The directors present the strategic report for the year ended 31 December 2019.
The company did not trade during the year. It is the immediate parent company of Arnold Laver & Company Limited, whose principal activities are timber importing and the merchanting and manufacture of timber and related products. The following is the fair review of the business for Arnold Laver & Company Limited.
The Company’s growth strategy continues to be based on both organic growth, through the existing depot network and with new site openings, and selective acquisitions. Two new Timberworld depots were opened in 2019 (Coventry & Peterborough) and a further three have been opened in 2020 (Croydon, Cannock & Milton Keynes). All depots have so far performed in line with or above expectations, despite the downturn resulting from Covid-19.
In addition, the trade and assets of Cotswold Manufacturing Ltd, comprising a door manufacturing facility in Stockton-on-Tees, were acquired in November 2019. This supports one of the Company’s key growth drivers, being the expansion and development of our Door & Joinery category.
The business will continue to remain customer-focused, delivering service and product innovation to support its growth plans across its target market segments. Its broad range of products, market sectors and customers should ensure that it is not over-reliant on any one market. It is well placed to service the growth opportunities that exist in most of the major cities, particularly in the areas of commercial development, house-building and major infrastructure investment. We continue to target specialist end-users with a range of innovative decorative products. Finally, the Company continues to invest in production capacity to support its growth plans and to deliver value-add product solutions for our customers.
Development and performance
In 2019, full year revenues were £146m, representing a 6% increase on the same period last year, again setting record trading levels for the Company. The resulting operating profit was £3.2m, representing a 100% increase on 2018, before amortisation of goodwill and after charging £1.6m of additional costs associated with central group support.
The current financial year started well before Covid-19 severely impacted sales in April and May. From there, trading recovered strongly and by summer 2020 was at comparable levels to the same period in 2019. This recovery is helping to ensure that the business performance remains solid in 2020. Action plans are also under way in Q3 to enable the delivery of further growth in 2021.
Arnold Laver Holdings Limited is a the parent company to Arnold Laver & Company Limited and does not trade. It is large for reporting purposes by virtue of the size of its subsidiary Arnold Laver & Company Limited. The Companies Act 2006 requires large businesses to comply with s172 and accordingly the directors have included the following statement relevant to its trading subsidiary:
In accordance with section 172 of the Companies Act 2006, each of our directors acts in the way he considers, in good faith would promote the success of the company for the benefit of its members as a whole. The directors have taken into consideration, amongst other matters:
the likely consequences of any decisions in the long-term;
the interests of the company’s employees;
the need to foster the company’s business relationships with suppliers, customers and others;
the impact of the company’s operations of the community and environment;
the desirability of the company maintaining a reputation for high standards of business conduct; and
the need to act fairly between members of the company.
The Board acknowledge that every decision it makes will not necessarily result in a positive outcome for all of the Group’s stakeholders. By considering the Company’s purpose, vision and values, together with its strategic priorities and having a process in place for decision making the Board does however, aim to make sure that its decisions are consistent.
Stakeholder engagement
The Board believe that considering our stakeholders in key business decisions is not only the right thing to do, but is fundamental to our ability to drive value creation. The Board seeks to understand the respective interest of such stakeholder groups through various methods, including direct engagement by Board members; receiving of reports and updates from members of management who engage with such groups; and coverage in our Board papers of relevant stakeholder interests with regards to proposed courses of action. The directors consider the following to be the Company’s key stakeholders:
Employees
The strength of our business is built on the hard work and dedication of our employees. The Board recognises that the implementation of an effective people strategy and strong culture underpin the effective delivery of the company strategy.
Employees are kept informed of performance and strategy through regular presentations and updates from members of the Board. These updates are further supported by newsletters and management briefings. The directors attend key business meetings throughout the year, including weekly trading meetings. An anonymous employee whistleblowing line is also in place, allowing employees to raise any concerns in confidence.
Key focus of the Board includes employee health and well-being, personal development, pay and benefits.
Customers
The profitability of the business is underpinned by providing effective partnerships with customers to understand their needs and requirements. In recognition of this a core principle of the business is to be customer centric, building relationships and engaging at a local and national level, providing a high level of service through the expert knowledge of our employees and ensuring a quality product.
The Board receives regular updates on customer opinion, behavior and feedback, including analysis of the Net Promoter Score. The insight received is used to inform decision making, understand customer needs and views in order to improve our offer and service for them.
Suppliers
The Board recognizes that relationships with suppliers are important to the Group’s long-term success and is briefed on supplier feedback and issues on a regular basis. The Board seeks to balance the benefit of maintaining these strong relationships with the need to ensure the desired quality and service for our customers. Engagement with suppliers is primarily through our Group procurement function. Key areas of focus include innovation, product development, health and safety and sustainability.
Communities
The Board supports the initiatives with regards to reducing the adverse impacts on the environment and engages with the communities in which we operate. Key areas of focus include how we can support local causes and issues, create opportunities to recruit and develop local people and help to look after the environment. We partner with local charities at a site level to raise awareness and funds. The key issues and themes across local communities are reported back to the Board.
Government and regulations
We engage with the government and regulators through a range of industry consultations, forums, and meetings to communicate our views to policy makers relevant to our business. Key areas of focus are compliance with laws and regulations, health and safety and product safety. The Board is updated on legal and regulatory developments and takes these into account when considering future actions.
Investors
The Group relies on our shareholders and providers of debt funding as essential sources of capital to further our business objectives. Investor involvement in the decision making process includes representation on the company Board. The company has open dialogue with all investors through regular meetings which cover a wide range of topics including financial performance, strategy, outlook and governance.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2019.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
BHP LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Basis for opinion
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue .
Other information
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' r eport 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.
As explained more fully in the directors' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://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 profit and loss account has been prepared on the basis that all operations are continuing operations.
Arnold Laver Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is Bramall Lane, Sheffield, South Yorkshire, S2 4RJ.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements , including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group . T he company has therefore taken advantage of e xemptions from the following disclosure requirements:
- Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group .
Arnold Laver Holdings Limited is a wholly owned subsidiary of National Timber Group Topco Limited and the results of Arnold Laver Holdings Limited are included in the consolidated financial statements of National Timber Group Topco Limited which are available from Companies House.
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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future paymen ts discounted at a market rate of interest. 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are s ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value th r ough profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’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 average monthly number of persons (including directors) employed by the company during the year was:
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2019 are as follows:
The impacts of Covid-19 could not have been reasonably anticipated at 31 December 2019. The Directors therefore consider the impact of the Covid-19 pandemic on the business to be a non-adjusting post-balance sheet event in the preparation of these financial statements.
The company's immediate parent company is National Timber Group Midco Limited.
The ultimate controlling party is Cairngorm Capital Partners II LP, a fund managed by Cairngorm Capital Partners LLP, a partnership registered in England and Wales.
The group headed by National Timber Group Topco Limited is the smallest and largest group in which the results of the company are consolidated.