The Director s present the S trategic report for Cloetta UK Limited, formerly Candyking UK Limited ("the Company") for the year ended 31 December 2019. On 1 May 2019 the Company changed its name from Candyking UK Limited to Cloetta UK Limited.
The Company is a wholly owned subsidiary of a group of entities headed up by Cloetta Ab ("the Group").
The results of the year show a profit after taxation of £1,846,226 (2018: £637,316). Cloetta UK Limited has net liabilities of £720,033 at the year end (PY: net assets of £3,434,444).
On 1 May 2019, the business and related assets and liabilities of the Company’s wholly owned subsidiary Cloetta UK Dormant Limited (formerly Cloetta UK Limited) was acquired by the Company as essentially a merger of the two businesses. The value of assets and liabilities transferred was a net liability of £6,000,703 which was satisfied by additional share capital from Cloetta UK Dormant Limited of the same amount.
Given the resulting Cloetta UK Dormant Limited entity post acquisition had no value, the additional share capital received was subsequently written off to the merger reserve to reflect the substance of the transaction as a merger of two Group businesses.
The purposes of the transfer of business, assets and liabilities was principally to benefit from the synergies resulting from the integration with the Company’s existing business which allows for a number of cost savings.
Operating profit is encouraging, showing good growth at £2,635,535 for the year (2018: £845,000), with the overall profit generated supporting the Directors view that merger of the two businesses puts the UK part of the overall Group on the right future track in terms of both market and profit generation.
Although the Directors felt that the Market in 2019 remained challenging, they are satisfied with results overall and remain confident regarding future sales and value creation. With the merger resulting in an enlarged Cloetta UK presence, sales in the Company have naturally increased as a result of a now combined Pick & Mix and Packed business.
2019 was always a year of planned change and consolidation for the Company, combining 2 previously separate businesses into one entity led by one management team, as well as considering route market structure in the UK, moving Agent managed business to in house and transitioning back office systems to the Group’s functional platform for managing business throughout its operations.
With respect to the legacy Candyking business, this was broadly flat vs the prior year. From a more detailed channel perspective, the business saw an improved demand in High Street, Grocery was flat and Leisure was slightly in decline. Moving forward, the C ompany remains focused on growing all major customer channels with high levels of promotional activity and activation continuing to be seen as key levers. A major Brand refreshment is planned for the Candyking concept in 2020.
From a sales and operational perspective, the Company continues to demonstrate cost control and the Directors believe current structure is fit for purpose. As referenced in the ‘Principal Risks and Uncertainties’ section below, post year end the emergence of Covid-19 has significantly impacted the business however the Directors continue to be of the view that the UK business is well placed in its current form for reacting to the impacts of the pandemic. Elements of this in the impacted period post year end has been shown as, for example, the offering of Pick & Mix within supermarkets has been adjusted to better meet the needs and perceptions of the end customer.
Moving forward the Directors see many opportunities for the now enlarged confectionery business trading as Cloetta UK. In addition to incremental sales opportunities, opportunities also exist to drive improved profitability through identified efficiencies that should come with creating one Cloetta UK.
Whilst there is always a risk that future sales will not be secured upon the expiry of any existing customer contract, the Company is showing growth and the acquisition of the packed business in the year better balances the risk within the Company with a broader portfolio of products to sell, both Pick & Mix and Packed confectionery.
Outside of this, the Company operates in a market that can be subject to significant rises in both commodity pricing and the associated cost to serve. It therefore must have a robust pricing strategy that ensures any legitimate cost increases are recoverable from its customers.
At date of signing of these financial statements, the Directors also reference the impact of Covid-19 on current business fundamentals in 2020 into 2021. The emergence of Covid-19 occurred post year end, the impact of which is unprecedented. There is no doubt it will cause a serious interruption to the Company’s planned ambition for 2020 and beyond, as has been seen through the actual impact to the business post year end. Despite this, the Directors consider that the Company is relatively well placed for what comes next, and are confident regarding a resumption of the growth story and future mission for the business in UK in the medium to long term future.
A number of measures have been taken to monitor and limit the effects of Covid-19, such as safety and health measures for our people (for example, social distancing where presence is required on Company and customer sites and working from home where possible) as well as securing the supply of materials that are essential to our production process.
At this stage, the impact on the business and results post year end to date has been significant and based on our experience to date and future uncertainties we expect this to remain the case for at least the near future. As we operate in the cinema and Pick & Mix sector, we have experienced decreased demand for our products and expect this to continue through 2021.
We will continue to follow the latest government policies and advice and, in parallel, we will do our utmost to continue our operations in the best and safest way possible without jeopardising the health of our people.
The Directors are satisfied with the 2019 results. The Company performed well against its key financial KPIs of reported revenue and operating profit which both showed growth when compared to the previous year. These results were delivered against a backdrop of significant change to the Company as described above.
The creation of one UK business was a key step within the Group’s strategy. Now completed, despite the emergence of Covid-19 the Directors are confident regarding future sales and value creation in the medium to long term future. The Company’s key mission now is profitable growth, the new combined business will bring improved efficiencies over time and strengthen Cloetta’s positioning as an important, branded supplier to the market. This increased traction is also considered to be a key factor in terms of unlocking future potential in both Packed and Pick & Mix supporting the growth mission.
As Directors of Cloetta UK Limited, our key responsibility is to promote the success of the Company. This principle is embodied in our terms of reference and is the cornerstone of our discussions and our decision making. Each Director is cognisant that in discharging this key responsibility, they must have regard to:
The likely consequences of any decisions in the long-term
The interests of the C ompany’s employees
The need to foster the Company’s business relationships with suppliers, customers, and others
The impact of the Company’s operations on the community and environment
The desirability of the Company maintaining a reputation for high standards of business conduct; and
The need to act fairly between shareholders of the Company.
The Directors of Cloetta UK Limited consider, both individually and collectively, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1) (a-f) of the Act).
The Board’s approach to section 172(1) and decision making
The Board’s terms of reference, which are reviewed annually, clearly articulate the Board’s responsibilities, the role of the Chair and matters reserved for the Board. They also set out which of the Board’s powers and responsibilities may be delegated to other committees and the governance mechanisms by which the Board monitors those committees’ activities and performance. The Chair ensures that these terms of reference are adhered to and, by doing so, ensures that Directors have due regard for all appropriate factors during the decision-making process.
The Board is responsible for several key strategic decisions, including approving the business plans, objectives, and strategy of the Company. It is also responsible for conduct risk strategy and appetite for recommending dividends and for setting dividend policy.
The Company’s strategy and business plans are approved annually by the Board. The Board also assesses how the strategy underpins long-term value creation by discussing and approving a four-year plan. Such matters are also discussed at the Group’s strategy review and planning meetings, in which the Directors of the Company and its parent and sister Companies participate. On-going performance is discussed and monitored at Board meetings.
The Directors’ assessment of long-term value creation also considers the Company’s resilience. The Directors determine and monitor underwriting, reserving, business, operational, credit, market and liquidity risk appetites and tolerances. They ensure the Company has an effective risk management framework in place, approve its conduct risk strategy and appetite.
All relevant factors are appropriately addressed by the Board when considering matters reserved for it, as set out in its terms of reference.
The Board also ensures that appropriate consideration is given to relevant factors by the committees to which it delegates responsibilities. The Board reviews the terms of reference of such committees on an annual basis and receives regular updates and reports from those committees’ chairs.
The Board also reviews the Company’s key policies on an annual basis, ensuring that all relevant considerations to assist it discharge its responsibilities are embedded in the key operations of the business. These policies help to promote the long-term success of the Company by focusing on areas such as the key operations of the Company.
The Board reviews its key stakeholder map on an annual basis. New key stakeholder relationships are identified through information received and considered by the Board on a regular basis, or through the Board’s consideration and approval of substantial contracts and commitments.
To assist the Directors in discharging their responsibilities, they are provided with on-going training and development opportunities.
For the wider workforce, there is a comprehensive staff development programme tailored to meet individual needs. Elements of this training are mandatory, with all staff required to successfully complete nano e-learning modules on key areas such as money laundering, bribery and corruption, data protection, fraud, and cyber risk.
Our culture
Building and maintaining the Company’s reputation and its high standards of business conduct are essential to the future success of the Company. This is embedded in our culture.
The Company also maintains a ‘Code of Conduct’ setting out the standard we expect from all our staff. This is regularly reviewed and updated, and compliance is attested to by each employee on an annual basis.
Our people
In order to generate value, we recognise that our people, culture, social and community strategies must be both sustainable and aligned to the long-term interests of all our stakeholders. We seek to make both a positive contribution to society and to be aware of the long-term consequences of our actions. We also seek to generate new commercial opportunities by developing strong stakeholder relationships and by recruiting and retaining a highly skilled, engaged, and motivated workforce.
Our stakeholders
The Board recognises the importance of engaging with its broader stakeholder base. We are focused on responding to the needs, and building long-term relationships with, our customers. Other key stakeholders are the producers and suppliers who we purchased goods and services from.
The Company seeks to make information available for financial stakeholders. This includes contact details should stakeholders wish to discuss anything directly.
On behalf of the board
The Directors of Cloetta UK Limited (formerly Candyking UK Limited), registered Company number 01726257, (“the Company”) present their annual report and audited financial statements for the year ended 31 December 2019.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on pages 12 to 33.
No ordinary or preference dividends will be distributed for the year ended 31 December 2019 (2018: Nil).
No Directors' indemnity insurance is held.
As set out in the Strategic report, at the date of signing of these financial statements, the Directors also reference the impact of Covid-19 on current business fundamentals in 2020 into 2021. The emergence of Covid-19 occurred post year end, the impact of which is unprecedented. There is no doubt it will cause a serious interruption to the Company’s planned ambition for 2020 and beyond, as has been seen through the actual impact to the business post year end. Despite this, the Directors consider that the Company is relatively well placed for what comes next, and are confident regarding a resumption of the growth story and future mission for the UK business in the medium to long term future. See the Strategic report for further details on the impacts of the pandemic and actions taken by the Company to react to this.
Growing sales remains the key future priority. The creation of one Cloetta UK organisation which combines Packed with Pick & Mix should be a real accelerator with respect to both sales and value creation in the UK.
The Directors acknowledge that short term there is significant change management required to create a solid and profitable platform for growth. In 2020 and into 2021 , Covid-19 impact will inhibit value creation, moving forward past this challenge the business will resume its mission of improving results through the focused strategy and approach as described above.
The financial statements have been prepared on the going concern basis of accounting. This presumes that the Company will remain in operational existence for the foreseeable future. Due to historic trading results the Company does require support from the Group and with the emergence of Covid-19 and the significant impact on the Company this support is expected to continue to be required for at least the next 12 months from signing of the financial statements.
The Company has received a letter of support from the ultimate parent undertaking to confirm their willingness to provide this support for at least the required period. The Directors’ have, in making their assessment of going concern, considered the ability of the parent entity to continue to provide the required support and are satisfied that the parent has sufficient facilities available to enable them to provide the required financial support.
Currently the appointment of auditors for the year ended 31 December 2020 is being considered.
The Company applies the detailed Financial Policy set by the Group which covers all aspects of Financial Strategy including the financing policy, cash management policy, interest-rate risk policy and currency risk policy.
The Company is exposed to all of these risks and deal with these through the various Group policies as detailed further below.
Foreign currency exchange rate risk
As a consequence of its international activities, the Company is exposed to changes in foreign exchange rates. These exposures derive primarily from purchases in foreign currencies or from holdings of foreign net assets, debtors and creditors, in currencies other than GBP. Transaction exposure is present since sales are mainly denominated in the local currency (GBP) and purchasing is denominated in a number of currencies (EUR, SEK, GBP).
The C ompany has taken steps to mitigate transaction risk by maintaining a proportion of its purchases with UK suppliers. In addition, where possible, income from sales in Euros is retained in a Euro bank account to naturally hedge against purchases settled in Euros.
Liquidity risk
Liquidity risk is minimised by matching cash surpluses and deficits between G roup C ompanies within a cash pool in order to use the additional credit facilities as efficiently and seldom as possible.
Price risk
The C ompany is exposed to price risk as a result of its operations. The risk associated with increased commodity prices are mitigated by a Group Purchasing department who review the market and liaise with current and potential suppliers on an ongoing basis.
Credit risk
The Company does not have any significant concentrations of credit risk. Customers are subject to a credit policy which requires appropriate credit checks on potential customers before sales are made. Sales are subject to payment conditions which vary per customer. A loss allowance for trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired.
Interest rate risk
The Company has interest-bearing non-current and current liabilities. Loans with other Group entities are taken out on a fixed interest basis which minimises the level of interest rate risk. Bank loans and overdrafts are at floating rates. The Company continuously monitors exposure to interest rate risk and would take action such as derivative financial instruments to manage the level of interest rate risk if deemed appropriate.
An agreed deal between UK and the EU regarding BREXIT was far more beneficial for the Company than a no-deal scenario. There is a small BREXIT cost relating to additional paperwork routines moving in and out of UK, however, this is non-material when compared to the consequences of a no-deal which would have attracted significantly higher tariffs on imports under a world trade agreement and could have resulted in significant disruptions in the import channel. The transition has been relatively smooth, few delays regarding goods received internationally despite a slightly slower process clearing customs, it’s still early in the process, however, so far this has gone exceptionally well.
Basis for opinion
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you where:
the Directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the C ompany’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue .
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.
Reporting on other information
Responsibilities for the financial statements and the audit
As explained more fully in the Statement of Directors' responsibilities set out on page 6 , the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view . The D irectors are also responsible for such internal control as they 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 C ompany ' 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 C ompany or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors ' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: http://www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditors ' report.
Use of this report
This report, including the opinions, has been prepared for and only for the C ompany’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing .
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
certain disclosures of Directors’ remuneration specified by law are not made; or
the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
The profit and loss account has been prepared on the basis that all operations are continuing operations. The notes on pages 16 to 33 form part of these financial statements.
Cloetta UK Limited, formerly Candyking UK Limited (“the Company”) is a private Company limited by shares incorporated in England and Wales and domiciled in the United Kingdom. The registered office is Fort Southwick, James Callaghan Drive, Fareham, Hampshire, England, PO17 6AR.
On 1 May 2019 the Company changed its name from Candying UK Limited to Cloetta UK Limited.
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 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:
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 each category of financial instrument; 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 26 ‘Share based Payment’ : Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements ;
Section 33 ‘Related Party Disclosures’ : Compensation for key management personnel .
The Company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the Company as an individual entity and not about its group .
The Company is a wholly owned subsidiary of the Cloetta AB G roup and its results are included in the consolidated financial statements of Cloetta AB Group which are available from Englundav ä gen 7, Solna, Sweden and at cloetta.com.
Rebates are accrued for over the period for which they relate. The Company issues rebates to customers based on the relevant sales activity in the financial year for the purpose of contributing towards the marketing costs for the Company's products.
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 .
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the C ompany 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 Company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow G roup C ompanies 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are s ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value th r ough profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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.
Financial liabilities are derecognised when the C ompany’s contractual obligations expire , are discharged or cancelled.
Equity instruments issued by the Company 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 Company.
Preference Shares
Preference shares contractual terms are considered when deciding on how to treat them in the financial statements. Where the preference shares are redeemable for a fixed or determinable amount at a fixed date or determinable future date, or give the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount, is a financial liability. Otherwise it will be included within equity.
In the application of the Company’s accounting policies, which are described in note 2 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.
There are no critical accounting estimates or key judgements expressed in these financial statements which may be reasonably expected to have a movement which would create a material impact on the financial statements in the next 12 months.
An analysis of the Company's turnover is as follows:
Exchange differences recognised in profit or loss during the year amounted to a gain of £1,855,922 (2018 £290,448 loss).
The average monthly number of persons (including Directors) employed by the Company during the year was:
Aggregate employee remuneration (including Directors) comprised:
The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2018 - 1).
The number of D irectors who exercised share options during the year was 0 (2018 - 0).
The other Directors receive remuneration for their services from within the Cloetta AB Group as their services as D irectors of the C ompany were considered incidental to the ir other services within the Cloetta AB G roup of C ompanies. It is not possible to determine an allocation of costs to th e C ompany and no amounts have been directly recharged .
In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. As the proposal to increase the rate to 25% had not been substantively enacted at the balance sheet date, its effects are not included in these financial statements. However, it is likely that the overall effect of the change, had it been substantively enacted by the balance sheet date, would be to reduce the tax expense for the period by £27,895 , to increase the deferred tax asset by the same amount.
The tax assessed for the year is higher (2018: higher) than the standard rate of corporation tax in the UK of 19% (2018:19%). The differences are explained below:
It is Cloetta's initiative to centralise all UK sales within the Cloetta group in the UK with respect to the group restructuring of sales organisations. Therefore the UK distribution rights for listed products gives Cloetta UK the right to sell these products in the UK. The rights were bought form Cloetta Italia S.r.l and Lonka Sales B.V.
As part of the Company’s acquisition of Cloetta UK Dormant Limited, the net book value of the intangible assets in relation to UK distribution rights were recognised. These rights were originally acquired by Cloetta UK Dormant Limited from Cloetta Italia S.r.l and Lonka Sales B.V. in 2016.
There are no commitments in relation to contracted capital expenditure.
On 1 May 2019 the Company increased its investment in Cloetta UK Dormant Limited through receipt of 6,000,703 shares of £1 each and acquired their trade and assets as a merger of the businesses. The amount was written off to the merger reserve representing the substance of the transaction and reflecting that the remaining Cloetta UK Dormant entity investment value was considered to be nil.
Details of the Company's subsidiaries at 31 December 2019 are as follows:
Registered office addresses:
Cloetta UK Dormant Limited was previously registered as Cloetta UK Limited and changed it name on 1 May 2019. The company was previously trading and registered dormant from 1 May 2020.
Finished goods are stated after provision for impairment of £20,000 (2018: £20,000)
Trade debtors are stated after provision for impairment of £23,114 (2018: £5,568).
The amounts owed by Group undertakings are all interest free, unsecured and repayable on demand.
All of the amounts due to Group undertakings are unsecured interest free and repayable on demand except for £1,698,074 (2018: £nil) which is the short term element of the loan incurring interest at 1%, is unsecured and is repayable at fixed dates within one year.
The bank overdraft is part of a Group cash pool. This is repayable on demand and is incurring interest at 1 month STIBOR + 1%.
Included in the amounts due to Group Companies are 3 loans which have the following terms:
Two loans totalling £2,668,255 (2018: £nil) are due for repayment on 1 October 2021 incurring interest at 1.225%.
One loan incurring interest of 1% of which £1,698,074 (2018: nil) is due in 2020 and is reflected within creditors: amounts falling due within one year, and £5,317,233 (2018: £nil) is due for repayment on 1 October 2021 recognised within Creditors: amounts falling due after more than one year.
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax is not recognised in respect of tax losses of £6,628,390 (2018: nil), which includes losses from Cloetta Dormant Limited transferred on merger of £4,897,221, as it is not probable that they will be recovered against the reversal of deferred tax liabilities or future taxable profits.
The deferred tax asset at 31 December 2019 has been calculated based on the rate substantially enacted at the balance sheet date.
The C ompany operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Company in an independently administered fund.
The pension charge represents contributions payable by the Company to a defined contribution fund administered by Benefex and held with Scottish Equitable. There were no outstanding contributions due to the fund at the balance sheet date (2018: £nil).
The ordinary shares, 'B' ordinary shares and preferred shares rank pari passu for voting purposes. If a dividend is declared on the ordinary shares or 'B' ordinary shares, the preferred shares are ignored for the purpose of calculating the entitlement of the holders of the ordinary shares or 'B' ordinary shares to any dividend declared.
The redeemable shares have no dividend or voting rights and will be entitled to a return of capital only, on a winding-up of the Company. There are no restrictions on the date of redemption, and redemption is at the option of the shareholder. No premiums are payable on redemption.
Included with other reserves are amounts paid by former parent as capital contribution.
Details of this reserve can be found in note 26.
On 1 May 2019 the trade and assets from Cloetta UK Dormant Limited were acquired by the Company. Due to the nature of the acquisition being a transfer of trade and assets from another wholly owned subsidiary within the Cloetta AB Group, this was essentially a merger of two businesses. The amounts were therefore transferred at net book value at the date of acquisition. As Cloetta UK Dormant Limited held no trade or assets following the acquisition, the increase in the investment was transferred to the merger reserve as shown in note 23.
Operating lease payments represent rentals payable by the Company in respect of property and motor vehicles used. The contract term in relation to the property concludes on 31 July 2024, although this includes a break date of 31 July 2020.
At the reporting date the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
At time of publication, the Directors also reference the impact of Covid-19 on current business fundamentals in 2020 and into 2021. The impact of Covid-19 is unprecedented, there is no doubt it will be a serious interruption to the Company's planned ambition for 2020. Despite this, Cloetta UK is relatively well placed for what comes next, and already is confident regarding a resumption of the growth story and future mission for the business in UK.
We have taken a number of measures to monitor and limit the effects of Covid-19, such as safety and health measures for our people (such as social distancing and working from home) and securing the supply of materials that are essential to our production process.
At this stage, the impact on the business and results has been significant and based on our experience to date we expect this to remain the case for the near future. As we operate in the cinema and Pick & Mix sector out of home, we have experienced decreased demand for our products and expect this to continue in 2020 through into 2021.
As the Company is a wholly owned subsidiary of the Cloetta AB Group, it has taken advantage of the exemption contained in FRS 102 'Related Party Disclosures' and has therefore, not disclosed transactions or balances with entities which form part of that Group.
Transactions with Directors comprised wages as detailed in the Directors' remuneration note. There were no other transactions with Directors or other disclosable related party transactions.
The immediate parent Company of Cloetta UK Limited was E Out Instrument AB until 31 December 2019 when it became Cloetta Sverige AB, which is incorporated in Sweden.
The ultimate parent Company and controlling party is Cloetta AB, which is incorporated in Sweden.
Cloetta AB is the smallest and largest Group to consolidate the results of the Company.
The consolidated financial statements of this Group are available to the public at Englundav ä gen 7, Solna, Sweden and at cloetta.com.