020 STG UK signed a three-year agreement, to distribute Mac Baren pipe tobacco, which includes St. Bruno, being the UK’s number 2 brand.
Scandinavian Tobacco Group announced the completion of an acquisition of Royal Agio Cigars on 2 January 2020. Throughout 2020 Royal Agio was integrated into the STG business. Due to an existing distribution agreement STG UK will be taking ownership of the Agio portfolio in the UK as of 1 April 2021. The UK Agio portfolio consists of three Meharis SKU’s that will deliver an additional 1.7% market share for cigars.
Key performance indicators (“KPIs”)
The main KPI’s used in the business for an understanding of the development, performance or position of the business are; net revenue, volume sales and market share.
Turnover
Total turnover has increased by 11.3% in the year to £32,614,348 from £29,302,145 in 2020. This is compared to a cigar market decline of 6.8% for the same period.
Cigar Volumes
Cigar sales volumes have decreased by 3.0% to 131.7 million cigars.
Cigar market share
Total cigar market share has decreased to 30.9% from 54.7% in 2020 (including Agio). The decrease in market share is due to the development and emergence of non-traditional filtered cigarillos affording cigarette consumers a menthol choice post-menthol ban. The total cigar market is now 426Mio cigars, an increase of 24.3% MAT Vs previous year.
Scandinavian Tobacco Group United Kingdom Limited
Strategic report (continued)
For the year ended 31 December 2021
Page 2
Principal risks and uncertainties
The management of the business and the execution of the Company’s strategy are subject to a number of risks:
Excise
Tobacco products are subject to substantial excise duty which forms a significant amount of the retail price. Increases in excise may reduce demand for our products and alter the sales mix of our portfolio. Management regularly reviews our brand portfolio to meet our customers changing preferences.
Marketplace
The current economic climate is reducing smoker’s disposable income, leading to customers down-trading to value for money brands, with the exception of the medium to large category that enjoyed buoyant sales during the Covid-19 lockdowns (Henri Wintermans ½ Corona). This changes our product mix from premium brands to value for money brands.
Regulation
The tobacco industry operates under restrictive regulations which are likely to increase over the coming years. Higher costs relating to compliance with the changing legislative environment are expected. The progressive denormalisation of smoking engendered within such a negative environment, will increase the downward pressure on volumes. Management therefore, monitor proposals of new measures, identify their impact and actively consults with government via the tobacco industry body.
Brexit - Import Tariffs
As the UK is no longer a member of the EU there are direct implications for the tobacco industry. As at 1 January 2021 the UK tobacco industry adopted Australian health warnings. STG UK made provision for continuity of supply and had stockpiled approximately 6 months inventory in order to adjust to the new rules relating to import.
Results
The profit and loss account is set out on page
9
. The profit for the financial year amounted to £5,401,853
(
20
20
: £4,388,993). The net assets at 31 December 20
21
were £
16,440,765
(20
20
: £
21,038,909
).
Jurjan Klep
Alastair Williams
Director
Director
Morten Guldager
Director
25 March 2022
Scandinavian Tobacco Group United Kingdom Limited
Directors' report
For the year ended 31 December 2021
Page 3
The directors present their annual report and financial statements for the year ended 31 December 2021.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Jurjan Klep
Alastair Williams
Morten Guldager
Results and dividends
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £9,999,997. The directors do not recommend payment of a final dividend.
Going concern
The company meets its day-to-day working capital requirements though its bank facility. The current economic conditions continue to create uncertainty over (a) the level of demand for the company's products; and (b) the availability of bank finance for the foreseeable future. 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. 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 instruments
Foreign exchange risk
The company is exposed to foreign exchange risk when purchasing goods for resale, from outside the UK. To mitigate this risk the company transacts in sterling with other group companies.
Credit risk
Credit risk arises from credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. If wholesale customers are independently rated, these ratings are used. If there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experiences and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by management. The utilisation of credit limits is regularly monitored.
Auditor
Saffery Champness LLP have expressed their willingness to continue in office.
Scandinavian Tobacco Group United Kingdom Limited
Directors' report (continued)
For the year ended 31 December 2021
Page 4
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the 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 of disclosure to auditor
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.
On behalf of the board
Jurjan Klep
Alastair Williams
Director
Director
Morten Guldager
Director
25 March 2022
Scandinavian Tobacco Group United Kingdom Limited
Independent auditor's report
To the members of Scandinavian Tobacco Group United Kingdom Limited
Page 5
Opinion
We have audited the financial statements of Scandinavian Tobacco Group United Kingdom Limited (the 'company') for the year ended 31 December 2021 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards,
including Financial Reporting
S
tandard 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 2021 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.
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
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.
Scandinavian Tobacco Group United Kingdom Limited
Independent auditor's report (continued)
To the members of Scandinavian Tobacco Group United Kingdom Limited
Page 6
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.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the
audit
:
-
the information given in the strategic report and the directors'
r
eport for the financial year for which the financial statements are prepared is consistent with the financial statements
; and
-
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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 identifie
d
material misstatements in the strategic report and the directors'
r
eport
.
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
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 directors'
r
esponsibilities
s
tatement, 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.
Scandinavian Tobacco Group United Kingdom Limited
Independent auditor's report (continued)
To the members of Scandinavian Tobacco Group United Kingdom Limited
Page 7
Auditor's 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 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
.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation and Duties legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud
.
Scandinavian Tobacco Group United Kingdom Limited
Independent auditor's report (continued)
To the members of Scandinavian Tobacco Group United Kingdom Limited
Page 8
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
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.
Roger Weston (Senior Statutory Auditor)
For and on behalf of Saffery Champness LLP
28 March 2022
Chartered Accountants
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
Scandinavian Tobacco Group United Kingdom Limited
Statement of comprehensive income
For the year ended 31 December 2021
Page 9
2021
2020
Notes
£
£
Gross sales
71,437,379
66,235,130
Duty in sales
(38,823,031)
(36,932,985)
Turnover
3
32,614,348
29,302,145
Cost of sales
(23,502,609)
(21,283,407)
Gross profit
9,111,739
8,018,738
Distribution costs
(1,881,270)
(1,991,563)
Administrative expenses
(609,934)
(662,430)
Other operating income
40,000
40,000
Operating profit
4
6,660,535
5,404,745
Interest receivable and similar income
7
-
18,692
Interest payable and similar expenses
8
(1,809)
(320)
Profit before taxation
6,658,726
5,423,117
Tax on profit
9
(1,256,873)
(1,034,124)
Profit for the financial year
5,401,853
4,388,993
The income statement has been prepared on the basis that all operations are continuing operations.
Scandinavian Tobacco Group United Kingdom Limited
Statement of financial position
As at 31 December 2021
Page 10
2021
2020
Notes
£
£
£
£
Fixed assets
Tangible assets
11
12,158
26,153
Current assets
Stocks
12
2,658,753
17,998,029
Debtors
13
20,571,612
12,250,586
Cash at bank and in hand
17
23,230,365
30,248,632
Creditors: amounts falling due within one year
14
(6,801,758)
(9,234,252)
Net current assets
16,428,607
21,014,380
Total assets less current liabilities
16,440,765
21,040,533
Provisions for liabilities
Deferred tax liability
15
1,624
-
(1,624)
Net assets
16,440,765
21,038,909
Capital and reserves
Called up share capital
17
7
7
Profit and loss reserves
16,440,758
21,038,902
Total equity
16,440,765
21,038,909
Scandinavian Tobacco Group United Kingdom Limited
Statement of financial position (continued)
As at 31 December 2021
Page 11
The financial statements were approved by the board of directors and authorised for issue on 25 March 2022 and are signed on its behalf by:
Jurjan Klep
Alastair Williams
Director
Director
Morten Guldager
Director
Company Registration No. 130335
Scandinavian Tobacco Group United Kingdom Limited
Statement of changes in equity
For the year ended 31 December 2021
Page 12
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 January 2020
7
26,649,906
26,649,913
Year ended 31 December 2020:
Profit and total comprehensive income for the year
-
4,388,993
4,388,993
Dividends
10
-
(9,999,997)
(9,999,997)
Balance at 31 December 2020
7
21,038,902
21,038,909
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
5,401,853
5,401,853
Dividends
10
-
(9,999,997)
(9,999,997)
Balance at 31 December 2021
7
16,440,758
16,440,765
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements
For the year ended 31 December 2021
Page 13
1
Accounting policies
Company information
Scandinavian Tobacco Group United Kingdom Limited is a
private
company
limited by shares
incorporated in
England and Wales
.
The registered office is
1st Floor, West Wing, Davidson House, Forbury Square, Reading, Berkshire, RG1 3EU. The address of its principal place of business is 250 Centennial Park, Centennial Avenue, Elstree, Borehamwood, Hertfordshire.
1.1
Accounting convention
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 a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares
publicly available consolidated financial statements
, including this company,
which are
intended to give a true and fair view of the assets, liabilities,
financial position and profit or loss
of the group
.
T
he company has
therefore
taken advantage of
e
xemptions from the following disclosure requirements:
The financial statements of the company are consolidated in the financial statements of
Scandinavian Tobacco Group A/S
. These consolidated financial statements are available from
Sandtoften 9, 2820 Gentofte, Denmark. www.st-group.com
1.2
Going concern
Scandinavian Tobacco Group United Kingdom Limited is a subsidiary company of Scandinavian Tobacco Group A/S, and as such has the full support of its Danish listed parent company. The company has significant strength in product portfolio: Signature Blue is the number 1 selling cigar in the UK, and Moments Blue remains the fastest growing; The company has over 54% of the UK cigar market, a share that has seen growth and stability over-time. The impact of Covid-19 had a negligible impact on sales, as demonstrated by the volume and net sales performance since March 2020. The company's profitability and cash flow remains strong.
true
1.3
Turnover
Turnover represents amounts invoiced, less discounts, rebates and duty and net of value added tax, for goods sold to customers during the period. Turnover is recognised when goods are despatched.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
1
Accounting policies (continued)
Page 14
1.4
Tangible fixed assets
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:
Leasehold improvements
10% straight line
Fixtures and fittings
20% straight line
Computers
33.3% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and
is credited or charged to profit or loss
.
1.5
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.
Stocks are recognised as an expense in the period in which the related revenue is recognised.
Cost is determined on the first-in, first-out (FIFO) basis. Cost includes the purchase price, taxes, duties, transport and handling directly attributable to bringing the stock to its present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.6
Cash and cash equivalents
Cash and cash equivalents
are basic financial assets
and
include cash in hand
. The company makes use of a group cash pool, which is shown within Debtors on the balance sheet.
1.7
Financial instruments
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.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
the net amounts presented in the financial statements
,
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
1
Accounting policies (continued)
Page 15
Basic financial assets
Basic financial assets, which include debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Impairment of financial assets
Financial assets, other than those
held
at
fair value through profit and loss
, are assessed for indicators of impairment at each reporting end date.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when
the company
transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including
creditors
, bank loans, loans from
fellow group companies and preference shares that are classified as debt, are
initially recognised at transaction price unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present value of
the future
paymen
ts discounted at a market rate of interest.
Financial liabilities classified as payable within one year are not amortised.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.8
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement
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.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
1
Accounting policies (continued)
Page 16
Deferred tax
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.
1.9
Employee benefits
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
.
1.10
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.11
Leases
Rentals payable under operating leases,
including
any lease incentives received, are charged to
profit or loss
on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease
s
asset are consumed.
1.12
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation
in the period
are included in profit or loss.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 17
2
Critical accounting judgements and key sources of estimation uncertainty
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.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant
effect on amounts recognised in the financial statements.
Inventory provision
The principal activity of the Company is that of importer and distributor of the STG cigar and pipe tobacco portfolio. This is subject to restrictive and changing regulations. As a result it is necessary to consider the recoverability of the cost of inventory and the associated provision required. When calculating the inventory provision, management considers the condition of the inventory, the anticipated future sales and any enacted future tobacco legislation. See note 12 for the net carrying amount of the inventory and associated provision.
Impairment of debtors
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor and the credit quality of the customer, taking into account its financial position and past experience. Individual risk limits are set based on internal or external ratings in accordance with limits set by management. The utilisation of credit limits is regularly monitored. See note 13 for the net carrying amount of the debtors and associated impairment provision.
3
Turnover and other revenue
Substantially all turnover arises from sales within the United Kingdom from the principal activity of the company.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 18
4
Operating profit
2021
2020
Operating profit for the year is stated after charging:
£
£
Fees payable to the company's auditor for:
- the audit of the company's financial statements
18,850
17,900
- preparation of the company's financial statements
2,000
1,000
Depreciation of owned tangible fixed assets
10,022
31,865
Loss on disposal of tangible fixed assets
1,106
14,000
Operating lease charges
196,379
205,352
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2021
2020
Number
Number
Selling and distribution
20
20
Administration
7
6
Total
27
26
Their aggregate remuneration comprised:
2021
2020
£
£
Wages and salaries
1,062,827
1,044,658
Social security costs
139,564
139,366
Pension costs
58,214
56,344
1,260,605
1,240,368
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 19
6
Directors' remuneration
2021
2020
£
£
Remuneration for qualifying services
120,410
115,659
Company pension contributions to defined contribution schemes
6,273
6,157
126,683
121,816
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2020 - 1).
7
Interest receivable and similar income
2021
2020
£
£
Interest income
Interest receivable from group companies
18,558
Other interest income
134
Total income
18,692
8
Interest payable and similar expenses
2021
2020
£
£
Interest payable to group undertakings
1,713
320
Other interest
96
1,809
320
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 20
9
Taxation
2021
2020
£
£
Current tax
UK corporation tax on profits for the current period
1,256,986
1,042,699
Adjustments in respect of prior periods
1,790
3,086
Total current tax
1,258,776
1,045,785
Deferred tax
Origination and reversal of timing differences
5,723
(11,661)
Changes in tax rates
(67)
Deferred tax not previously recognised
(7,559)
Total deferred tax
(1,903)
(11,661)
Total tax charge
1,256,873
1,034,124
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2021
2020
£
£
Profit before taxation
6,658,726
5,423,117
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%)
1,265,158
1,030,392
Tax effect of expenses that are not deductible in determining taxable profit
2,863
2,209
Adjustments in respect of prior years
(5,769)
3,086
Effect of change in corporation tax rate
(67)
(1,563)
Other permanent differences
(5,312)
Taxation charge for the year
1,256,873
1,034,124
The change in future expected corporation tax rates from 19% to 25% has had an impact on the deferred tax liability carried by the company. Further details are given in note 15.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 21
10
Dividends
2021
2020
£
£
Interim paid
9,999,997
9,999,997
An interim dividend of £1,428,571 per share was declared and paid on 14 September 2021.
11
Tangible fixed assets
Leasehold improvements
Fixtures and fittings
Computers
Total
£
£
£
£
Cost
At 1 January 2021
314,497
129,785
224,100
668,382
Disposals
(47,598)
(47,598)
At 31 December 2021
314,497
129,785
176,502
620,784
Depreciation and impairment
At 1 January 2021
292,317
129,785
220,127
642,229
Depreciation charged in the year
10,022
10,022
Eliminated in respect of disposals
(43,625)
(43,625)
At 31 December 2021
302,339
129,785
176,502
608,626
Carrying amount
At 31 December 2021
12,158
12,158
At 31 December 2020
22,180
3,973
26,153
12
Stocks
2021
2020
£
£
Finished goods and goods for resale
2,658,753
17,998,029
Stocks are stated after provision for impairment of
£13,832
(2020 -
£248,643
).
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 22
13
Debtors
2021
2020
Amounts falling due within one year:
£
£
Trade debtors
10,982,992
11,299,386
Corporation tax recoverable
33,014
Amounts owed by group undertakings
9,391,716
791,695
Other debtors
72,425
73,252
Prepayments and accrued income
91,186
86,253
20,571,333
12,250,586
2021
2020
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 15)
279
Total debtors
20,571,612
12,250,586
Invoice amounts owed by group undertakings are unsecured, interest free and are repayable on demand. Cash advances owed by group undertakings are unsecured, interest free (2020 - interest free) and are repayable on demand.
14
Creditors: amounts falling due within one year
2021
2020
£
£
Trade creditors
139,308
535,199
Amounts owed to group undertakings
2,278,863
5,407,851
Corporation tax
63,074
Other taxation and social security
3,738,403
2,606,870
Accruals and deferred income
645,184
621,258
6,801,758
9,234,252
Invoice amounts owed to group undertakings are unsecured, interest free and are repayable on demand. Cash advances owed to group undertakings are unsecured and bear interest at 1.55% (2020 - 1.38%) and are repayable on demand.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 23
15
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
Assets
Assets
2021
2020
2021
2020
Balances:
£
£
£
£
Accelerated capital allowances
-
1,624
279
-
2021
Movements in the year:
£
Liability at 1 January 2021
1,624
Credit to profit or loss
(1,836)
Effect of change in tax rate - profit or loss
(67)
Asset at 31 December 2021
(279)
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period.
Deferred tax is calculated at 25% (2020 - 19%).
16
Retirement benefit schemes
2021
2020
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
58,214
56,344
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.
Scandinavian Tobacco Group United Kingdom Limited
Notes to the financial statements (continued)
For the year ended 31 December 2021
Page 24
17
Share capital
2021
2020
2021
2020
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
7
7
7
7
There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.
18
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2021
2020
£
£
Within one year
242,324
122,686
Between two and five years
516,058
114,425
758,382
237,111
During the year the company renegotiated their property lease, significantly increasing the level of financial commitments.
19
Ultimate controlling party
The ultimate parent undertaking and controlling party is Scandinavian Tobacco Group A/S, a company incorporated in Denmark.
The Company's immediate parent undertaking is ST Cigar Group Holding B.V., incorporated in Eersel, The Netherlands which in turn is a 100% subsidiary of the Danish company Scandinavian Tobacco Group A/S.
The smallest and largest group which consolidates the results of Scandinavian Tobacco Group United Kingdom Limited is Scandinavian Tobacco Group A/S. Copies of these groups' financial statements may be obtained from:
Scandinavian Tobacco Group A/S, Sandtoften 9, 2820 Gentofte, Denmark. www.st-group.com
2021-12-31
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