The Director presents his strategic report on Nippon Express (U.K.) Limited (also referred to as “Company”) and its subsidiary (also referred to as the “Group”) for the year ended 31 December 2022.
The economic uncertainty caused by the the COVID-19 pandemic declined by the end of the year to 31 December 2022. The Group’s profit before tax decreased from £7,480,958 in 2021 to £6,845,110 in 2022, while shareholders’ funds have increased to £25,271,909 (2021: £17,641,773). Operating profit decreased from £7,562,692 in 2021 to £6,901,403 in 2022.
Group turnover of £154.17m (2021: £147.45m) was achieved for the year, an increase of 5% from 2021. This has resulted in a gross profit margin of 27.48% (2021: 28.50%) for the Group.
The Irish subsidiary’s results show a profit before taxation of €1,566,600 (2021: €184,170) while shareholders’ funds have increased to €3,068,698 (2021: €1,703,325).
The Group continues to develop its sales team to gain new customers and obtain repeat business from existing customers.
Brexit
Whilst the Brexit transitional period ended on 31 December 2020 the impact on the island of Ireland’s trade with the UK continued to be felt through 2022 and into 2023 with the UK government and EU attempting to find a better way to manage the border between Northern Ireland and the Republic of Ireland, and the so called border in the Irish Sea. This culminated on 27 February 2023 when the Prime Minister Rishi Sunak and the President of the European Commission, Ursula von der Leyen, announced that a new agreement had been reached to change the way the Northern Ireland Protocol operates. This agreement is called the Windsor Framework and it is hoped that this will finally resolve the border issues. Continuing political uncertainty at Stormont persisted and it is not yet clear whether this new agreement will represent the final solution to the Northern Ireland Brexit challenge.
Elsewhere, Brexit is perceived to have had some negative impact on the UK economy, but the Group, whilst losing some accounts, has also gained, with the overall impact being assessed as minimal.
The principal risks and uncertainties facing the Company and the Group are broadly grouped as economic, liquidity, credit and currency risk as well as the current cost of living crisis.
Economic risk
As the global economy has largely moved on from the pandemic, wage inflation, together with increased supply chain and energy costs, saw inflation in the UK grow to over 10% for the first time in a generation. With inflation at now generationally high levels, this has seen interest rates continue to rise as the Bank of England attempts to slow inflationary pressures, significantly increasing the cost of borrowing for consumers.
The COVID-19 pandemic led to disruption in supply chains and logistics processes with ports closed and containers in the wrong places around the world. This disruption caused capacity issues which led to some freight rates growing above historic levels, pushing revenues and margins to high levels. These rates are not considered to be sustainable in the long term, with margins already returning to pre pandemic levels.
The industry also faces challenges including the availability of skilled labour, for example HGV drivers through to issues with lorry fleets arising from Ultra Low Emission Zones in London and elsewhere in the UK, as well as increasing fuel costs and the need to be energy efficient.
To counter some of these issues the company plans to use new technology to convert diesel lorries to hydrogen, using spare capacity from the roll out of solar panels on the roofs of our warehouses, that are sited across the country. Most of our in-house freight is between these sites so the Group is confident it can reduce emission and costs.
Cost of living crisis and global factors
As the UK has exited the COVID-19 pandemic, the UK economy has significantly weakened with consumers experiencing higher cost of living due to increased inflation as mentioned above. This in turn means that there is a risk that our customers will have a reduced need for freight and logistical services as stock may take more time to sell through. Global factors including a weak global economy, underpinned by the impact of the pandemic, as well as the war in Ukraine have increased fuel prices all of which are impacting operating costs and have further contributed to consumers experiencing higher costs of living.
The Group has been able to navigate these challenging conditions with the strong service it provides to its customers while the Company has the financial headroom to navigate any potential reduction in turnover.
Financial risk management
Liquidity risk
Increasing inflation will have a monetary impact as central banks have increased interest rates, which will in turn potentially disrupt what has been a relatively stable foreign exchange climate, and which will lead to businesses having to pay more for borrowings.
The Group has no borrowings and maintains strong liquidity levels, with those strong liquidity levels predicted to remain and grow over time, assuming predictions and budgets are met. Within stress tested cash flow models, cash is still expected to be strong for over 12 months even with test assumptions that see revenues significantly declining and costs going up.
Management are confident that both scenarios can be managed and that the liquidity risk to the business is low.
Credit risk
As previously mentioned the cash position and cash flow of the Group are strong while the Company has no loans or cash based debts with external lenders.
The cost of living crisis along with the residual effects of COVID-19 did however bring increased credit risk as there was a concern that customers might default in what was likely to be a difficult market place.
The Company has a strong focus on recovery of debt aided by terms which allows it to hold stock until debts are paid, and the need for customers to ensure their supply chains continue to operate. Although there were some bad debts, they were small losses which did not impact cash flow or profitability in a material way.
Currency risk
The Company operates in a number of currencies, mainly Sterling, US Dollars and Euros. The variety of currencies billed leads to a position of natural hedging with limited exposures to any individual currency.
The wider Group above the Parent Company, also manages an international currency netting process with intragroup payments made to the netting pool.
Going concern
The financial statements have been prepared on a going concern basis as the Director believes that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements. The Director has based the assessment of going concern on cash flow forecasts which have been stress tested while consideration has been made in respect of risks and uncertainties outlined above. Thus the Group continues to adopt the going concern basis of accounting in preparing the annual financial statements.
Nippon Express (UK) Ltd operates within the Group headed by Nippon Express Company Ltd. The Company’s immediate holding company is Nippon Express (Europe) Gmbh.
The Company has one director, who is based in the UK, and he follows Group policies, procedures and governance rules as determined by the Global and European Head-offices.
The Company is subject to an annual audit of its Financial Statements but is also regularly visited by the Group’s internal audit team – as a part of a global internal audit plan as sanctioned by the Japanese Head-office.
The Director has regular Board meetings with other employees invited as guests to attend and reflect upon the key points being discussed. All key discussions and actions being minuted and these actions then reviewed at a future date. Aside from Board meetings there are also regular monthly meetings attended by the General Managers that report to the Director.
General Managers are appointed to cover regions and specialities of commercial activity as well as internal functions like Finance, HR and Compliance.
The compliance team work regularly with suppliers wanting to test our ISO9001 status, as well as other security audits that might be carried out by organisations such as the Civil Aviation Authority and the Health and Safety Executive.
The Director considers that he has acted in the way that would be most likely to promote the success of the Group for the benefit of its members as a whole in the decisions taken during the year and, in doing so, have had regard to the stakeholders and matters set out in s172(1) (a-f) of the Companies Act 2006. In performing their duties under section 172, the Director has had regard to the matters set out in section 172(1) as follows:
The likely consequences of any decision in the long term
As a part of the managerial process the Director and General Managers will take great care in making any decisions that might have a strategic impact on the business.
As a provider of transport and logistical services, the business was classed as an essential service and we continued to take great care and ensure that where staff needed to attend the office or work in the warehouse, that the staff were given the personal protective equipment (PPE) that they required.
More recently the Board has been required to consider the impact of aggressive rent demand increases from landlords with regard to lease renewals and possible new sites. New locations for key customers in both the UK and Ireland have been located at strategically important locations, with a view to fast delivery for customers at a good price, as the market for direct delivery expands.
The interests of the Group's employees
The Company views its employees as valued members of a large community. This attitude, that was clearly displayed though the COVID-19 pandemic, continues to exist today and the Director and wider leadership team view this continuing core value as fundamental to the future growth and success of the Group.
The employees have an employee assistance programme to fall back on for any reason that might be troubling them, both home and work related.
The Company expects its staff to operate at high levels and to be engaged with the business but also looks to train, develop and enthuse its team members, with the goal of creating a high-performance team and culture.
The Company expects its employees to respect the Nippon Express brand and respect their co-workers. It expects professional behaviour and aims to create an environment free from all forms of racism and discrimination.
The need to foster the Group's business relationships with suppliers, customers and others
The freight forwarding business is fundamentally a business where we connect parties to a contract to work together. From shareholders through to customers, employees and suppliers, we create a chain to bring products from one part of the world where they are built or made to the territory of the consumer.
We respect our customers and in line with the Company’s ethos of “We find the way” we challenge ourselves to find better, faster, safer and more efficient routes to bring products to market, whether it be by sea, air, rail or freight. In all instances we work with our partners to provide the best and most secure services, connecting the customer to our staff to our supplier.
We aim to pay all suppliers on time and value the support they give to us irrespective of the size of the supplier’s business and value of their goods or services.
The impact of the Group's operations on the community and the environment
The movement of goods inevitably leads to emission, and the use of fossil fuels whether goods are moved by container vessels, trucks, vans or aeroplanes.
As far as is possible, we implement policies and processes to reduce our emissions with this topic a regular source of debate for General Managers in an effort to reduce our carbon footprint.
We have continued to engage with energy consultants to try and determine how we reduce our footprint and target being a neutral emitter of pollutants.
We have installed LED lighting into most of our work space, significantly reducing carbon emissions in respect of lighting. We are also still planning to work with our landlords and energy grids, to install solar panels on warehouse roof space to generate our own electricity which will reduce or replace, our reliance on fossil fuels in powering our facilities and equipment. Due to delays in relation to the lease negotiations, this project will be revisited once the lease has been renewed.
Following the adoption of our solar strategy to reduce our carbon footprint in our warehouses, we continued to explore the opportunity to use any spare capacity to produce hydrogen, at which point and subject to technology currently being developed, we would aim to convert our fleet of lorries to run on hydrogen. This would significantly reduce our use of diesel fuel.
We estimate these projects could have a payback as short as 4 to 6 years, albeit the cost of implementation is increasing. Setting the costs aside we view these projects as a key element for a responsible corporate.
The desirability of the Group maintaining a reputation for high standards of business conduct
The Company and Group have a proud heritage of being there for customers when support and action is needed. In a business sector with few barriers to entry maintaining a reputation for being able to meet customer needs becomes critical and, “Finding the Way”, becomes the core challenge to maintain our brand and the values that it stands for.
The need to act fairly as between members of the Group and its stakeholders
All stakeholders are valued, and maintaining the values within our team is a core and strategic goal for the business.
Working together and valuing the contribution of others within our team is a vital step in creating harmonious processes and systems that will enable the business to meet it challenges and go above and beyond for our customers.
Approved and signed by the director
The director presents his annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 13.
A dividend of €1,800,000 (£1,584,071) was paid during the year (2021: €1,800,000 (£1,524,145)). As at the date of approval of the financial statements, final dividends relating to the 2022 results have been declared totalling €1,800,000 (£1,558,100) (2021: €1,800,000 (£1,584,071)). This was paid in October 2023.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The Company's lease of its head office at Hayes is currently operating on a rolling basis with a new lease currently being re-negotiated with the landlord. The old lease is within the 1954 Landlord and Tenant Act so the company has security of tenure while the lease details are being agreed.
The Company will continue to invest in sales resources and to improve operating procedures, with a particular focus on reducing the carbon footprint of the Company as explained within the Strategic Report.
Further details of future developments can be found in the Strategic Report on page 1 and form part of this report by cross-reference.
The auditor Deloitte LLP is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The Company is required to report on carbon emissions arising from its activities for financial year 2022. This is to comply with The Companies (Director’s Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 which implement government policy on Streamlined Energy and Carbon Reporting (SECR).
The Company is reporting on operations within the Financial Control Boundary and as such aligns with our annual reporting.
For financial year 2022, the Parent Company’s operations are within seven sites:
Hayes (HQ)
East Midlands (old)
East Midlands (new)
Glasgow
Manchester
Swindon
Newcastle
The majority of energy use is diesel/petrol fuel for transport; the remainder is for propane and electricity used in distribution centres and offices. Two sites used natural gas in 2022: Manchester and the new East Midlands site.
The lease on the East Midlands site expired on 31 March 2023 so a new site was acquired on 8 November 2022 and staff moved in during February 2023. So between 8 November and 31 December 2022 East Midlands had two sites.
Data Quality
The electricity data for most sites is derived from half hourly readings where AMR is installed, all readings are actual readings. For Swindon landlord invoices are used which show kWh actual data from sub-meters. For Manchester, no landlord energy invoices have been received since occupancy in 2020. Therefore meter readings and estimations have been used. Gas is used at Manchester where meter readings are used as no landlord invoices have been received since moving to the site in 2020. Propane data is from delivery invoices. Transport data is derived from fuel cards where data contains litres of fuel purchased and therefore reliable in terms of the total fuel purchased. Grey fleet consumption is estimated from mileage claims by employees.
We have followed the 2019 HM Government environmental reporting guidelines. We have also used the GHG reporting protocol – Corporate Standard and have used the 2022 UK Government's Conversion Factors for the Company Reporting.
The carbon intensity ratio used is total gross emissions in metric tonnes CO2e per £1,000 of company turnover which was £135,099,323 (2021: £139,263,557). The ratio is shown in the table above.
In the period covered by the report, LED lighting was continuing to be installed at the Hayes site. The company is currently considering solar PV panels at Hayes and, if installed and successful, will be rolled out to other sites, where appropriate. Hydrogen powered trucks are under consideration for 2023/24.
ESOS Energy Audits were conducted in 2022 for Transport energy use, Swindon, Hayes and Manchester sites, with costed energy efficiency recommendations in each report.
In our opinion the financial statements of Nippon Express (U.K.) Limited (the “Parent Company”) and its subsidiary (the “Group”):
give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022 and of the group’s profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
the Group Statement of Comprehensive Income;
the Group and Parent Company Balance Sheet;
the Group and Parent Company Statement of Changes in Equity;
the Group Statement of Cash flows; and
the related notes 1 to 27.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (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 director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the group or the parent company or to cease operations, or has 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 FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We considered the nature of the group’s industry and its control environment, and reviewed the group’s documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management and the directors about their own identification and assessment of the risks of irregularities, including those that are specific to the group’s business sector.
We obtained an understanding of the legal and regulatory framework that the group operates in, and identified the key laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements. This included UK Companies Act, pensions legislation, tax legislation; and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty.
We discussed among the audit engagement team regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements.
As a result of performing the above, we identified the greatest potential for fraud in the risk of revenue not being recognised in the correct financial period. Our specific procedures performed to address this risk included testing, on a sample basis, third party evidence to determine whether revenue had been recognised in the correct accounting period.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
enquiring of management and legal counsel concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations; and
reading minutes of meetings of those charged with governance.
Report on other legal and regulatory requirements
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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's report.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
Use of our report
This report is made solely to the group and parent 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 group and parent 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 group and parent company and the group and parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Nippon Express (UK) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Heathrow 360, 2 Millington Road, Hayes, Middlesex, UB3 4AZ.
The group consists of Nippon Express (UK) Limited and its subsidiary.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The 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. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Nippon Express (UK) Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future and a period of at least 12 months from the date of approval of the financial statements. The director has based the assessment of gong concern on cash flow forecasts which have been stress tested while consideration has been made in respect of risks and uncertainties as detailed within the Strategic report. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the provision of freight forwarding services provided are generally recognised upon dispatch from the UK in respect of export services, on delivery to the customer in respect of domestic services, and upon customs clearance or delivery to customers in respect of import services.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in profit and loss.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group 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 group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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.
Basic financial assets, which include debtors and cash and bank balances, 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.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans from fellow group companies 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 payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit and loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The 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 profit and loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. Deferred tax assets and liabilities are offset if, and only if, there is 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.
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.
The Company operates both a defined contribution scheme and a defined benefit scheme. The defined benefit scheme was closed to new members on 31 March 2003.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
Where there is an increase in the asset/decrease in the liability, the subsequent gain is recognised within other comprehensive income and is shown as a separate item on the face of the balance sheet.
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.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
The financial statements of the foreign subsidiary are translated into sterling at the closing rates of exchange and the difference arising from the translation of the opening net investment in the subsidiary at the closing rates is recognised in the statement of comprehensive income.
In the application of the group’s accounting policies, the director is 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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The cost of the defined benefit pension scheme is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty. Management obtains the advice of professional advisers to ensure the assumptions are reasonable. Further details are given in note 20.
The recognition of a pension surplus related to the defined benefit pension scheme is considered a critical judgement due to the technical and complex nature of such schemes. If the surplus were to be incorrect, the amounts would be material.
Turnover represents the total amount invoiced for services rendered, excluding customs duty and value added tax paid on behalf of customers. Analyses of turnover by class of business and geographical location are as follows:
The prior year geographical turnover has been amended since the figures for Europe were reflected against Rest of the World and vice versa. The comparative has been corrected for this error but the total turnover remains the same.
* £60,000 of the auditor’s remuneration within 2022 relates to unexpected costs incurred in relation to the current auditor’s first year audit of financial year 2021
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to profit and loss, the following amounts relating to tax have been recognised directly in other comprehensive income:
An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured using this tax rate and reflected in these financial statements.
The proposed final dividend for the year ended 31 December 2022 is:
The local currency equivalent of the above proposed dividend is £1,584,071 (2021: £1,558,100).
The proposed final dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.
Registered office addresses:
The amounts owed by group undertakings are in respect of trade balances conducted under normal trading conditions.
The amounts owed to group undertakings are in respect of trade balances conducted under normal trading conditions.
Provisions relate to dilapidation costs and costs of removal of fixed assets from leased premises. Where the effect of the time value of money is material, the provision has been discounted to reflect the present value of the liability.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The Company currently operates a defined benefit pension scheme for all qualifying employees. The defined benefit pension scheme was open to all qualifying permanent full-time and part-time employees of Nippon Express (U.K.) Limited up to 31 March 2003, and from that date the defined benefit scheme was closed to new entrants. The defined benefit scheme was closed on 1 October 2009 to future accrual. A new defined contribution scheme has replaced all the defined benefit arrangements for current and future employees.
An actuarial valuation of the defined benefit scheme was carried out as at 31 March 2021, and revealed a funding shortfall of £859,000.
To eliminate the shortfall the trustee and the Company agreed additional contributions of £290,000 per annum over a seven year period from 1 April 2022. The Company does not deem the obligation to meet this a principal risk or uncertainty.
The figures below have been based on a full actuarial valuation as at 31 March 2021, updated to the current year end by a qualified independent actuary.
A surplus of £2.2m has been recognised at the reporting date and results can change dramatically year on year depending on market conditions. The liabilities are linked to yields on AA-rated corporate bonds, while assets are measured at their bid value and a large proportion of the assets of the Scheme is invested in equities and diversified growth funds. Changing markets in conjunction with discount rate volatility will lead to volatility in the funded status of the pension plan and thus to volatility in the net pension asset on the Company’s balance sheet and in the Statement of Comprehensive Income.
The assets of the scheme have been taken at market value and the liabilities have been calculated using the following principal actuarial assumptions:
Assumed life expectations on retirement at age 65:
The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:
Amounts recognised in profit and loss
Amounts recognised in other comprehensive income
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans which are wholly or partly funded.
Movements in the fair value of plan assets
The actual return on plan assets was £286,000 (2021 - £172,000).
Fair value of plan assets at the reporting period end
The Ordinary shares are irredeemable and have full rights in the Company with regard to voting, dividends and capital distribution. The shares rank pari passu in all respects.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
A dividend of €1.8m (£1.6m) was paid in October 2023 in respect of the year ended 31 December 2022. This is detailed in note 11.
The Company's lease of its head office at Hayes is currently operating on a rolling basis with a new lease currently being re-negotiated with the landlord. The old lease is within the 1954 Landlord and Tenant Act so the company has security of tenure while the lease details are being agreed.
The company has taken advantage of the exemption granted under FRS 102.33.1A not to disclose related party transactions with Nippon Express Holdings Inc Group companies which are 100% owned within the Group.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting date:
The following amounts were outstanding at the reporting date:
The Company’s immediate holding company is Nippon Express (Europe) Gmbh, a company incorporated in Germany.
Up to February 2022, the Company’s ultimate parent undertaking and controlling party was Nippon Express Company Limited, a company incorporated in Japan and which was the smallest and largest of such group undertakings of which the Company is a member and for which group financial statements are prepared. Copies of its financial statements are available from 1-9-3, Higashi Shimbashi, Minato-ku, Tokyo, 105-8322, Japan.
From February 2022, the Company’s ultimate parent undertaking and controlling party was Nippon Express Holdings Inc, a company incorporated in Japan and which was the smallest and largest of such group undertakings of which the Company is a member and for which group financial statements are prepared. Copies of its financial statements are available from Kanda-Izumicho 2, Chiyoda-ku, Tokyo, Japan.