The directors present the strategic report for the year ended 31 December 2022.
Despite the challenges of 2022, as a group Paxton has very much got back on track.
In brief, the group grew during the year, with turnover increasing by 9.7% (2021: 23.6%) and gross profit by 1.9% (2021: 20.3%). At the same time administrative expenses increased by 20.9% (2021: 7.4%) and net profit for the year before tax ended up at £135,228 (2021: £5,146,915). The group's net worth at the end of the year was £24,953,322 (2021: £24,211,820).
The group operates in a highly competitive market. In order to maintain and improve its position in this market, and substantial investment has continued to be made by the group in research and development. This investment is made both for improving existing products and creating new innovative products for the market with a focus on providing returns over the longer term.
The group did not enter any new markets in the year, instead looking to cultivate the overseas markets already entered into, with particular focus on the US.
Environmental matters
The group is committed to being environmentally responsible and has shown this in achieving the ISO 14001:2015 accreditation for its factory in Eastbourne in February 2018 and passing the audit for this in the past 4 years. The group continuously reviews its policies and capital to see where environmental improvements can be made and has installed charge-points for plug in hybrid cars to encourage the use of low emission vehicles. As well as this, the group has a cross company environmental group to track and report on environmental initiatives. Going forward we are looking to install solar panels on our latest building development as part of ongoing improvements to the environment.
Social and Community Issues
The group take social and community issues seriously and has arranged multiple charity days through the year to generate donation income for selected charities.
The group's business is partly speculative, in that it is not known which new products will succeed, even though sales trends for existing products are known. The directors cannot give any undertaking as to the success or otherwise of new products yielded by its research and development work. There is therefore a significant risk inherent with expenditure related to this.
The directors are not privy to new products currently in development by the group's competitors; there is therefore a risk that sales of its own products may suffer in the future as a result of unknown improvements in competitors' products.
The group is typical of many businesses of its type in that it is heavily reliant on IT systems. Whilst the directors diligently review and improve measures for ensuring resilience of its systems and back up of its data, they cannot absolutely ensure that failures will not damage the group's business at some point. In order to mitigate this risk the group continues to invest heavily in its IT infrastructure.
Sales to the group's customers are made on a credit basis. Trade debtors amount to a substantial sum. Mindful of the current credit conditions affecting all companies, including our customers, there is an increased awareness regarding the importance of adherence to our credit terms. The board has satisfied itself that its customers are financially sound and will continue to be able to fund their debt for the foreseeable future. There is continued focus on strong credit management to ensure timely payment from customers and a healthy corporate liquidity position.
The current global electronic component shortage. As a manufacturer of electronic goods, we are impacted by global demand of electronic components. There has been an ongoing shortage of key components which has affected companies worldwide. In order to mitigate this risk, we are continuously reviewing the components used in our products as well as investing in our Supply Chain team.
As a company with a global presence, we are aware of the risk posed by worldwide geo-political instability. To mitigate this, we always take this under consideration whenever looking to expand into new markets and when sourcing new materials, as well as keeping our current positions under ongoing review.
Duty to promote the success of the company and group
The directors consider the successful running of the company and group in terms of achieving its long-term strategy which centres on building a resilient company and group that is great to work for and known for the quality of our products. The ongoing success of the company and group centres around positive and effective dealings with all the stakeholders of the group and the directors were mindful of the long terms consequences of key commercial decisions made during the year and determined that these were in the interests of the group’s owner, employees, agency staff, contractors, customers, installers, suppliers, local universities, and other stakeholders, as they were all aligned with the group’s strategy.
The principal decisions made in the year were:
Make a significant investment stock holding to alleviate the threat of disrupted supply chains during the current political unrest in order to protect our customers from a shortfall
Focus on securing high risk stock components at the necessary premiums to ensure continuity of supply to our customers
Provide all staff with a mid-year increase in salary to help with the cost-of-living challenges being faced
The directors undertook the decisions above fully understanding the short-term impact to the group from a profitability and cash flow perspective. These decisions will ultimately secure the medium- and long-term future of the group.
As set out in the directors’ report, the group takes employee involvement very seriously and we ensure we engage with our staff at all levels on a wide range of matters. The group also regularly engages with its distributors, installers, and suppliers to maintain these important relationships.
The directors confirm that throughout the year they have acted in the way they consider, in good faith, to be most likely to promote the continued success of the company and group for the benefit of its members.
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 11.
Ordinary dividends were paid amounting to £220,000. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements unless otherwise stated were as follows:
The group operates a treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the company’s activities.
The group’s principal financial instruments are cash balances. In addition, the group has various other financial assets and liabilities such as trade debtors and trade creditors arising directly from its operations.
The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the group has sufficient liquid resources to meet the operating needs of the business.
Interest rate risk arises from cash balances, bank overdrafts and loans. The directors continually review the group's exposure to interest rates and take action to ensure that the risk is appropriate in relation to the financial results of the group.
The group’s principal foreign currency exposures arise from trading with overseas companies. Dollar and Euro bank accounts are maintained in order to try and mitigate foreign currency risk.
The group has implemented policies that require appropriate credit checks on potential customers before sales are made. In addition the company has insured its risk of debtor irrecoverability.
The group is heavily committed to research and development activities. During the year the group concentrated its research and development activities on both continuous improvement on its current product portfolio as well as diversification into other market sectors.
The group is conscious of the need to keep employees informed regarding the progress and future plans of the group and the mutual benefit that can be engendered by good internal communications. This is achieved through regular meetings with managers and staff and an open forum in which a two way flow of comment and ideas is encouraged. An example of this is the Paxton Exchange which offers senior management the opportunity to communicate the group goals and achievements to all members of staff. A significant amount of time and money is invested in employee training in the group and is available to all levels of staff. The Paxton Seagull, the staff newsletter, is a further commitment to the concept of improving communications within the group. The group is committed to providing a fantastic company culture for all its staff members. In July 2022 the decision was made by the directors to offer all staff an increase to their base salaries to help with the cost of living challenged faced both in the UK and the markets we operate in overseas.
The directors consider the fostering of good relationships with all stakeholders as essential for the ongoing success of the company. In that regard they have always considered the impact on the suppliers, customers, end users, staff and others of all decisions made. Key decisions, and their impact on specific groups, have been summarised in the s172 statement included on both our website and in the strategic report.
The group is continuing to develop its overseas marketing and sales strategy and the directors expect that this will contribute to an increase in profitability.
The auditor, Humphrey & Co Audit Services Ltd, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group has consumed more than 40,000 kWh of energy in this reporting period and is required to report on its emissions, energy consumption or energy efficiency activities.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2021 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total kilowatt hours per square foot for the offices and total kilowatt hours per £1,000 produced for the factory and warehouse.
The ratios for each site were:-
Paxton House - 12.36 kWh per square foot per year
Paxton Technology Centre - 11.43 kWh per square foot per year
Brampton Road - 16.54 kWh per £1,000 produced
Harvington Road - 2.62 kWh per £1,000 produced
Greenville, USA - 12.33 kWh per square foot per year
There was no capacity to introduce energy improvements to our sites in 2022. A full audit of our carbon footprint will be conducted by an independent consultant in 2023.
A new environment policy will be launched in 2023 to ensure budgets and objectives relating to energy improvements are part of our group's goals.
We have audited the financial statements of Paxton Access Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company 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).
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 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.
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We obtained an understanding of the group and the laws and regulations that could reasonably be expected to have a direct effect on the financial statements through discussion with the directors and management and the application of our knowledge and experience. We discussed with management whether there were any known or suspected instances of fraud and/or non-compliance with relevant laws and regulations. We also obtained an understanding of the company's and group's accounting systems and internal controls.
We audited the risk of management override of controls, by testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business. Our other group audit procedures included, but were not limited to, attending a year end stock count, carrying out detailed substantive testing of a sample of income and expenditure transactions arising in the year and a sample of balance sheet items such as fixed assets, debtors, creditors, etc. We also reviewed the financial statements and checked disclosures to supporting documentation to assess compliance with applicable law and regulation.
Because of the inherent risk 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. The 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 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 income statement has been prepared on the basis that all operations are continuing operations.
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 £94,987 (2021 - £126,581 loss).
Paxton Access Group Limited (“the Company”) is a limited company by shares domiciled and incorporated in England and Wales. The registered office is Paxton House, Home Farm Road, Brighton, East Sussex, BN1 9HU.
The Group consists of Paxton Access Group 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 consolidated group financial statements consist of the financial statements of the parent company Paxton Access Group Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
During the year the group breached its bank loan covenant in respect of debt service coverage. The bank is aware of the breach and have indicated that they are not taking any further action in respect of the breach at this point in time although they reserve the right to do so in the future should they deem it appropriate. Following discussions with the bank, the directors are confident of the banks continued support for the foreseeable future
The group benefits from the support of its owners and financial resilience developed through working with key managerial stakeholders. 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.
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.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Freehold land is not depreciated.
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 income statement.
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.
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. 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.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
The cost of stock is based on an average cost basis, where the actual cost of stock purchased to obtain the quantity held is identified and an average cost calculated.
Financial instruments are recognised in the group's statement of financial position 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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, 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 income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The 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 income statement, 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.
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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce a constant periodic rate of charge on the net obligation in each period.
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.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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 critical judgments which have the most significant impact on amounts recognised in the financial statements are as follows:
Provision is made where necessary for obsolete, slow moving and defective stocks. The directors review the level of provision based on the level and condition of stock items and their knowledge of the business.
The group provides a 5 year warranty on its products. A provision for expected warranty claims is calculated based on prior experience of levels of warranty claims incurred and future expectations.
The directors estimate the expected useful lives of the company's fixed assets which in turn impacts on the amount of depreciation charged in the year.
The directors estimate the amount of deferred tax that is likely to be recovered by the likely availability of future taxable profits.
In the opinion of the directors there are no estimates or assumptions which have a significant risk of causing a material misstatement to the carrying amount of assets and liabilities within the next financial year.
An analysis of the group's turnover is as follows:
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 2 (2021 - 3).
The actual (credit)/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:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 December 2022 are as follows:
The investments in subsidiaries are all stated at cost.
Bank loans are secured over the company's freehold and leasehold properties. There is also a debenture in favour of HSBC Bank comprising a fixed and floating charge over all the assets and undertakings of Paxton Access Limited and Paxton Inc.
There were eight bank loans at the year end and they are repayable in monthly instalments and are due to be repaid fully between 2024 and 2029. Interest is charged at a fixed rate of 3.6% on one of the loans and interest on the other loans is charged at rates of between 2.25% to 2.35% over the Bank of England base rate.
Other loans are in respect of loans from close family members of a director and are repayable on demand. Interest is charged on the loans at a rate equal to the Bank of England base rate.
Directors' loans are in respect of loans from a director and his wife and are also repayable on demand. Interest is charged at a rate equal to the Bank of England base rate.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The provision for warranty claims is a provision for future product costs arising in the normal course of business from prior year sales. The group provides a 5 year warranty on its products.
Deferred tax assets and liabilities are offset where the group or 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:
It is estimated that £625,000 of the deferred tax asset set out above is expected to reverse within the next 12 months.
Deferred tax balances have been measured at 25% (2021 - 21.25%).
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 the group had a pension liability of £146,969 (2021 - £113,760).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. All ordinary shares rank equally with regard to the company's residual assets.
The holders of preference shares are entitled to receive dividends as declared from time to time but the shares do not carry any voting rights. The preference shares are not redeemable and rank ahead of the ordinary shares with regard to the company's residual assets.
Merger Reserve
This reserve was created following a share for share exchange whereby Paxton Access Group Ltd acquired all of the share capital of Paxton Access Inc from Mr A Brotherton-Ratcliffe.
Operating lease rentals consist of rentals payable by the group for motor vehicles. The motor vehicle leases are generally for a term of 3 years.
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:
Amounts contracted for but not provided in the financial statements:
There is a commitment of £664,831 (2021 - Nil) for property, plant and equipment, which are contracted for but not provided for in the Financial Statements.
The ultimate controlling party is A Brotherton-Ratcliffe, a former director of the company.