The directors present the strategic report for the year ended 31 December 2021.
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 principal activities of Arnold Laver & Company Limited are the merchanting and manufacture of timber and related products. These activities originate from Arnold Laver’s founding of the business in Sheffield in 1920.
The Company’s growth strategy continues to be based on both organic growth, through the existing depot network and new site openings, and selective acquisitions. An established depot was added in 2021 following the acquisition and subsequent hive-up of Hymor Timber Limited in Stoke-on-Trent. The integration of the Hymor Timber business has been very successful and the depot’s performance has exceeded pre-acquisition expectations. We continue to invest in our digital platforms to support both existing business and to increase our trading account base. In addition, there has been further development of the ALCO brand to grow sales of our specialist timber products into second-line merchants and other key resellers.
There has been a continued focus on growing the recently created brands, Intelligent Door Solutions, for our manufactured Door & Joinery business, and National Timber Systems, covering the engineered timber products business (roof trusses, floor joists & roof cassettes). Both businesses were slower to recover from the effects of COVID-19 due to economic conditions within the commercial sector, however both also started to perform strongly late in 2021 and continue to do so early in 2022.
The business will continue to remain a timber specialist that is 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 also continue to target specialist end-users with a range of innovative decorative products. Finally, the Company continues to invest in value-add production capacity to support its growth plans and to deliver product solutions for our customers.
Development and performance
In 2021, full year revenues were £185.2m, representing a 49% increase on the same period last year. Revenue growth was driven by the recovery in the market post COVID 19, albeit the business remained impacted by lockdown measures in Q1. Throughout the pandemic the Group continued to invest in growth initiatives which have continued to gain traction during 2021, with revenue up 26.3% versus 2019 pre-pandemic levels.
Progress was made on delivering gross margin growth with an increase of 90bps to 28.6% being achieved. The business continued to develop its strong pricing disciplines and also benefitted from its established procurement strategy and sales mix, with demand particularly strong in the higher margin RMI market.
Operating costs % of revenue reduced to 23.3% in the year, with the business benefitting from the operational gearing impact of higher volumes and the actions taken during the pandemic to accelerate planned cost efficiency measures.
Operating profit was £8.7m, up from a loss of £1.3m for 2020, before amortisation of goodwill and after charging £3.2m of additional costs associated with central group support.
The current financial year started strongly, however we anticipate challenges relating to prevailing economic conditions and the geopolitical situation. Despite these challenges, the present expectation is that revenue and operating profit will exceed 2021 levels.
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, behaviour 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 recognises 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 along with the need to obtain value for money for our investors and desired quality and service levels 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.
The Company’s operations expose it to a variety of financial risks as discussed below. The Company has a risk management programme that seeks to limit the adverse effect of such risks on financial performance.
The principal risks and uncertainties affecting the Company include the following:
Price risk
The Company is exposed to commodity price risk as a result of its operations. Commodity prices are continually monitored and proactively managed at both an operational management level and through the Group procurement function to ensure that selling prices are quickly adjusted to mitigate the risk to earnings.
Credit risk
The Company has implemented a policy that requires credit checks on potential customers before sales are made, in line with the terms of its credit insurance. The amount of exposure to any individual counterparty is subject to a limit, which is assessed regularly by the board.
Liquidity risk
The Company maintains short-term debt finance that is designed to ensure the Company has sufficient funds for its operations.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2021.
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £1,463,275. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
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.
The company is not required to separately produce its Energy and carbon report because it is included in the group accounts for National Timber Group Topco Limited.
Basis for 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 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
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 .
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 .
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the timber processing and retail trade;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company ;
we assessed the extent of compliance with the laws and regulations considered above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company ’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
using audit data analytical software, identified higher risk transactions (including journals);
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators (which was deemed to be the Health and Safety Executive) and the Group’s legal advisors;
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities 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 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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The Company tests fixed investments assets and investments annually for impairment, or more frequently if there are indications that an impairment may be required.
In determining whether fixed asset investments are impaired, the value of use of the cash generating unit is reviewed. The key estimates made in the value in use calculation are those regarding discount rates, sales growth rates and direct costs to reflect the operational gearing of the business. Reviews are performed by forecasting cashflows based upon the budget and latest forecasts, which anticipates sales growth based on industry growth expectation and management experience.
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 charge/(credit) 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 2021 are as follows:
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.