Company Registration No. 02823778 (England and Wales)
ZONES (UK) LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
ZONES (UK) LTD
COMPANY INFORMATION
Directors
A D Kaye
F Lalji
R Day
(Appointed 4 April 2022)
Mr S Hobday
(Appointed 25 April 2023)
Secretary
T Boyd
Company number
02823778
Registered office
St Clements House
27 Clements Lane
London
EC4N 7AE
Auditor
Jeffreys Henry LLP
1a New Street
London
EC2M 4TP
ZONES (UK) LTD
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Directors' responsibilities statement
5
Independent auditor's report
6 - 9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 25
ZONES (UK) LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present the strategic report for the year ended 31 December 2022.
Section 172 Statement
The Directors are well aware of their duty under Section 172 of the Companies Act 2006 to act in the way which 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 and, in doing so, to have regard (amongst other matters) to:
The likely consequences of any decision in the long term;
The interests of the Company'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 the environment;
The desirability of the company maintaining a reputation for high standards of business conduct; and
The need to act fairly between members of the Company.
The Board recognises that the long-term success of Zones (UK) Ltd requires positive interaction with its stakeholders, including customers, suppliers, government and regulatory authorities. The directors seek to actively identify and positively engage with key stakeholders in an open and constructive manner. The board believes that this strategy enables our stakeholders to better understand and address relevant stakeholder views which will assist the Board in its decision making and to discharge its duties under Section 172 of the Companies Act 2006.
Fair review of the business
This past year has seen a significant increase in revenue and margins as our business continued to recover from the economic impact of COVID-19 and successfully circumnavigating the issues post Brexit.
The business has strategically worked upon expanding our locations across Europe and opened a fully operative sister entity in the Netherlands (ZBS BV), to accompany our other entities in Ireland, Turkey and Israel and further support our customers, suppliers and partners. This includes leased premises including office, warehouse and configuration space and have expanded our team of logistics and configuration engineers.
A lot of our customers had continued increased spend from 2021, predominantly relating to countries reopening following lockdowns, however we have incurred increased costs in warehousing, freight and administration due to our preparation for the future.
Our credit lines remain fully intact, and we retain a robust working capital facility with our Bankers, and this enabled us to continue effective working relationships with our supply chain. This working capital facility will remain to accommodate the forecasted recession periods over 2023 and onwards,
The growth in global business over the past few years has caused the Group to tighten controls to protect against changes in currency values, especially the Euro. We work with currency brokers and our bankers to ensure that we do not suffer losses in our currency exposure, whilst remaining competitive when quoting clients.
We are confident that we are well-placed to manage all the challenges we will face with the current economic climate in 2023 and onwards.
ZONES (UK) LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Principal risks and uncertainties
The management of the business and the execution of the company's strategy are subject to a number of risks.
The key risks and uncertainties affecting the company are as follows:
purchasing cycles of customers;
more manufacturers going direct;
industry consolidation and increased competition;
loss of significant customers;
decrease in gross margins due to increase in competition in the computer industry;
decrease of rebates/incentives from key suppliers;
the ongoing impact of the Covid pandemic;
rapid inventory obsolescence due to accelerating technological changes in the personal computer industry; and
Brexit and general economic conditions.
A decline in sales could adversely affect our business, financial condition, cash flows or results of operation.
Key performance indicators
The main KPIs in the year are as follows:
Sales increased by 10.7% to £68.3m (2021: £61.7m)
Gross profit up by 17.8% to £6.7m (2021: £5.7m)
Gross profit margin increased by 0.6% to 9.8% (2021: 9.2%)
A D Kaye
Director
27 October 2023
ZONES (UK) LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
The principal activity of the company continued to be the trade of computer consumables, hardware, software and data centre, security mobility and cloud services.
Results and dividends
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
A D Kaye
F Lalji
R McFadden
(Resigned 4 April 2022)
Mr J Bauer
(Resigned 25 April 2023)
R Day
(Appointed 4 April 2022)
Mr S Hobday
(Appointed 25 April 2023)
Financial instruments
Treasury operations and financial instruments
The company operates a treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the company’s activities.
The company’s principal financial instruments include derivative financial instruments, the purpose of which is to manage currency risks and interest rate risks arising from the company’s activities. In addition, the company has various other financial assets and liabilities such as trade debtors and trade creditors arising directly from its operations. Derivative transactions which the company enters into principally comprise forward exchange contracts. In accordance with company’s treasury policy, derivative instruments are not entered into for speculative purposes.
Auditor
In accordance with the company's articles, a resolution proposing that Jeffreys Henry LLP be reappointed as auditor of the company will be put at a General Meeting.
Energy and carbon report
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
ZONES (UK) LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
On behalf of the board
A D Kaye
Director
27 October 2023
ZONES (UK) LTD
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 5 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
ZONES (UK) LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ZONES (UK) LTD
- 6 -
Opinion
We have audited the financial statements of Zones (UK) Ltd (the 'company') for the year ended 31 December 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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 company's affairs as at 31 December 2022 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
The Company meets its day to day working capital requirement through use of cash reserves and bank facilities. The Directors have considered the applicable of the going concern basis in the preparation of the financial statements. This included review of forecasts which show that the Company should be able to sustain its operation within the level of its current debt facility arrangements.
The current bank facilities is still in place. The Company continues to benefit from the support of Zones Inc who have provided a US$1m guarantee on the debt facility. The Directors have reasonable expectation that the Company has adequate resources to continue operation for the foreseeable future for the reason they have adopted the going concern basis in the preparation of financial statements.
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 our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
ZONES (UK) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZONES (UK) LTD
- 7 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not 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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' 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 company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the company's business activities to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.
ZONES (UK) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZONES (UK) LTD
- 8 -
The extent to which the audit was considered capable of detecting irregularities including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the IT services sector.
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environmental, health and safety legislation and anti-money laundering regulations.
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
we assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 3 of the Group financial statements were indicative of potential bias;
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims;
reviewing correspondence with HMRC and the company’s legal advisor.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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.
ZONES (UK) LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZONES (UK) LTD
- 9 -
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.
Sudhir Rawal (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP
27 October 2023
Chartered Accountants
Statutory Auditor
1a New Street
London
EC2M 4TP
ZONES (UK) LTD
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
2022
2021
Notes
£
£
Turnover
2
68,259,928
61,680,159
Cost of sales
(61,524,929)
(56,019,335)
Gross profit
6,734,999
5,660,824
Administrative expenses
(5,858,058)
(5,337,982)
Operating profit
3
876,941
322,842
Interest payable and similar expenses
5
(211,866)
(89,611)
Profit before taxation
665,075
233,231
Tax on profit
6
(155,495)
(40,974)
Profit for the financial year
509,580
192,257
The profit and loss account has been prepared on the basis that all operations are continuing operations.
ZONES (UK) LTD
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
Notes
£
£
£
£
Fixed assets
Tangible assets
7
157,410
150,804
Current assets
Stocks
8
2,122,556
2,975,461
Debtors
9
10,227,845
13,685,688
Cash at bank and in hand
172,804
1,109
12,523,205
16,662,258
Creditors: amounts falling due within one year
10
(8,195,942)
(12,837,969)
Net current assets
4,327,263
3,824,289
Total assets less current liabilities
4,484,673
3,975,093
Provisions for liabilities
Deferred tax liability
12
14,909
14,909
(14,909)
(14,909)
Net assets
4,469,764
3,960,184
Capital and reserves
Called up share capital
14
866,666
866,666
Share premium account
783,334
783,334
Profit and loss reserves
2,819,764
2,310,184
Total equity
4,469,764
3,960,184
The financial statements were approved by the board of directors and authorised for issue on 27 October 2023 and are signed on its behalf by:
A D Kaye
Director
Company Registration No. 02823778
ZONES (UK) LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
Share capital
Share premium account
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2021
866,666
783,334
2,117,927
3,767,927
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
-
192,257
192,257
Balance at 31 December 2021
866,666
783,334
2,310,184
3,960,184
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
-
509,580
509,580
Balance at 31 December 2022
866,666
783,334
2,819,764
4,469,764
ZONES (UK) LTD
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
20
1,173,298
(1,743,954)
Interest paid
(211,866)
(89,611)
Income taxes paid
(41,580)
(138,512)
Net cash inflow/(outflow) from operating activities
919,852
(1,972,077)
Investing activities
Purchase of tangible fixed assets
(122,017)
(83,905)
Net cash used in investing activities
(122,017)
(83,905)
Net increase/(decrease) in cash and cash equivalents
797,835
(2,055,982)
Cash and cash equivalents at beginning of year
(2,123,223)
(67,241)
Cash and cash equivalents at end of year
(1,325,388)
(2,123,223)
Relating to:
Cash at bank and in hand
172,804
1,109
Bank overdrafts included in creditors payable within one year
(1,498,192)
(2,124,332)
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 14 -
1
Accounting policies
Company information
Zones (UK) Ltd is a private company limited by shares incorporated in England and Wales. The registered office is St Clements House, 27 Clements Lane, London, EC4N 7AE.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention.
1.2
Going concern
The Group meets its day to day working capital requirement through use of cash reserves and bank facilities. The Directors have considered the applicable of the going concern basis in the preparation of the financial statements. This included review of forecasts which show that the Group should be able to sustain its operation within the level of its current debt facility arrangements. The current bank facilities are due for renewal in trueDecember 2023 and the directors are in the process of negotiating new facilities. The group continues to benefit from the support of Zones Inc who have provided a US$1m guarantee on the debt facility. The Directors have reasonable expectation that the Group has adequate resources to continue operation for the foreseeable future for the reason they have adopted the going concern basis in the preparation of financial statements.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and 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.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue relating to the sale of goods whereby the buyer does not take immediate delivery of the goods is recognised when the buyer takes title of the goods providing; the delivery is probable, the goods are on hand and ready for delivery, the buyer acknowledges deferral of delivery and usual payment terms apply.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
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:
Fixtures, fittings & equipment
20% - 30% p.a. on cost
Computer equipment
33% p.a. on cost
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible 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.
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.
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Cash at bank and in hand
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.
1.8
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
Basic financial assets
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.
Other financial assets
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.
Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
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.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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.
Other financial liabilities
Derivatives, including 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 subsequently 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.9
Equity instruments
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.
1.10
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
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.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
1.14
Under a bill-and-hold arrangement, the seller may have a performance obligation to act as the custodian for the goods being held at its facility. If so, the seller may need to allocate a portion of the transaction price to the custodial function, and recognize this revenue over the course of the custodial period.
2
Turnover and other revenue
An analysis of the company's turnover is as follows:
2022
2021
£
£
Turnover analysed by class of business
Goods
64,509,209
61,680,159
Services
3,750,719
3,507,803
68,259,928
61,680,159
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Turnover and other revenue
(Continued)
- 19 -
2022
2021
£
£
Turnover analysed by geographical market
United Kingdom
28,962,602
28,213,638
European Union
34,848,277
28,413,654
Other
4,449,049
5,052,867
68,259,928
61,680,159
3
Operating profit
2022
2021
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(298,508)
(88,593)
Fees payable to the company's auditor for the audit of the company's financial statements
26,284
34,136
Depreciation of owned tangible fixed assets
115,411
113,484
Cost of stocks recognised as an expense
61,823,482
56,107,825
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £298,508 (2021 - £88,593).
4
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Directors
4
4
Administration and operations
37
41
Sales
17
14
Warehouse
7
10
Total
65
69
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
5,387,188
4,480,103
Social security costs
310,283
344,728
Pension costs
171,381
135,749
5,868,852
4,960,580
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
5
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
211,866
89,611
6
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
155,495
41,580
Deferred tax
Origination and reversal of timing differences
(606)
Total tax charge
155,495
40,974
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:
2022
2021
£
£
Profit before taxation
665,075
233,231
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
126,364
44,314
Tax effect of expenses that are not deductible in determining taxable profit
118,459
Group relief
(6)
Permanent capital allowances in excess of depreciation
(89,328)
(2,728)
Change in deferred tax provision
(606)
Taxation charge for the year
155,495
40,974
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
7
Tangible fixed assets
Fixtures, fittings & equipment
Computer equipment
Total
£
£
£
Cost
At 1 January 2022
108,023
560,377
668,400
Additions
122,017
122,017
At 31 December 2022
108,023
682,394
790,417
Depreciation and impairment
At 1 January 2022
76,417
441,179
517,596
Depreciation charged in the year
7,993
107,418
115,411
At 31 December 2022
84,410
548,597
633,007
Carrying amount
At 31 December 2022
23,613
133,797
157,410
At 31 December 2021
31,606
119,198
150,804
8
Stocks
2022
2021
£
£
Finished goods and goods for resale
2,122,556
2,975,461
9
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
8,604,830
10,929,409
Other debtors
1,348,177
2,447,745
Prepayments and accrued income
274,838
308,534
10,227,845
13,685,688
The majority of the trade debtors have been invoice discounted.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
10
Creditors: amounts falling due within one year
2022
2021
Notes
£
£
Bank loans and overdrafts
11
1,498,192
2,124,332
Trade creditors
3,582,308
8,982,433
Corporation tax
155,495
41,580
Other taxation and social security
173,677
171,719
Other creditors
359
Accruals and deferred income
2,786,270
1,517,546
8,195,942
12,837,969
11
Loans and overdrafts
2022
2021
£
£
Bank facility
1,498,192
2,124,332
Payable within one year
1,498,192
2,124,332
The bank facility is secured by way of a fixed and floating charge over the company's assets and a guarantee of $1million from Zones Inc.
12
Deferred taxation
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:
Liabilities
Liabilities
2022
2021
Balances:
£
£
Accelerated Capital Allowances
14,909
14,909
There were no deferred tax movements in the year.
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
13
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
171,381
135,749
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
14
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
A Ordinary shares of £1 each
520,000
520,000
520,000
520,000
B Ordinary shares of £1 each
346,666
346,666
346,666
346,666
866,666
866,666
866,666
866,666
Each Ordinary A and each Ordinary B share is entitled to one vote in any circumstances.
15
Operating lease commitments
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2022
2021
£
£
Within one year
258,050
427,431
Between two and five years
209,850
94,850
467,900
522,281
16
Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022
2021
£
£
Aggregate compensation
788,192
671,762
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
16
Related party transactions
(Continued)
- 24 -
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Sale of goods
Purchase of goods
2022
2021
2022
2021
£
£
£
£
Entities with control, joint control or significant influence over the company
8,291,041
6,523,600
3,025,798
656,414
8,291,041
6,523,600
3,025,798
656,414
The following amounts were outstanding at the reporting end date:
Amounts due from related parties
2022
2021
£
£
Entities with control, joint control or significant influence over the company
875,664
1,557,911
875,664
1,557,911
A $1million guarantee has been provided by parent company Zones Inc for the invoice discounting facility held with Close Brothers.
17
Ultimate controlling party
The immediate parent undertaking is Zones (EMEA) Limited, a company incorporated in the UK.
The ultimate controlling party is F Lalji (Director).
18
Post reporting date events
There are no post reporting date events to report.
19
Analysis of changes in net debt
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
1,109
171,695
172,804
Bank overdrafts
(2,124,332)
626,140
(1,498,192)
(2,123,223)
797,835
(1,325,388)
ZONES (UK) LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
20
Cash generated from operations
2022
2021
£
£
Profit for the year after tax
509,580
192,257
Adjustments for:
Taxation charged
155,495
40,974
Finance costs
211,866
89,611
Depreciation and impairment of tangible fixed assets
115,411
113,484
Movements in working capital:
Decrease/(increase) in stocks
852,905
(1,297,997)
Decrease/(increase) in debtors
3,457,843
(3,731,703)
(Decrease)/increase in creditors
(4,129,802)
949,514
Cash generated from/(absorbed by) operations
1,173,298
(3,643,860)
ZONES (UK) LTD
MANAGEMENT INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
ZONES (UK) LTD
SCHEDULE OF ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED 31 DECEMBER 2022
2022
Movement
Movement
2021
£
£
%
£
Administrative expenses
Wages and salaries
5,279,843
861,824
19.51%
4,418,019
Social security costs
310,283
(34,445)
9.99%
344,728
Temporary staff
107,345
45,261
72.90%
62,084
Staff pension costs defined contribution
171,381
35,632
26.25%
135,749
Rates
490,710
(25,460)
4.93%
516,170
Power, light and heat
35,308
15,616
79.30%
19,692
Property repairs and maintenance
356,944
36,960
11.55%
319,984
Premises insurance
34,672
4,558
15.14%
30,114
Computer running costs
3,888
3,888
-
-
Hire of equipment (not operating lease)
4,004
(1,460)
26.72%
5,464
Travelling expenses
77,658
74,388
2274.86%
3,270
Professional subscriptions
52,871
39,177
286.09%
13,694
Legal and professional fees
65,457
8,948
15.83%
56,509
Accountancy
(1,614,384)
(508,971)
46.04%
(1,105,413)
Audit fees
26,284
(7,852)
23.00%
34,136
Bank charges
81,493
(12,891)
13.66%
94,384
Bad and doubtful debts
114,266
(34,080)
22.97%
148,346
Printing and stationery
20,979
9,374
80.78%
11,605
Advertising
386
(38,784)
99.01%
39,170
Telecommunications
57,040
14,076
32.76%
42,964
Sundry expenses
27,084
14,418
113.83%
12,666
Canteen
35,677
3,900
12.27%
31,777
Depreciation
118,824
15,851
15.39%
102,973
Profit or loss on foreign exchange
45
148
143.69%
(103)
5,858,058
520,076
9.74%
5,337,982
ZONES (UK) LTD
DETAILED TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2022
2022
2021
£
£
£
£
Turnover
Sales of goods
68,259,928
61,680,159
Cost of sales
Opening stock of finished goods
2,975,358
1,677,464
Finished goods purchases
60,970,680
57,405,720
Closing stock of finished goods
(2,122,556)
(2,975,359)
Profit or loss on foreign exchange
(298,553)
(88,490)
(61,524,929)
(56,019,335)
Gross profit
6,734,999
5,660,824
Administrative expenses
(5,858,058)
(5,337,982)
Operating profit
876,941
322,842
Interest payable and similar expenses
Bank interest on loans and overdrafts
(211,866)
(89,611)
Profit before taxation
665,075
233,231
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