Company Registration Number
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DAVID WOOD BAKING UK LIMITED
COMPANY INFORMATION
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DAVID WOOD BAKING UK LIMITED
CONTENTS
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DAVID WOOD BAKING UK LIMITED
GROUP STRATEGIC REPORT
FOR THE PERIOD ENDED 31 MAY 2023
The directors present the strategic report for the six month period ended 31 May 2023.
The group's principal activities are the manufacture and sale of breads, confectionery items and savoury products such as frozen pies and readymade meals to the retail and food service industry in the UK and Ireland. There have not been any significant changes in the group's principal activities in the year under review. The directors are not aware, at the date of this report, of any likely major changes in the group's activities in the next year.
The group continues to invest in research and development. This has resulted in a number of updates to existing products. The directors regard R&D investment as necessary for continuing success in the medium to long term future by delivering sales growth through investment in organic growth drivers such as new product development and expansion in high growth markets. As shown in the group’s income statement on page 14, the company’s sales have decreased by 45% from £172,793,214 in the year to 30 November 2022 to £94,736,599 in the period to 31 May 2023. On a like for like basis, sales would increase by 9.6%. Operating profit has increased from a loss of £3,842,099 to a profit of £3,702,306. In common with all our competitors we experienced significant increases in our direct costs during the early part of 2022. This gave rise to a period of losses whilst we were negotiating increases with our customers. As a result of several rounds of selling price increases throughout 2022 to cover ongoing increases in material, transport and utility input costs we returned to profit in the latter part of 2022. The group continues to offset strong competitive action by enhancing margins wherever possible through a relentless drive for operational improvement across all our producing sites. The current improvement in operating profit from last year is attributable to the selling price increases along with the operational improvements at our new site in Spalding. Efficiencies at all sites continue to improve and action plans are in place at those sites that have some way to go in achieving satisfactory levels of profitability. Having undertaken a period of very heavy expenditure in capital projects at the sites over the last few years focused on reducing unit costs, increasing capacity and widening the range of products that the business can manufacture, the level of required investment is now significantly less. The benefits of this investment are now being seen in our current year profit performance. The statement of financial position on page 15 of the financial statements shows that the group’s financial position at the period end has improved, with net assets increasing from £9.6m at 30 November 2022 to £11.2m at 31 May 2023. Working capital has also increased, and the company manages its working capital and operations in order to generate strong cash-flows. The key focus for management has been to bring the Spalding site into full operation. The site was acquired in late 2020 and it will become a large, modern and efficient bread producing site. Production commenced in the second half of 2021. Management will then focus entirely on maximising efficiencies and profitability at each individual site.
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DAVID WOOD BAKING UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
Key performance indicators used to monitor the performance of the business include:
∙Detailed weekly and monthly operating reports for each site highlighting continual improvements in site efficiencies and capacity utilisation. We monitor adherence to plans, customer service levels, variances to our production standard costs and stock levels.
∙Health and safety - accidents, both reportable and other are measured and trend analysis used to monitor improvements.The company implemented ISO 45001:2018 Occupational Health and Safety Management System during the year with all sites now fully accredited.
∙Food safety - regular site audits are conducted by our own internal teams as well as by customers and external auditors. We recognise that we have obligations to our customers and the consumers. The group holds BRC Global Standard for Food Safety Certification for each of its sites: All audit actions no matter how small are acted upon.
The impact of recent global events over this last year on our input costs has presented a principal risk for the company. Supply costs of ingredients, transport and utilities have increased substantially from early 2022 and we have been successful in passing these costs on to our customers albeit with some delay in achieving the selling price increases required. Costs are monitored very closely to ensure we are able to act quickly to pass any future cost increases on to customers.
The most recent forecasts show that the Company is expecting to be able to continue to meet its liabilities as they fall due for the foreseeable future and to stay within recently agreed borrowing limits on banking facilities. We have critically reviewed these forecasts site by site and monitor them against actual weekly & monthly performance. All financing required is in place. The next few years will see a period of consolidation where we will not require the level of investment seen in recent years and we will retain cash from the operational profits of the business. The company has a well established and strong senior management team that has managed the business through a very difficult period of significant global inflationary pressure, extensive capital projects & continued sales growth. The directors have therefore satisfied themselves that the business will continue to flourish and is able to meet its liabilities as they fall due for the foreseeable future and will operate within its agreed banking facilities. Commercial risks include:
∙Cost increases in raw materials or energy - where possible these are managed by means of longer term contracts or contracts with customers that provide a margin of profit over actual costs. The purchasing team focus on obtaining value for money on all materials acquired with a constant review of key materials acquired
∙Contracts can and have been lost due to competition from other suppliers into the markets we serve. The company sets margin targets based on cost assumptions for a site as well as capacity opportunities at each site but will not commit to contracts unless the margins are acceptable to it. The company manages this risk by providing added value services to its customers, having fast response times not only in supplying products but in handling all customer queries, and by maintaining strong relationships with customers.
∙The group is financed by a number of fixed and variable rate loans from its bankers and other funders. It therefore has an exposure to interest rate increases but at a level that does not give rise to any concern.
∙Currency risk - As the group does little business outside the UK, currency risk is not a significant issue in risk management.
∙Credit risk - The group mainly trades with long standing customers. The nature of these relationships assist management in controlling its credit risk. The group credit insures and operates within these limits.
∙Liquidity risk - Management control and monitor the group's cash flow on a regular basis, including forecasting future cash flows.
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DAVID WOOD BAKING UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
The group continues to focus on improving capacity utilisation at each site as well as maximising site operational efficiency.
We continue to focus on developing customer relationships by selling more of our existing products to existing customers.
We continue to focus on engineering improvements at each site to reduce materials wasted and avoid additional employee recruitment as we grow.
This will all deliver products at the very best value for money to its customers whilst achieving acceptable margins for the future benefit of the business.
The directors have regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006. Under this regulation, the directors have a duty to act in good faith and promote the long-term success of the group.
The group is ultimately wholly owned by a director of the group and therefore the interest of the directors and shareholder are aligned with the success of the group. In making key decisions the group has had to balance the needs and requirement of its key stakeholders. These include shareholders, employees, customers, suppliers and other stakeholders such as the general public and the environment. The following key strategic decision was made in the year:
∙Further extensive investment was made at the new Spalding site during the reporting period. The investment supports our value creation strategy to expand our production capabilities in markets where there is clear profitable demand for our products. The site fits well with the geographic location of our customer base and our existing facilities. Wherever possible we financed the investment with hire purchase agreements. As the site has become active, we have recruited to fit the values and culture of the Group. The planned future investment will be funded with additional borrowings and will eventually create several hundred jobs to benefit the local community.
∙As a result of significant input cost increases the group was forced to pass on these costs to customers and ultimately the consumers. Whilst delays gave rise to losses, this has ensured the longer-term ongoing profitability of the business as well as the company’s ability to meet its ongoing obligations to suppliers and employees.
The interests of the above key stakeholders are not always totally compatible and may even be mutually exclusive at times. Therefore, the group has to constantly weigh up the needs and requirements of all key stakeholders and attempt to find the right balance where decisions may affect more than one stakeholder. At all times, the group remains ethical in its dealings with key stakeholders and attempts to keep all key stakeholders informed of relevant business decisions.
In making long term decisions about the future of the group, at all times we have the requirements of our key stakeholders in mind. The board take our responsibility to ESG (Economic, Social and Corporate Governance) extremely seriously and the likely consequences of all our long-term decision making is part of our ongoing risk management process.
The culture of the business is one of support and inclusiveness with the aim of ensuring our business is sustainable in the long run. We aim to be an equal opportunities employer at all times and deal fairly and ethically with all stakeholders. Robust procedures are in place for conflict resolution.
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DAVID WOOD BAKING UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
The directors and senior management promote effective engagement with all the company’s employee. Directors visit each site on a regular basis and engage with all employees whilst there. Visits are often timed so that engagement includes night shift workers. Monthly senior management meetings and divisional sales meetings are often held at different sites to encourage engagement. This all provides valuable feed back to the directors on site opportunities and issues. The company operates a number of measures to facilitate workforce engagement including works councils, employee forums, staff briefings.
The directors and senior management engage with customers to provide information about key customer relationships. Material relationships are being constantly monitored and reviewed by the directors who remain in close contact directly and indirectly with all key customers to understand their concerns and support their everchanging needs.
Information from key suppliers is provided directly to the directors and senior management. The directors review and approve most supplier contracts and are involved in sourcing strategies.
The directors recognise its impact on local communities and its responsibility to the environment.
This report was approved by the board and signed on its behalf.
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DAVID WOOD BAKING UK LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 MAY 2023
The directors present their report and the financial statements for the period ended 31 May 2023.
The financial statements are drawn up to the nearest Saturday to 31 May 2023 which falls on 27 May 2023 ("the financial year"). The comparative financial statements were prepared to 27 November 2022 ("the financial year").
The profit for the period, after taxation, amounted to £1,583,636 (2022 - loss £3,074,184).
Ordinary dividends were paid amounting to £Nil (2022 - £82,500). The directors do not recommend payment of a further dividend.
The directors who served during the period were:
During the year the group incurred costs in relation to research and development amounting £1,941,474 (2022 -£4,507,331). Costs have been expensed to the profit and loss account when incurred.
The group is committed to equal opportunity in all employment practices, policies and procedures. This means that no employee or potential employee will receive less favourable treatment due to race, religion, nationality, age, sex, sexuality or disability.
All employees are trained for several roles and encouraged to move up to a higher grade. Employees are kept informed about group matters through internal media and through managers.
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DAVID WOOD BAKING UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
The SECR disclosure presents our carbon footprint within the United Kingdom across Scope 1, 2 and to some extent scope 3 emissions, an appropriate intensity metric, the total energy use of electricity, gas and transport fuel and an energy efficiency actions summary taken during the relevant financial year.
31 May 30 November 2023 2022 Energy consumption kWh kWh Aggregate of energy consumption in the year 42,883,483 92,824,905 Emissions of CO2 equivalent Metric Metric tonnes tonnes Scope 1 - direct emissions - Gas combustion 4,940 10,271 - Fuel consumed for owned transport 56 114 4,996 10,834 Scope 2 - indirect emissions - Electricity purchased 3,213 6,452 Scope 3 - other indirect emissions - Fuel consumed for transport not owned by the group 1 3 Total gross emissions 8,210 17,289 Intensity ratio Tonnes CO2e per employee 4.708 13.853 Tonnes CO2e per tonne of product 0.1684 0.1762
Quantification and reporting methodology
Reporting Period 1 December 2022 - 31 May 2023 Boundary (consolidation approach) Operational approach Alignment with financial reporting SECR disclosure has been prepared in line with David Wood Baking UK Limited annual accounts made up to 30 November 2022. Reporting method GHG Emissions reporting are in line with the Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard Emissions factor source DEFRA, 2020 for all emissions factors https://www.gov.uk/government /publications /greenhouse-gas- reporting-conversion-factors-2020 Conversion factor source Natural gas and gasoline: Federal Register EPA; 40 CFR Part 98; e-CFR, June 13, 2017 EPA GHG Emission Factors Hub Diesel U.S. Energy Information Administration — British Thermal Unit Conversion factors 2020 Calculation method Activity Data x Emission Factor = GHG emissions Activity Data x Conversion Factor = kWh consumption
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DAVID WOOD BAKING UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
Quantification and reporting methodology (continued)
Other relevant information on Where applicable consumption was converted to kWh using calculation conversion factors linked above, while emissions were calculated with the DEFRA emission factors. Transport data was calculated from mileage data to kWh to litres and GHG emissions using the method above. In absence of the exact engine sizes of the vehicles average conversion factors were used to calculate emissions. Reason for the intensity Based on the nature of our business, as well as following the measurement choice recommendations of the SECR legislation we chose the following intensity metric: floor area. This metric reflects the total tCO2 emitted in line with the floor area that shows the development of our energy efficiency. Through the comparison of the coming financial years this metric will show a trend of David Wood Baking Limited's energy efficiency. Rounding The total tCO2e expressed in the table above might have a slight difference compared to the absolute results due to rounding (no more than 1 %). The results in the table are expressed in tons CO2e and may not add up precisely to the totals due to rounding. Energy efficiency action summary The group continues to achieve direct savings in energy and associated carbon emissions, through operational and technological improvements, including;
∙Installed a new more energy efficient boiler to be fitted for office hot water and heating (currently immersion tank).
∙Changeover to LED lighting and installation of PIR motion sensors at all sites.
∙Ensure discipline around shutting down air compressors after Friday night Hygiene and then restarting ahead of Sunday night Production.
∙Turn off conveyers and ovens when not in use.
∙Use of “auto-stop” and automatic power down of equipment when not in use after a specified timescale, e.g., 1-2 hours.
∙Idle the ammonia plant so it runs at 10-20% instead of 100% during production gaps or turn off
∙Turn heating off in unused areas.
∙Run production 13 shifts instead of 14 shifts per week and shut down all production lines for 12 hours.
∙Installation of thermal curtains to retain temperature inside while palletizing.
∙No ingredients weighing overnight.
∙Steam and air leaks quick resolution.
∙Cooling towers to be switched off on a timer after packs are turned off.Reduced the compressor efficiency to 50% during weekend hours due to reduced working hours/less traffic into chilled/frozen areas so temperatures are maintained at lower rate.
Certain information is not shown within the Directors' Report as it is instead included within the Strategic Report in accordance with section 414C(11) of the Companies Act 2006. It has done so in respect of future developments and financial risk management.
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DAVID WOOD BAKING UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
The auditors, Armstrong Watson Audit Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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DAVID WOOD BAKING UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE PERIOD ENDED 31 MAY 2023
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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DAVID WOOD BAKING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DAVID WOOD BAKING UK LIMITED
We have audited the financial statements of David Wood Baking UK Limited (the 'parent Company') and its subsidiaries (the 'Group') for the period ended 31 May 2023, which comprise the Group Statement of Comprehensive Income, the Group and Company Statements of Financial Position, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, including a summary of 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).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
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 or the 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.
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DAVID WOOD BAKING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DAVID WOOD BAKING UK LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
∙the Group 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 its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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DAVID WOOD BAKING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DAVID WOOD BAKING UK LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group 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:
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:
∙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 industry;
∙we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management; 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 entity’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; and
∙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; and
∙assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias.
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; and
∙enquiring of management as to actual and potential litigation and claims.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities 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 Auditors' Report.
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DAVID WOOD BAKING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DAVID WOOD BAKING UK LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditors
Leeds
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DAVID WOOD BAKING UK LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 MAY 2023
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DAVID WOOD BAKING UK LIMITED
REGISTERED NUMBER: 06665444
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2023
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DAVID WOOD BAKING UK LIMITED
REGISTERED NUMBER: 06665444
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 MAY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 23 to 49 form part of these financial statements.
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DAVID WOOD BAKING UK LIMITED
REGISTERED NUMBER: 06665444
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 23 to 49 form part of these financial statements.
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DAVID WOOD BAKING UK LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 MAY 2023
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DAVID WOOD BAKING UK LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 MAY 2023
Page 19
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DAVID WOOD BAKING UK LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 MAY 2023
Page 20
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DAVID WOOD BAKING UK LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
Page 21
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DAVID WOOD BAKING UK LIMITED
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE PERIOD ENDED 31 MAY 2023
Page 22
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
David Wood Baking UK Limited ("the company") is a private company limited by shares, and is registered and incorporated in England and Wales. The registered office and principal place of business is 1 Calverley Road, Oulton, Leeds, LS26 8JD.
The group consists of David Wood Baking UK Limited and both of its subsidiaries. The company's and the group's principal activities and nature of its operations are disclosed in the Directors' Report.
2.Accounting policies
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, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.
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 are drawn up to the nearest Saturday to 31 May which falls on 27 May 2023 ("the financial year"). Comparative figures are for the year ended 26 November 2022. The financial statements have been prepared under the historical cost convention modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.
The Parent Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
The consolidated financial statements incorporate those of David Wood Baking UK Limited and both of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).
All financial statements are made up to the nearest Saturday to 31 May which falls on 27 May 2023 ("the financial year"). 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. The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.
Page 23
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
The financial statements have been prepared on a going concern basis notwithstanding net current liabilities of £29.4m at 31 May 2023, which has reduced from £35.4m at 30 November 2022.
In determining whether the Group's accounts can be prepared on a going concern basis, the Directors considered the Group's business activities and cash requirements together with factors likely to affect its performance and financial position. The company reacted to manage the impact of input price inflation and continues to manage its capital and costs and seeks to improve its liquidity position. Supply costs of ingredients, transport and utilities have stabilized since the year end and the business has generated profits in all periods to July 2023. The following positive actions have already been taken by the Directors to improve the security of the business.
∙In early 2023, additional finance has been secured from new and existing lenders including further shareholder funding. If the assumptions in the forecasts are met, then the forecasts suggest these facilities are sufficient for the company's ongoing needs to November 2024. Since November 2022 the business has been trading at profit levels consistent with or in excess of its forecasts;
∙Where possible, materials and energy prices are being contracted ahead of time to improve visibility of delivery costs. Where material and energy prices have already been fixed, these prices are reflected in the forecasts. Costs are being monitored very closely to ensure we can act quickly to pass any future cost increases on to customers;
∙We have now come to the end of a period of heavy investment in the new Spalding site. Capital expenditure has now been reduced.
In the period November 2022 to July 2023, the directors are really pleased with the positive trading pattern. Site operating performance has increased on average, and the Spalding site is ramping up activity. Capital expenditure is now well controlled. The business has been trading at profit levels consistent with or in excess of its forecasts and has traded within its borrowing facilities.
Further actions, including further cost savings and working capital benefits, are available to the directors to mitigate the impact of the trading environment.
We have prepared forecasts on a site-by-site basis, to November 2024 which we monitor against actual weekly and monthly performance. The forecasts expect the business to achieve turnover in excess of £200m on an annualised basis, at gross margins consistent with those the business delivered prior to 2022.
The impact of economic events on our input costs has presented a principal risk for the company in this last eighteen months. The key judgements in relation to the going concern assessment are the ability of the company to meeting its forecast sales demand and the likelihood of further input price inflation or deflation and whether margins will be maintained.
The directors are confident in the company's ability to achieve the forecast results and in each of the eight months December 2022 to July 2023, the company has achieved the forecast profitability levels.
At 31 May 2023, the group had net current liabilities of £29.4m (2022 - £35.4m).
Following a post year end refinancing referred to above, the company had utilised £40.9m of £41.1m borrowing facilities at the end of July 2023. The facilities in use comprise an overdraft, an invoice finance facility and other borrowings. There are financial covenants associated with some of these facilities, which are reviewed monthly or quarterly as required.
Page 24
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
The invoice finance and overdraft facilities are due for annual renewal in February 2024 and July 2024 respectively. The directors believe they will be available throughout this period and beyond and their forecasts are prepared on the basis that these facilities will be on extended on the current terms. The other borrowings are repayable on terms between repayment on demand to 14 months’ time.
The directors have obtained written confirmation that that loans from shareholders that are repayable on demand will not be called in within the forecast period. All contractual loan repayments have been modelled into the forecasts.
We have critically reviewed our forecasts site by site and monitor them against actual weekly and monthly performance. We have stress-tested various scenarios and the impact of a number of sensitivities on these forecasts principally based on loss of sales and further increases in costs.
In addition to the above measures that have been taken by the directors, the company retains the full support of its lenders. In August 2023, the company’s bankers have agreed to formally waive its covenants and have intimated a willingness to do so again in the future. That being said, based on forecasts prepared by the directors, the board do not anticipate that the company will be in breach of its covenants and expect the company to be able to operate within its available facilities. Whilst the Board acknowledges there remains some risk associated with liquidity and covenants, the directors expect the business to continue to deliver further months of positive trading performance against its forecasts, creating additional headroom, therefore reducing risks associated with covenant performance and facility headroom.
In conducting this review, the directors have considered whether material uncertainties might exist regarding the company’s ability to continue as a going concern. While the process of forecasting future sales demand and input prices will always be inherently uncertain, the directors do not consider this uncertainty to be material to the company’s ability to continue as a going concern.
Notwithstanding the uncertainties outlined above, strong trading performance from November 2022 to the date these financial statements are approved means the directors are very confident that the company will have access to adequate resources to enable it to continue to operate as a going concern for the foreseeable future, being a period of at least twelve months from the date when these financial statements are authorised to be issued. For these reasons, the directors consider it appropriate for the company to continue to adopt the going concern basis of accounting in preparing the Annual Report and financial statements. Accordingly, the financial statements of the company have been prepared on a going concern basis
Turnover is recognised at the fair value of the consideration received or receivable for goods 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.
Grant Income
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. Grant income is recognised within other operating income.
Page 25
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
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.
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date if the fair value can be measured reliably.
Amortisation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases: Patents 10% on cost
Page 26
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
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 basis:.
Depreciation is provided on the following basis:
Freehold land and Assets under construction are not depreciated.
The gain and loss arising on disposals of an asset is determined the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the and and buildings is usually considered to be their market value.
Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and losses are recognised in profit or loss.
In the separate accounts of the company, interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
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).
Page 27
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
Cash and cash equivalents are basic financial instruments and include cash in hand and deposits held at call with banks.
Page 28
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
The group has elected to apply the provisions of Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Instruments Issues' of FRS 102 to all of its financial instruments.
Financial instruments are recognised 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
Basic financial assets, which include trade and other 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 financial asset is measured at the present value of the future receipts discounted at a market rate of interest.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting 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 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.
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 group after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including trade and other creditors, accruals, bank and other borrowings and amounts due to group undertakings, 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.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Page 29
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
Borrowings
Borrowings are initially recognised at the transaction price, including transaction costs, and subsequently measured at amortised cost using the effective interest method. Interest expense is recognised on the basis of the effective interest method and is included in interest payable and other similar expenses.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the group's contractual obligations are discharged, cancelled, or they expire.
Equity instruments issued by the group are recorded at the fair value of 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.
Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the. effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received. Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the company. The annual contributions payable are charged to the profit and loss account. Past service cost is recognised as an expense immediately.
Page 30
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
2.Accounting policies (continued)
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 the statement of comprehensive income 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.
Page 31
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
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. Critical judgements The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements. Lease classification In categorising leases as finance leases or operating leases, management makes judgements as to whether significant risks and rewards of ownership have transferred to the group as lessee. Property valuation The group's freehold properties are held at fair value or cost less any subsequent accumulated depreciation. The directors are required to ensure that revaluations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from fair value at the period end. In determining whether or not to perform a full valuation of the property portfolio, the directors have regard to current property conditions and they exercise their judgement in determining whether or not to perform a full valuation. The last such valuation was performed in August 2022, as disclosed in note 14. Key sources of estimation uncertainty The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows. Impairment of tangible fixed assets Management conduct impairment tests where there is an indication of impairment of an asset. When reviewing the need for impairment, management considers external sources such as market value declines, increase in market interest rates and negative economic changes, as well as internal sources such as obsolescence or physical damage and the economic performance of the asset. See note 14 for the carrying amount of tangible fixed assets. Measurement of stock The group measures the cost of stock using the retail method, whereby the sales value of the stock is reduced by the appropriate gross margin, which is estimated by management. When making this estimation, management consider stock that has been marked down to below its original selling price. See note 16 for the carrying value of stock. Holiday pay accrual The group makes an estimate as to the amount of outstanding holiday held by its employees at the year end. In making this estimate, management consider factors such as number of days or hours worked by staff each week, irregular hours and changes to employees' pay. The holiday pay accrual is included within accruals and deferred income in note 18.
Page 32
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Turnover analysed by geographical market
Page 33
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 34
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 35
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 36
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
11.Taxation (continued)
In the budget on 3 March 2021, the UK Government announced an increase in the main UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted and the effect of this change is included in the reconciliation above.
Page 37
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 38
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Page 39
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
14.Tangible fixed assets (continued)
Page 40
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 41
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 42
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 43
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 44
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 45
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Page 46
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
Revaluation reserve
Profit and loss account
Reserve transfer During the year, the group transferred £Nil (2022 - £Nil) from the revaluation reserve to the profit and loss reserves, equivalent to the excess depreciation that has been charged in respect of the revalued property.
Page 47
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
30.Financial commitments, guarantees and contingent liabilities
The bank holds a composite company limited multilateral guarantee dated 26 August 2014 between David Wood Baking Limited, David Wood Baking UK Limited and Peter Hunt's Bakery Limited.
The group also provided a guarantee over borrowings taken out by the directors for a property they own personally, but which is occupied and used by the group. This amounted to £1,610,000 (2022 - £1,033,040) at the period end date.
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DAVID WOOD BAKING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
The ultimate controlling party is
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