The directors present the strategic report for the year ended 31 December 2022.
The Group’s principal business comprises the auditing and inspection of customers’ food production and processing food service/hospitality activities. In addition, we continue to grow our service lines in consulting, food regulatory and technical services. In late 2022 we started developing ESG and digital services for our clients.
These services will continue to be in demand as consumers, food processors, supermarkets and the food service/hospitality sectors continue with their increasing demand for increased visibility and sustainability of food supply chains. The Group has a loyal client base, and by being part of the international NSF group, shares in the global drive to expand its mission to improve human and planet health.
The Group is part of the global NSF International Group and has responsibilities for markets in the geographic areas of Europe, Middle East, and Africa.
Turnover has increased for the year by £3m to £29.5m which is 11.6% higher than the previous year. We are expanding our business offering with existing clients but have also seen an increase in completely new customers. Cost of sales has not increased in line with revenue, only a 9% increase, as we leveraged operational efficiencies.
In 2022 a significant investment was made in building refurbishments at the Oxford Head office. A complete refit took place with energy efficiency, sustainability and increasing employee engagement in a post Covid era being the key drivers of this. |
Financial risk management objectives and policies are outlined in the directors’ report.
The demand for the Group’s services is underpinned by consumer concerns over food safety, sustainability of supply chains and government legislation. Our principal operations are in established markets where there is some organic growth and the Group is gaining additional customers. The principal risks to the Group are therefore related to maintaining a competitive position in a mature market, whilst expanding its offering with new digital services, broadening the customer base and focusing on services with sustainable margins.
The Group uses a number of new digital dashboards to track key performance indicators. Goals have been set for every individual in the business. This has resulted in a much clearer focus for the business and individuals.
The scorecard contains five segments to ensure there is a balanced approach.
Financial – focusing on revenue and increasingly profitability.
Customers – ensuring we are tracking how well we are serving them.
Colleagues – making NSF a great place to work to retain and attract talent.
Operations – to ensure we are running efficiently and effectively.
ESG - making every possible effort to ensure our activities preserve human and planet health.
In 2022 the Innovation team within the Group has been focusing on offering new services to meet the markets' changing needs while continuing to gain more customers and expand our offering with existing clients. Revenue and profitability have increased. Turnover has increased by 11.6% compared to the prior year, 2022: £29.5m (2021: £26.4m). The total comprehensive loss in 2021 of £0.1m has significantly improved and the Group are now reporting total comprehensive income of £0.6m.
Levels of customer service have remained strong in 2022 and we have gained some significant new blue chip clients.
Overall our labour turnover is still higher than we would like, however we operate in a very tough market with a limited talent pool. The business is investing further in our people strategy to develop more of our own talent and we continue to benchmark all roles to ensure that our package is competitive in the market place. Regular employee surveys have taken place and the Group has seen increasing scores particularly in employee engagement. The Group is constantly reviewing its DEI polices to ensure we maintain a leading position.
We made significant progress in 2022 to further improve our IT and other technology, and the Group has now mapped a strategic pathway with enterprise solutions to further optimise our operational efficiencies and improve customer service.
At the end of 2022 the Group hired dedicated additional resources to develop new ESG related services and allow our customers to fulfil the needs of the markets they serve.
The Group will continue to scrutinise the core markets it serves with regular strategic reviews, allowing our innovation teams to focus on developing new services to meet future and ever-changing client needs.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to recruit disabled workers for those vacancies that they are able to fill. All necessary assistance with initial training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, wherever, possible, for retraining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.
The group's policy is to consult and discuss with employees, at meetings, on matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
The auditor, Shaw Gibbs (Audit) Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The company has chosen in accordance with Companies Act 2006, s414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (accounts and Reports) Regulations 2008, Sch.7 to be contained in the directors' report. It has done so in respect of the directors' business review, principle risks and uncertainties facing the company, and future developments.
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.
The directors have reviewed the consolidated net current liability position of £3,717k (2021: £3,610k) and the net liability position of £1,558k (2021: £2,173k) and have concluded that, in the context of the overall size of the group and its position within the wider NSF group, the net current liability position is not a cause for concern given the continuous improving trends in the markets in which the company and its group operate and the continued access to funding.
In addition, the ultimate holding company, NSF International, has confirmed that it will provide sufficient working capital for the company and its group to meet their liabilities for at least twelve months from the date of signing these financial statements. The group also has access to a line of credit, shared with the global NSF group, of $100,000,000.
The group's activities expose it to a number of financial risks including credit risk, cash flow risk and liquidity risk. The group does not undertake hedging or use financial instruments to manage financial risks.
Foreign exchange risk
The group's activities expose it to the financial risks of changes in foreign currency exchange rates. The nature of foreign currency trading activities is such that it is more economic for the group to carry the foreign exchange risks than to undertake hedging or derivative transactions to mitigate the risks. Risk is mitigated where possible by using foreign currency funds to settle liabilities in local currencies and in respect of foreign subsidiaries, debts and liabilities are offset to limit payments and foreign exchange exposure.
Credit risk
The group's principal financial assets are bank balances and cash, trade and other receivables.
The group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. Credit risk is mitigated by performing credit risk assessments; where risks are identified, advance payment or specific settlement terms are agreed.
The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Liquidity risk
The group maintains liquidity sufficient to ensure that sufficient funds are available for ongoing operations and future developments. The group also has access to a line of credit, shared with the global NSF group, of $100,000,000.
We have audited the financial statements of NSF Safety and Quality UK Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the group's and 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; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the 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 directors 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.
Opinions on other matters prescribed by the Companies Act 2006
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 directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you 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.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
At the planning stage of the audit, we gain an understanding of the laws and regulations which apply to the company and how the management seek to comply with those laws and regulations. This helps us to plan appropriate risk assessments.
During the audit, we focus on relevant risk areas and review the compliance with the laws and regulations by making relevant enquiries and undertaking corroboration, for example by reviewing Board Minutes and other documentation.
We assess the risk of material misstatement in the financial statements including as a result of fraud and undertake procedures including:
Reviewing the controls set in place by management;
Making enquiries of management as to whether they consider fraud or other irregularity may have taken place, or where such opportunity might exist;
Challenging management assumptions with regard to accounting estimates; and
Identifying and testing journal entries, particularly those which appear to be unusual by size or nature.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The group statement of total comprehensive income has been prepared on the basis that all operations are continuing operations.
There are no recognised gain and losses other than those passing through the group statement of total comprehensive income.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £890,706 (2021 - £1,262,275 loss).
NSF Safety and Quality UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Hanborough Business Park, Long Hanborough, Oxford, OX29 8SJ.
The group consists of NSF Safety and Quality UK Limited and all of its subsidiaries.
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: Carrying amounts, 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; and
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
The consolidated group financial statements consist of the financial statements of NSF Safety and Quality UK Limited together with all entities that it controls (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
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.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The directors have reviewed the consolidated net current liability position of £3,717k (2021: £3,610k) and the net liability position of £1,558k (2021: £2,173k) and have concluded that, in the context of the overall size of the group and its position within the wider NSF group, the net current liability position is not a cause for concern. The group also has access to a line of credit, shared with the global NSF group, of $100,000,000 which further supports this opinion.
The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the strategic report. The directors' report further describes the financial position of the group; its cash flows, liquidity position and borrowing facilities; the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.
In addition the ultimate holding company, NSF International, has confirmed that it will provide sufficient working capital for the company to meet its liabilities for at least twelve months from the date of signing these financial statements.
Turnover is stated net of VAT and trade discounts and is recognised when the significant risks and rewards are considered to have been transferred to the buyer. Turnover is exclusively the supply of services and represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable.
Where a contract has only been partially completed at the balance sheet date, turnover represents the fair value of the service provided to date based on the stage of completion of the contract activity at the balance sheet date. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year.
Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 3 to 10 years.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
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 the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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.
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
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, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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 the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The 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 the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset 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.
Group relief
The company is part of a tax group with other group entities for corporation tax purposes. Group relief is used to manage the overall tax position of the group. Consideration is earned or paid for for this group relief equivalent to the tax charge or credit transferred. These are disclosed as part of the total taxation charge.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
In 2021 NSF Safety and Quality UK Limited took advantage of the Coronavirus Job Retention Scheme Grant whereby they received £241k from HMRC in the year. This was recognised within "other operating income".
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.
For the purposes of preparing consolidated financial statements, the assets and liabilities of foreign subsidiary undertakings are translated at the exchange rates ruling at the balance sheet date. Statement of comprehensive income items are translated at the average exchange rate for the relevant year. Exchange differences arising are taken to the group's retained earnings.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Management carry out a review of indicators of impairment in relation to investments in subsidiaries on an annual basis.
In performing this review, management are required to make judgements as to whether the information considered (for example recent trading results for each subsidiary) represents an indicator of impairment. Should indicators of impairment be noted, management then perform a detailed review of the value of the investments held in order to assess whether an impairment is required (see below).
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.
Determining whether the carrying value of the company's investments is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
The value in use calculations used in modelling the values in use of the entities held as investments by NSF Safety and Quality UK Limited are depending on the discount rates used and long-term growth rates used. These are the best estimates available at the time, but could be impacted by market conditions, such as rises in the risk-free rates in the relevant economies.
The management forecasts utilised in the model are based on the assumption that the group revenues and margins would return to pre-COVID levels by 2023. The financial performance and position of the relevant entities at the balance sheet date and post year-end suggests that this is a reasonable assumption.
Having taken into consideration the above estimates and the level of uncertainty involved, the directors are of the opinion that no impairment is required at this stage.
Having taken into consideration the historic and current levels of bad debts, the directors consider it appropriate to have a specific bad debt provision in place. The directors' assessment of the necessity and adequacy of the bad debt provision takes into consideration the latest available information regarding the recoverability of the relevant amounts and the circumstances of the customers.
The turnover and profit before taxation are attributable to the one principal activity of the group. No geographical analysis of turnover is presented as the directors are of the opinion that to do so would be seriously prejudicial to the interests of the group.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 0 (2021 - 1).
In 2022 all of the directors of the parent company were remunerated by other NSF International group companies, which are outside of this UK group.
Key management personnel
There are no key management personnel for the group other than the directors and accordingly no separate statement has been produced for key management personnel remuneration.
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was enacted on 24 May 2021. This may have an impact on the company's tax charge of future years accordingly.
Details of the company's subsidiaries at 31 December 2022 are as follows:
The bank loans relate to a line of credit with JP Morgan, which bears interest at the on-month LIBOR, plus a spread ranging from 0.50% to 1.00%, depending on NSF's total leverage ratio. This line of credit is guaranteed by NSF International, the ultimate controlling party, and several of its subsidiaries.
Within current creditors, there is a loan payable to NSF Wales Limited of £1.9m (2021: £1.6m) which is repayable on demand. Interest is charged at 1% above the LIBOR rate. Also included within current creditors is a loan payable to NSF International of £723k (2021: £632k), and a loan payable to NSF International UK Limited of £218k (2021: £106k). These loans do not bear any interest and are repayable on demand. The Directors do not currently anticipate that the balances will be recalled within twelve months of the balance sheet date.
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. At the balance sheet date, £48k (2021: £64k) is included in accruals.
The company is party to a group VAT registration and is therefore jointly and severally liable for the total amounts due to HM Revenue and Customs by all group companies included within that registration. At 31 December 2022, £809k was due (2021: £549k) and payable by NSF Safety and Quality UK Limited.
Audit exemption
NSF Safety and Quality UK Limited has given statutory guarantees against all the outstanding liabilities of the below listed wholly-owned subsidiaries, all registered in England and Wales under Section 479A of the Companies Act 2006, thereby allowing these subsidiaries to be exempt from the annual audit requirement for the year ended 31 December 2022. NSF Agriculture UK Ltd is a dormant company and it is therefore exempt from the audit requirement regardless.
Although the company does not anticipate the guarantees to be called upon, the book values of the guaranteed liabilities, excluding intercompany balances, for each relevant subsidiary at 31 December 2022 and 2021 are set out below:
| 2022 £000 | 2021 £000 |
NSF Agriculture UK Ltd (Registration number 03707745) | - | - |
NSF Certification UK Ltd (Registered number 03406372) | 5,156 | 5,650 |
|
|
|
| 5,156 | 5,650 |
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:
The group companies have taken advantage of the exemptions provided by FRS 102 Section 33, to not disclose transactions and outstanding balances with other companies of the NSF International Group, which are directly or indirectly wholly owned by NSF International.
The immediate parent of NSF Safety and Quality UK Limited is NSF International UK Limited, a company registered in England and Wales. Its registered address is:
Hanborough Business Park
Long Hanborough
Oxfordshire
OX29 8SJ
United Kingdom
The smallest group for which consolidated financial statements are published is headed by NSF Safety and Quality UK limited.
The ultimate controlling party and ultimate parent company, and the largest group of companies for which consolidated financial statements are available, is NSF International, a not for profit corporation chartered under the laws of the state of Michigan, USA. Consolidated accounts may be obtained from its registered address. The registered address is:
NSF International,
789 North Dixboro Road
Ann Arbor
MI 48105
USA